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Business deals

Sumitomo seeks to build Indonesia home delivery network

Trading house invests in Lippo shipper and will team with family-run shops

People shop at the Tanah Abang market in Jakarta. With its more than 13,000 islands, Indonesia faces a challenge of establishing an extensive home delivery network.   © Reuters

TOKYO -- Trading house Sumitomo Corp. will bring Japanese expertise in establishing home delivery networks to Indonesia, an archipelago of more than 13,000 islands.

Sumitomo spent roughly 1 billion yen ($9 million) to acquire a 40% stake in Reka Cakrabuana Logistik, a ground shipper affiliated with Indonesian conglomerate Lippo Group. The deal gives Sumitomo two seats on RCL's board.

Online shopping has grown by fivefold in the past five years in Indonesia, as has the need for home delivery. But the country's geography has hindered the formation of an extensive logistics network. Deliveries are made by local operators who often lack know-how of operating large warehouses effectively, risking the possibility of parcels being lost or arriving late. 

RCL, also known as Red Carpet Logistics, was created in 2016 as a spinoff of Lippo's logistics division that delivered the group's online orders. Since last year, RCL has expanded its client base to outside the Lippo Group, accepting orders for e-commerce deliveries, as well as handling customer-to-customer parcels. 

Sumitomo brings to the table its extensive logistics expertise. In Japan, the company oversees warehouses that support television shopping unit Jupiter Shop Channel, along with mail-order outfit Senshukai. Sumitomo is developing a tracking system to monitor all of its cargo.

Indonesia has the largest population in Southeast Asia and is home to countless family-run shops, some of which can play the essential role of doubling as package drop-off points. Sumitomo will recruit mom-and-pop stores through a midtier Indonesian commercial banking affiliate, which offers financing to small businesses.

RCL will adopt Lippo shopping malls and retail outlets as distribution depots as well. Both the Sumitomo and Lippo groups will make optimal use of existing assets to bolster delivery services.

Because e-commerce also includes Indonesia's growing online flea market, it is assumed that package drop-offs will thrive at microbusinesses. Indonesia's home delivery market came to about 500 million parcels in 2016, and is expected to climb to 1.8 billion in 2021.

Separately, Sumitomo and Lippo are developing a payment service for Indonesians that do not hold credit cards. That operation will complement the e-commerce logistics partnership, especially in rural areas where retail chains are sparse.

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