EPISODE 10 TRANSCRIPT
The Riches of Renovation:
Dimas Priawan of Dekoruma
16 March 2021
Welcome back to the Indo Tekno podcast, Season Two, Episode Ten. I'm Alan Hellawell, Founder of Gizmo Advisors and Venture Partner at Alpha JWC Ventures. Selamat datang kembali. Kami harap Anda menikmati podcast ini. The pandemic has driven a range of new behaviors across the world. Whether you've decided to become a Beef Rendang expert in the kitchen, learn how to play the Gamelan or finally addressed a long needed home redecoration, everyone seems to have developed their own pandemic passion projects and pastimes. Today's guest, Dimas Priawan, is Founder of Dekoruma, Indonesia's largest end-to-end home living platform. We will be discussing the various challenges and opportunities - offline, online and "O2O" (online-to-offline) - that COVID-19 has presented to Indonesia's home and living industry. Great to have you join us Dimas. We appreciate you taking time out to join the Indo Tekno Podcast.
DIMAS PRIAWAN 1:06
Thanks. I hope you and your family are doing fine. And I hope everyone listening is safe wherever you are right now.
Thanks for that Dimas. Now, Dekoruma was founded more than five and a half years ago. How exactly did you come up with this idea Dimas?
DIMAS PRIAWAN 1:21
Sure. I started when I was working at a company called aCommerce, that was basically an end-to-end solution provider for ecommerce space in Thailand. I was stationed in Indonesia. Back then, we had almost all ecommerce clients; small ones, big ones, marketplaces; that grew very, very big. During that period there, I realized that actually, there's only one particular business actually tackling common living, and everyone else was trying to sell fashion, electronics and trying to become Lazada, or trying to replicate another Tokopedia. It's just something very interesting for me, because there was only one selling furniture. And the reasons why I was interested: Number one, it the market size. If you look at home and living it's basic things, Alan. Things like food, fashion, and home and living. It's there. And it's huge, and yet there wasn't anyone doing it. And when it came to these realizations, of course, back then, in 2015, everyone was trying to sell clothes online. And when I spoke to my bosses, asking "how about selling sofas?", they would laugh at me. They would say: "Selling online, I can't even touch and feel the products." Back then I knew businesses like Wayfair in the US were thriving. And it was just about time when finally online e-commerce will turn toward home and living. And that's when I got interested, and I met Aruna, my partner. Both Aruna and myself came from families that were actually within this industry. My mum used to work at one of the largest property developers, and Aruna's dad basically did everything, from interior design and construction, all the way to property development. And one thing that is very common problem is actually on the supply chain. It's quite easy for you to become a designer and get $10,000 projects per month. But it's extremely hard for anyone in this business to actually build a $1 million business per month, for example, because fundamentally, every single project that you do has to be repeated from zero. There is no economy of scale. Everything has to be done manually. And they are shipping big things, shipping things that were extremely disorganized. There isn't anyone able to give you exact pricing, exact inventory. Because some of the times if you see samples it's great. But then it is not available in Indonesia. You have to wait for two months or three months. It has to be imported from India or China. We realize that it's extremely difficult to scale it offline. And there wasn't much investment anyway in these businesses in the past 10 or 20 years. Everyone was doing the same thing. So we knew that eventually technology will be there. Technology will be the one that is able to digitize the entire supply chain, making sure people can work digitally to cut all of those inefficiencies. And that's where we began Dekoruma.
Very useful background Dimas. Can you describe our current value proposition at Dekoruma?
DIMAS PRIAWAN 3:59
Sure. Dekoruma provides beautiful space saving home at affordable prices in an easy and delightful way. That's what we have been building for the past five years, Alan.
Excellent. And maybe, Dimas, in order to help our audience better envision this value proposition, can you explain Dekoruma in terms of comps around the world. For instance, what percent might it be Houzz or Pinterest? And to what extent do we resemble, for instance, a Trulia or Zillow in the US; or a Lianjia in China?
DIMAS PRIAWAN 4:30
Dekoruma in simplistic terms is a combination of mostly Houzz and Wayfair. We are basically a platform for customers, suppliers, contractors and designers to collaborate and transact. I think the major differences are, for example, with Houzz, most of the transactions will be done offline. So it's more of a listing model. But with Dekoruma, the transactions, the flow of data, the flow of money, the flow of the projects are actually being tracked within our platform. And yes, at the very end, we are actually working with multiple property developers to actually offer the entire house too. So there's a big part of Zillow within it, but it's going to be very small in our business right now.
And as such, as this kind of hybrid of a number of business models, are there any similar models within Southeast Asia itself?
