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DealStreetAsia

Indonesian startup SiCepat bets on web of affiliates to deliver the goods

Logistics company to invest further into its range of services and infrastructure

SiCepat offers warehousing and fulfilment, e-commerce-enabling services, online distribution and middle-mile logistics services. (Photo by Yuki Kohara)

JAKARTA -- When Indonesian logistics company SiCepat Ekspres declared itself a "soonicorn" -- a startup with a potential to be valued at $1 billion or more, making it a unicorn -- after closing a $170 million funding round in March, the announcement raised some eyebrows.

Although it had previously raised over $100 million in funding, the last-mile delivery company had hardly been seen as a contender to become the archipelago's next unicorn.

A key factor in the logistics startup's quiet, yet meteoric, rise has been how it has used a web of affiliates to expand its gamut of offerings. The company, which started as a last-mile delivery company for online merchants in 2014, today offers warehousing and fulfilment, commerce-enabling services, online distribution and middle-mile logistics services.

SiCepat's parent company, Onstar Express, owns a host of subsidiaries that provide additional services to supplement those offered by the flagship brand. These affiliates include PT Clodeo Indonesia Jaya, PT CKL Indonesia Jaya, PT Bintang Dagang Internasional and PT Bintang Aset Indonesia.

In fact, SiCepat's latest funding was raised to fuel the growth of all of Onstar's subsidiaries. When contacted, both SiCepat and Onstar declined to confirm the details of the providers of its "end-to-end" logistics services.

The holding company said it would further invest into its logistics services and infrastructure, including last-mile, fulfilment, e-commerce-enabler, merchant platform and mid-mile logistics offerings.

"Our goal is to support and empower millions of [small and medium-sized enterprises] and local businesses not only to survive but to thrive, as well by providing the ease of use where they can fully manage orders supported by our comprehensive solutions. Hence, user/merchant satisfaction levels and stickiness will be enhanced," said Onstar Express corporate finance vice-president Yurizki Rio.

Among SiCepat's oldest affiliates is Bandung-based PT Clodeo, a platform that helps online merchants manage their inventories.

Founded in 2017, Clodeo received an investment from Onstar before being taken under the holding company's wings. Soon after, the startup's co-founder and Chief Technology Officer Reynaldi Oeoen assumed the position of SiCepat CTO in 2018. Currently, Clodeo provides pick-up services to merchants, and its partners include SiCepat and its peers, including J&T, JNE, Anteraja and NinjaExpress.

On the warehousing side, Onstar has Haistar, a company founded and led by former SiCepat Chief Commercial Officer Donny Maya Wardhana. The company offers warehousing, sales channel and delivery management for e-commerce merchants, and much like Clodeo, partners with a host of last-mile courier companies.

Interestingly, Haistar gets part of its business from an exclusive tie-up with Tokopedia, the Indonesian e-commerce specialist which is understood to have invested in SiCepat in 2019, as reported by DealStreetAsia last year. Haistar is one of only three warehousing companies used by Tokopedia to roll out its own fulfilment service, called TokoCabang. In the terms and conditions for TokoCabang, Tokopedia says that its fulfilment service will be provided by a partner by the name of PT Bintang Dagang International, which is Haistar's legal name.

Last year, Haistar's Wardhana founded another company called Hera.id, the latest addition to Onstar's suite of logistics subsidiaries. Hera operates as an e-commerce enabler that provides multi-channel management, multi-location e-fulfilment and distribution to brand owners.

In the middle-mile play, SiCepat leverages the air freight capabilities of its sister company, CKL, which was founded a year after the former's establishment in 2014.

According to Rafael Damar, a senior analyst at Asia-focused strategic advisory firm YCP Solidiance, the expansion by logistics startups into multiple verticals can be expected given the intricate nature of modern supply chain networks requiring many different offerings from players.

The opportunity around the logistics space has been amplified by the immense growth of e-commerce in Indonesia. The local e-commerce market, according to YCP's forecast, will be worth $109 billion by 2025, with a 27% compound annual growth rate from an estimated $33 billion in 2020.

Indonesia has similarly seen other logistics technology players branching out into other verticals. Waresix, for one, has moved into the trucking space after starting as a warehousing player, while logistics enabler Shipper expanded into warehousing and fulfilment through its acquisition of e-commerce warehouse company Pakde. However, both Waresix and Shipper offer their new services under their own brand and company, which is different from the approach adopted by SiCepat.

"This move by SiCepat is optimal for long-term advantage in logistics. By being an open ecosystem, they are making their competitors [in some areas become] their customers in other parts of the value chain and hence, expanding their sources of revenue," said Damar.

