e27 recently had the honour of speaking to Wilson Yanaprasetya to talk about the role of rural commerce in the age of sustainable growth.
Wilson Yanaprasetya is the President and a Co-founder of Dagangan, an e-commerce platform focusing on rural Indonesia. They provide same-day or next-day delivery services to both micro SMEs and resellers that typically live at least 10 kilometres away from the wet market where they usually get their products. Dagangan currently covers more than 17,000 villages, serving over 30,000 customers.
e27: Last year, the business ecosystem kept throwing around words like ‟growth, growth, growth.‟ This year, the word we kept hearing is ‟profit.‟ What is your perspective on how leaders should approach business growth?
Wilson Yanaprasetya: The definition of growth has shifted in the last few years from ‟growth at all costs‟ to ‟sustainable growth.‟ So much money was pouring in the last few years, and many venture-backed companies were pressured to focus on growth.
The thing is, for many VC,, putting more money in should provide a competitive advantage. This leads to blitzscaling. Let’s say, you have not really reached your product-market fit yet, which obviously leads to negative scaling; this means every time you expand or sell something, you’re actually losing money. This may force you to raise more money to extend your runway. This becomes a vicious cycle.
There’s nothing wrong with scaling in general. In fact, for some companies, Airbnb, Google, Facebook — they all build scale. And because they build scale, they managed to get to where they are today.
I think that is actually what a lot of companies and investors are starting to realise: that more money doesn’t mean that you’re actually winning. It’s important to focus on product market fit before you scale and make sure that you are creating positive cash flow.
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e27: How are you adapting to the current market conditions?
Wilson Yanaprasetya: For Dagangan, we are focused on creating an operationally efficient business. When we started doing Dagangan, we tried to figure out, ‟Okay, in what ways would cost be an issue?‟ So we avoid burning through our runway and create negative blitzscaling.
The first thing that we had to do is experiment as much as possible to figure out how to reduce costs. We are dealing with rural communities, providing same-day delivery in areas 20 kilometres into the forest, jungle, and so on. So that’s basically what we focus on. We figured out that offline currently is the best way to acquire customers. And so we focus on offline customer acquisition which takes more time but is more stable.
We keep growing, achieving what we call hub and spoke, which is using warehouses that may be located deep inside the forest, inside the villages. We focus on the network effect, working with the head of villages in the area, the local key opinion leaders, and so on — to make sure that we get the trust.
After doing multiple experiments, we found that culture building is important when you’re actually building the company. Answering questions such as: what is our purpose? Our purpose is to empower the people in the rural communities in Indonesia.
Today, we have 50 different hubs and are growing. Our 50 locations span all across Java right now. That enables us to deliver at 95% cheaper than the nearest alternative. Our data analysts also see how deep we penetrate the communities as we onboard more suppliers.
Company building ideas often come from the people we work with. The feedback we receive from principals, suppliers, help us with cost efficiency. Today, we have a 10x deeper footprint than our nearest competitor and have achieved a positive contribution margin.
Now, we have a network of 500 local community leaders to help educate their communities and support us on onboarding more MSMEs to our platform. We also provide job opportunities to the local villages we work with. They are talented individuals that are likely to have limited exposure to the whole digital world, but they want to learn. Without them, we would not be able to achieve our coverage of over 17,000 villages today.
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e27: What advice do you have to bring down the client acquisition costs (CAC) for B2B companies?
Wilson Yanaprasetya:
Given the nature of our business and focus on rural communities, a great part of our customer acquisition strategy is actually done offline. We leverage the network of people in a village, and there are many different examples on how you can do that. We work quite closely with the heads of the villages and with the people in the field who are the farmers and who can help promote our brand. Through this process, we are able to reduce our CAC over time.
e27: For the benefit of those thinking about fundraising for a future round or being part of a team that’s looking at fundraising for the next two years, what do you think about bridge rounds, inside rounds, and raising growth rounds, etc?
Wilson Yanaprasetya: Fundraising in general can be supportive of company growth when you find a partner in the ecosystem that may be able to provide additional value to the company.
We actually raised a strategic round from a bank that had never invested in a startup before. After we met and had discussions, we found that there is a potential collaboration here where we can leverage their ecosystem without spending too much effort on increasing our CAC. In fact, they will even reduce our customer acquisition costs.
If you can find someone in the ecosystem within your supply chain who can strategically invest in you during this time as a strategy round, I think it will be beneficial. For the bank, we are able to help them deepen their footprint in tier-3 and tier-4 markets.
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e27: What are the challenges that you are facing, and how did you overcome them?
Wilson Yanaprasetya: Our biggest challenge at the beginning was finding product market fit. And then after you find your product market fit, we still need to adapt. In Indonesia, when you go to one village and you go to another village, they may have completely different behaviours. So that’s basically why we always apply an experimental approach.
With the finite resources you have — we keep our experiments as focused as possible and see what actually works and what doesn’t, and then localise it. Nowadays, you cannot just look into China, India, and the US and think: ‟this will probably work in this market‟.
Another challenge is localisation. In Dagangan, we have been fortunate to have very strong team members who are culturally fit, and who really understand people in the rural markets, specifically, in their own market. They are able to bring in a localised approach on how they acquire, retain, or even get customers to spread the word about Dagangan even further.
For more information on Dagangan and their services, visit their website.
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This article is produced by the e27 team, sponsored by Dagangan
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