The working capital trap: Lessons from Indonesia’s first D2C generation

Indonesia’s D2C and inventory-heavy startup sector looks different in 2026 than it did before 2022. The cohort of platforms that scaled between 2018 and 2021 (Fabelio in furniture, several in F&B, fashion, and household goods) encountered a category of operational risk that the original venture playbook tended to underestimate. Some platforms have stabilised. Several have restructured significantly. Fabelio, which entered PKPU proceedings in 2022 and was subsequently declared insolvent, is one of the more publicly documented examples.

After 15 years inside Indonesian risk functions, I have watched this sector with more interest than the financial services focus would suggest. The operational risk patterns underneath the D2C failures of this period are not unique to those sectors. They recur in any business where the gap between cash going out and cash coming back is large, and the venture funding model assumes that gap can be financed indefinitely.

What the D2C generation aimed to do

The Indonesian D2C cohort that emerged after 2018 had a clean thesis. Indonesia’s rising middle class, expanding e-commerce infrastructure, and digital payment penetration created a window for direct-to-consumer brands to skip traditional retail intermediation. The implicit assumption was that unit economics would improve as scale increased: customer acquisition costs would decline, operational costs would compress, working capital intensity would moderate.

What turned out to be harder

Three structural factors made the path harder than the original models priced in.

The cash conversion cycle. D2C businesses convert capital into inventory, inventory into delivered orders, and delivered orders into recognised revenue across a cycle structurally longer than software businesses face. A platform that grows 100 per cent in revenue often grows working capital requirements faster than that, especially when product categories carry inventory and returns risk.

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Inventory as a financial product. The inventory on a D2C platform’s balance sheet is not just stock. It is essentially a leveraged position on consumer demand at the price and SKU mix chosen six to 12 months earlier. When demand shifts, the inventory becomes more expensive to liquidate than to acquire. Platforms that priced inventory as a working capital line item rather than as a market exposure mispriced one of their largest risks.

Operational fragility at scale. Operational systems that work for a hundred orders a day break down at a thousand orders a day in ways not always visible until they break. The platforms that scaled fastest sometimes did so on top of operational systems that were not actually ready for the volume, with quality and customer experience consequences that compounded into churn and brand damage.

Lessons learned

Six principles emerge from the Indonesian D2C cycle.

Working capital is the business model. For inventory-heavy D2C, working capital management is not back-office. It is the business. Platforms that treated cash conversion cycle, payment terms, and inventory turn as primary metrics outperformed those that treated them as supporting metrics.

Growth without unit economics is a trap. The venture-funded D2C generation often raised on the assumption that scale would deliver unit economics later. Several categories never reached the inflection point because the cost structure was wrong from the beginning. The unit economics question should be answered before scale, not in spite of scale.

Inventory needs a hedging instinct. Holding inventory is taking a position on future demand. The platforms that built inventory planning, demand forecasting, and discount management as core disciplines absorbed inventory risk better than those that treated inventory as procurement.

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Operational systems must scale before volume scales. The institutions that survived the volume ramp had invested in operational infrastructure before the volume arrived. The ones that scaled volume first and operations second produced the customer experience failures that drove churn.

Founder accountability matters more in physical businesses. In software, a founder’s bad month produces a feature delay. In inventory-heavy D2C, a founder’s bad month can produce a cash flow event that becomes an insolvency event inside a single quarter. The governance scaffolding around the founder matters more when the business has physical exposure than when it does not.

PKPU is a recovery instrument, not just a failure marker. The Indonesian PKPU framework is designed to give viable businesses a structured path to restructure. The companies that struggled most were the ones where governance and disclosure had already eroded before PKPU was filed, not the process itself.

The macro stakes

Indonesia’s D2C category will not disappear. The structural opportunity (large rising middle class, growing e-commerce infrastructure, persistent inefficiency in legacy distribution) remains real. The next generation will be more capital-disciplined, more operationally rigorous, and more humble about the difference between software-style and physical-goods-style business models.

For founders and investors looking at D2C and inventory-heavy categories in 2026, the question is no longer whether the opportunity exists. It is whether the platform has built the working capital discipline, operational infrastructure, and governance scaffolding required to convert the opportunity into a durable business, rather than into another addition to the post-mortem literature.

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