Damar added that having independent entities could provide better agility in responding to market dynamics in the growth phase compared to the rather rigid one-company model. However, he noted that such a strategy could be costly to maintain, and therefore, the company may want to consolidate some entities to improve margins.

Damar believes that SiCepat's diversification strategy has shown its focus on 'playing the long game', which is bound to instil confidence among investors.

Existing investors may already be rubbing their hands after seeing the numbers presented by the company. Last year, the company claimed to have reached total transactions of Rp 3.7 trillion ($261 million), presenting 245% growth.

During the current Muslim holy month of Ramadan, SiCepat claims to have fulfilled more than 16 million packages as of the 15th day of the period, representing a 121% increase from the same period last year. The company predicts the numbers will increase by 30% in the last week of Ramadan.

This year, the company looks to be increasingly ambitious and has embarked on an aggressive marketing spree. In the first half of this year, SiCepat has become the main sponsor of national TV show Indonesian Idol, has signed a livery branding partnership deal with local airline Citilink and has signed up one of the country's most prominent YouTube celebrities, Deddy Corbuzier, as its brand ambassador.

SiCepat says it is hopeful the marketing moves will help crank up its fulfilment figures by 40% in the second half of this year.

By enhancing its brand awareness and providing a more comprehensive logistics service, SiCepat is looking to ward off competition from its last-mile delivery rivals, most notably J&T Express. Although J&T's offerings are not as expansive as SiCepat's at the moment, it might look to emulate its rival's strategy, particularly after reportedly raising one of the region's largest growth funding rounds, at over $2 billion.

In March, J&T announced the launch of its air freight delivery service, after fully leasing all-cargo aircraft.

While SiCepat has started to invest heavily in marketing, its appetite for expanding its already sizable ecosystem has not faded.

The year 2021 has seen parent Onstar engage in a series of investment transactions with listed digital company M Cash Integrasi and its subsidiaries. In January, SiCepat acquired a 51% stake in food and beverage ordering platform DigiResto from a subsidiary of digital distribution company M Cash. As a result of the transaction, SiCepat became the last-mile delivery provider for DigiResto and continues to eye the food delivery market for additional revenue opportunities.

The DigiResto deal was followed by an investment in Logitek Digital Nusantara, a company under M Cash subsidiary Telefast, which had been helping develop SiCepat sub-services such as a WhatsApp-based customer application called SiCepat Klik and delivery point services SiCepat Points.

In return, Telefast in April announced the acquisition of a 15% stake in SiCepat's sister company, Clodeo.

A key factor behind the deepening SiCepat-M Cash relationship is venture capital firm Kejora Ventures. Kejora is SiCepat's earliest institutional investor and had even roped in its limited partner, Barito Pacific, to join the startup's series A funding round in 2019.

The Indonesian venture capital firm has also been an active partner of M Cash in the past. In August 2019, M Cash subsidiary DIVA bought a 30% stake in mobile point-of-sale company Pawoon, a company backed by venture capital fund Kejora. Later in the same month, M Cash sold part of its 12.32% holding in DIVA to Kejora, which made the investment through its Star SEA Growth Fund I.

Kejora did not respond to a query about SiCepat's partnership with M Cash.

In an interaction with DealStreetAsia, M Cash Group Chief Executive Officer Martin Suharlie described his company's relationship with Onstar as a partnership "based on mutual benefits." The partnership, he added, enables M Cash to round out its tech ecosystems and digital portfolios with Onstar's logistics capabilities and allows Onstar to leverage its tech offerings.

Another potential upside for Onstar is M Cash's access and expertise in public market listings, which may be on the cards soon for SiCepat, whose investors include Indies Capital, led by Indonesia Stock Exchange (IDX) Commissioner Pandu Sjahrir.

M Cash currently has three digital subsidiaries which have tapped the local bourse: NFC Indonesia; Digital Mediatama Maxima; and Telefast Indonesia.

While M Cash CEO Suharlie said he was not able to assess SiCepat's capital market readiness, he expressed confidence that the logistics startup would progressively gain a competitive edge and clout in the domestic market and possibly make a foray into the regional market.

"Considering how the capital markets (local and international) are generally bullish on the logistics market in tandem with the rise of e-commerce, there is a good probability that SiCepat's public listing can gain considerable traction," he added.

For the original story from DealStreetAsia, click here.

DealStreetAsia is a financial news site based in Singapore that focuses on private equity, venture capital and corporate investment activity in Asia, especially Southeast Asia, India and greater China. Nikkei owns a majority stake in the company.

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