Interesting insighs from a Q&A with William Tanuwijaya, CEO of Tokopedia, one of Indonesia’s largest e-commerce marketplaces:
In response to a question on why Tokopedia does not offer Cash On Delivery (COD) services for buyers, William dropped what was perhaps the biggest contrarian insight of the night.
Indonesia has many islands — 17,508 to be exact — and if Tokopedia were to offer COD across Indonesia, it would be extremely costly. Especially so for goods returned. For this, William asked the audience to imagine: a courier traversing seas, jungles, horrible traffic only to reach the hands of buyers and be delivered all the way back. Even though COD opens up more consumers to Tokopedia, it is simply not a sustainable business model.
Cutting through the fog, William gave us his analysis of the problem: While Indonesia has a credit card penetration rate of about 3%, the real reason why consumers prefer COD is because “they don’t trust merchants”. Clearly, the solution is better directed towards increasing trust.
To solve this: Tokopedia reveals sales figures to consumers, offers a robust system of shop reviews and trust badges to help consumers make better purchase decisions. In addition, consumers get the next best thing after COD — payment at local convenience stores. […]
Another way to look at it is the overall market potential. According to William, only 1% of Indonesians shop online. That means there is still huge potential left.
Building trust is invalueable as it enables everything else. eBay learned this early on in the late nineties, only to dismiss capitalizing on those learnings over the last 10 or so years.