DIMAS PRIAWAN 5:17
I don't think so. The way we built the business is unique. There are competitors that are similar to us. But fundamentally, we are a marketplace model. Most other businesses in Indonesia are either direct-to-consumer businesses (it means that they build brands), or they are a listing provider. Listing, means that they just list the designers and the products, but the transaction goes offline. So we actually have never seen anyone in Southeast Asia with a business model that's similar to us.
Understood. Now Dimas, can you give us a brief tutorial on the commercial and residential property markets as they relate to Dekoruma? Where for instance, is the strongest growth that you're seeing and what parts might not be as healthy?
DIMAS PRIAWAN 5:58
The Indonesia property market is estimated at around $100 billion a year. And the home and living, retail and interior design is around $15 to $20 billion. And there is no exact statistic Alan, unfortunately, but we expect 60% of the entire market belongs to the residential and B2C (business-to-consumer) segment, and the remaining belongs to B2B, which means cafes, hotels, etc. And the strongest growth of the past year since COVID happened of course, is residential. It's not just us. If you look at let's say Wayfair, Nitori in Japan, Home24 in Europe, the shares have basically skyrocketed. Which part is not exactly healthy? Right now we have seen B2B and things like commercial projects, offices, cafes, that are in downturn because it's expected. People don't really go to the office. People don't go to cafes and so on and so forth, not even to the hotels. But right now, at least in the beginning of 2021, we have seen B2B actually start to recover. And that is actually going to be a very interesting trend moving forward.
That's very encouraging to hear. Now, Dimas, if you don't mind, paint a picture of 2020 for us, if you will. First, what has the past year done to the offline home renovation and design space in Indonesia?
DIMAS PRIAWAN 7:07
The fundamental things that differ are the way people look at their houses. Before COVID, the house is a hotel: you leave for work at 7am, then you make it back at 8pm. And during the weekend, you just fly to Bali or go to a fancy restaurant. You don't really spend much time at home. But right now we work, we live and our kids are learning and studying at home. And the thing is, in Indonesia, a majority of the houses are extremely small, smaller than let's say HDB's in Singapore. Most of the apartments are probably about 30 meters square for two bedrooms. And people start realizing "oh my gosh, my house is actually quite messy". And it's extremely tiring working from a dining chair from nine to six just for working. And this has changed the way people look at home and living. And of course, the good thing is the online players were thriving. But the offline retailers, the offline contractors that have been doing things extremely manually are actually in a worse position. People wouldn't dare to go to, let's say a store. That's where the business has changed around.
Right. It definitely sounds as though it's, at best, a mixed picture that you're painting for 2020. You do mention that the online guys generally did well. That, I assume, explains a lot of Dekoruma's success. But regardless, Dekoruma seems to have grown very steadily throughout this period. Are there any other trends that you've seized upon to see this kind of growth?
DIMAS PRIAWAN 8:34
Yeah. To give a perspective, before COVID, of 10 people buying sofas, probably only one or two are buying it from online, whether from us or from other players. But during COVID, actually, the demand dropped out. And they're only probably seven people who are buying sofas because we are in recession technically. Out of the seven people, probably three to four are actually buying it online. And this trend, from the seven, it will grow to 10. And if you look at how the government has completed major infrastructure projects, from Sumatra to Java or even in other islands, these consumers will grow beyond 10. And the behavior will shift online. We will see more and more people realizing their beautiful home that they live in. There will be more people who need to buy sofas, bed sheets, or even a kitchen set. But they will start the journey online. And that's something that will be permanent moving forward.
What has Dekoruma's growth been throughout 2020?
DIMAS PRIAWAN 9:29
We have grown more than 3x last year, and we didn't expect it of course when we did our business plan in early 2020. And to be very honest, when COVID hit, we didn't even know our growth trajectory because if you remember last year during this period, people were just frightened. In general we have been growing beyond expectations. And we're still growing Alan as of now. Probably right now we are growing on average 20% or 30% percent month-on-month.
Wow. Super impressive. Now maybe a more colorful question. Dimas, what were the most fascinating behaviors to have emerged within your ecosystem in your eyes in 2020?
DIMAS PRIAWAN 10:05
Last year during this period, people still wanted to get their kitchen set done. People still wanted to get their interior design done. The customers were not quite sure: are we able to do this online? But we did it and 90% of the projects were done online. That's number one. In terms of e-commerce, sofa beds and home office grew more than than 10x. So people started buying the home office sets, office chairs and working tables. And a lot of them actually buying a sofabed. In those two cases, we have seen something that is totally different as compared to before COVID.
