Blibli benefits from SBL’s physical retail outlets

“Price is one of the considerations, but price promotions on certain products happen all the time in mini-marts,” said Kurniawan. By shopping in the neighborhood store instead of a hypermarket, consumers save time and parking fees. “Shopping in smaller batches but more frequently is another global trend factoring into this,” said Bain & Company’s Parekh.

The effective, hyperlocal grocery retail landscape will make it difficult for digital platforms to convince shoppers to shift their grocery purchases online. “Delivery cost is a factor,” added Keswakaroon. “While there’s interest in the added convenience of having groceries delivered, the question becomes how much they are willing to pay for it.”

That’s why, perhaps, in its press announcements after the deal, Blibli’s chief executive and co-founder Kusumo Martanto didn’t talk much about how he expected to grow the groceries category on Blibli after the deal.

Blibli can onboard new customers and potentially upsell shoppers with products available on the e-commerce site.

Instead, he cautiously spoke of the deal as the strengthening of an “omnichannel solution” for Blibli and a way for both entities to offer a “complete, online and offline retail experience” to customers.

In other words, Blibli expects to benefit at least as much from Supra Boga Lestari’s physical retail footprint as the other way around. For one, it doesn’t hurt to have a profitable, proven business under its digital platform umbrella, especially as Blibli is headed for an IPO.

Besides, Blibli benefits from SBL’s physical retail outlets just as much as Amazon did from Whole Foods.

For one, the current economics of online grocery delivery are not attractive, said Bain’s Parekh. Online platforms and retailers will need to look at their value proposition, optimise their operational costs, and identify additional revenue streams.

It’ll take a few more years of experimentation before e-grocery finds a model that sticks. But given Indonesia’s high population density and low labor costs, it will most likely come out as a hyperlocal model. The existing retail outlets could serve as fulfilment bases, with delivery happening through two-wheelers, predicted Parekh. This is unlike other markets, such as South Korea, which lend themselves more to a model where deliveries occur in vans from centralised, semi-automated warehouses.

That puts the Blibli-SBL entity in a favourable position. Spending big on a supermarket chain may have sounded risky for an unremarkable e-commerce company, but it’s likely to turn out that it was US$142 million well-spent.