Understood. Now Dimas, is our model B2B, B2C, a mix thereof, or is it some other acronym?
DIMAS PRIAWAN 10:45
We are mostly B2C. We did have working relationships with multiple property developers. For example, if you buy an apartment from let's say, Keppel Land, you will get the fully furnished unit done by us. But it's technically a "B2B2C", because at the end of the day, we are serving the end customer. That has always been our core.
Now Dimas, can you describe Dekoruma's various business lines? You've mentioned that there's an e-commerce component. Do you take a commission on that? And also do you have, for instance, a subscription revenue stream?
DIMAS PRIAWAN 11:15
Our business is marketplaces. We have two major business lines. The first one is retail. When you come to our website, you can buy anything from mugs to glasses, bedsheets, all the way to sofa. And we get the commission from every sale that happens on our platform. And on interior design, our second core business line, you will meet our designers. You'll meet our contractors. The designers will then design your home using products derived from the marketplaces. And we also take commission from it. In general, there's a commission base and we don't really have a subscription revenue stream as of now.
Very clear. Thanks for that. How do you guys handle logistics on the e-commerce marketplace side?
DIMAS PRIAWAN 11:55
There are two parts. If you buy things like bedsheets or mugs, it's a simple and easy: it's the regular last mile logistics providers. But if you let's say buy a sofa, we actually work with the more traditional trucking and logistic companies. We actually equip them the simple app just to be able to give them the orders and then we do tracking to deliver the products to you. There are two major logistics system that we are using right now.
Understood. Now if I'm not mistaken, Dekoruma claims to have more than 80,000 unique products and has served more than 1 million customers. Can you give us examples of common transactions that customers make on our platform?
DIMAS PRIAWAN 12:32
In retail, the top selling items are sofabed and home offices. In general, we have seen for example, our average order value in 2016 was $20. We were selling many more cheap items like decorations. But our average order value last year was actually closer to 260 US dollars, which means we are more and more selling bigger items, bigger furniture. And people are actually more comfortable buying big ticket items from us. That's on the retail side. On the interior design side, it is dominated by only one thing: it's kitchen set. Most people, if they come to us, they want to get their kitchen set because, Alan, if you buy a house in Indonesia, yeah, you don't really have the kitchen set. You have to technically build it. Otherwise you are not able to cook and do your stuff. That's in general how common transactions happen on our platform.
Understood. Now at Dekoruma, we seem to have a lot of partners. What do these partnerships do for us most importantly?
DIMAS PRIAWAN 13:29
We are a multi-partnership platform I would say. We partner first with the suppliers. They supply the products, the end products, anything from glass all the way into flooring, stylings, wall painting, lighting, basically anything that is needed to actually build your home or your office or your cafe. That's number one. Number two, we partner with the interior designer. So equip them with an application called "Soma" so that they can design faster, they can design easier. And then we partner with multiple contractors. These are the guys who are building your kitchen set, installing your lighting, or installing your flooring. And on top of that we are partnering with banks and property developers. The banks, of course provide installments. We have up to six months 0% installment. And with developers, if you buy a house then you can get a fully furnished unit done by us. That's how the ecosystem is being built. And the most interesting part: the designer used to work for us to give us a supply of designs. But eventually because they are not our full time employees, they are actually our partners and they actually source their own projects. And they are right now becoming our customers, because they will still use the same applications, design their projects using the products that come from Dekoruma, and we will give them a commission. It's a very interesting ecosystem where the demand can become supply, and supply can become even
Understood. Now Dimas, are we also moving into property brokerage and listing? And if so, this is already an extremely competitive space I would think. What need are we addressing better than anyone else, if we're entering this space?
DIMAS PRIAWAN 15:02
It was initially something that was requested by our property developers. But it started when we became the contractor for the developers. During the meetings across the year, they were actually asking us: "Eh, look. Your Instagram has 1 million followers and your traffic is awesome. And your customers are customers that are probably buying houses, which is true. Because anyway, our customers are 28 to 38 years old, middle class and digitally savvy. They actually ask us: "how about you help us sell our entire house and apartment?" It's a win-win. We get the commissions and eventually you'll get the project itself. And we are doing a really great job. We leverage the traffic that's already existing on our platform. The problem we see right now is if you are a customer, if you are, let's say looking into any other listings, there's probably only two models that are actually growing in Indonesia. The first one: you will see multiple listings from multiple agents, and it's confusing because you don't really know who is what and what is who. Otherwise you will meet a freelancer who doesn't really have access to the entire supply. If I am a property brokerage, if I only have five units that belong to me, I cannot offer you something else. But with us, the customers from the behaviors that we see are very specific about the locations that they are looking for. If I want to buy a house in let's say, Bintaro, I'm not going to even bother looking at somewhere in Depok, for example. That's somewhere that we are able to serve them well. Because eventually, we are positioned as a neutral party, as an advisor giving them options. And eventually if they buy a house or apartment from us, we get the commission and we actually give back some part of the commission to the customer as a form of furniture voucher. Everyone is happy in this case, Alan.
Understood, Okay, that makes sense. Now Dimas, how many years behind places like China and the US is Indonesia in its adoption of technology in the home and living space?
DIMAS PRIAWAN 16:54
China from my experience is probably already ahead of the US in terms of consumer tech adoption. It was crazy the last time I went to Beijing and Shanghai. And if you look at Indonesia, my guess is that we are five years behind. But you see what happened is that COVID accelerated every single digital thing. So if you see, not just us, any other digital business, probably they grew quite a lot last year. And right now, it just depends on the industry. It depends on us, it depends on you as investors, it depends on everyone. It's really up to us how to speed up digitalization.
Well, let me continue that question. Where exactly does technology come into play for Dekoruma right now?
DIMAS PRIAWAN 17:34
Our technology comes from a very simplistic but very powerful and extremely important mission. We digitize the entire supply chain of home and living. I'm not sure whether you have renovated your home before. But if you do, you don't just buy a sofa. You need to buy flooring, you need to buy a wall painting, you need to buy lighting. And unfortunately, all these bits and pieces are coming from different vendors, different contractors, different people. And we have digitized the entire supply chain of products. You are able to just drag and drop the product. It's available in 3-D. Whatever you see is actually available in Indonesia, with the actual pricing and with the actual inventory. And once the product is done, we are digitizing the people: the contractor, the designers. Right now they are technically working from a single platform, something that we have never seen before in Southeast Asia from what we understand. So that's where the technology captures the supply chain as well as the data on how people work. Everything is becoming extremely transparent. As a customer, I'm able to see exactly details of my bill of quantity. If let's say I spend 10,000 US dollars for my home, I can break down every single item easily. For example, I don't like this flooring color. I want to change the tile, and I change it to a different type or different model. The pricing will automatically be updated. Previously, what happens as a designer, I will have to call the vendors asking whether it's available, what's the pricing, updated manually in Excel. All these are now done technically, automatically and instantaneously. So this is where technology comes in. And this is where we eliminate the inefficiency that has been plaguing the industry for years.
Okay, clear enough Dimas. Now are we disintermediating any parts of the home and living design value chain?
DIMAS PRIAWAN 19:14
Yes. In fact our platform is becoming the only intermediary between the supply and the customer, between the designers, the contractors and each other. We are not working against the intermediary, but what we are doing is we are eliminating the non-value added intermediaries. So to give a perspective, Alan, unfortunately in Indonesia or any other developing nation, the interior designers, the businesses dealing with the home and living supply chain and the contractors are not regulated. Anyone can claim: "Hi, Alan. I'm Dimas. I'm your designer," or "Hi Alan, I am a contractor. I have a factory. Look at my factory". But in most of the cases they are not designers. They are not contractors. They don't even own the factory. They are just somehow middlemen who are lucky enough to have found you. "I know Alan, who wants to buy a kitchen set. And I know someone who can do the kitchen set. And this guy is technically charging 10% or 20%, without giving any other benefit except the information. And in the era of the internet, fortunately, information becomes very cheap, because you can access it anywhere. But trust is getting more and more expensive. That's what we have been building. As information gets cheaper and more readily available. trust is something that most customers are looking at. How do you surrender a 10,000 US dollar down payment to contractors where these contractors don't even have a formal entity. It's quite scary. This is where we come to the customers and give them the trust that we are Dekoruma, we are a platform, we can take the money from you. And we make sure that the contractor will do the job well. The same way goes with the contractors. If they don't have to downpayment, they don't have enough working capital to work. And this will cause delay. These are the simple things that platforms like us are doing.
Understood, clearly trust is an extremely important ingredient to building and sustaining loyalty from your customers. Great. Now Dimas, I believe we have an experience center for our customers, designers and merchants to transact in. Will we be going more offline in the future?
DIMAS PRIAWAN 21:12
I think yes. It's not that we are going more offline in the future. I think the terms would be "offline to online". Yes, we will be building more and more experience centers in some parts of Jakarta and outside Jakarta. It's not exactly just to build a store to become a traditional profit center. But we knew exactly that there is a limit on how far digital can go right now. There are some parts of the population and the customers Indonesia that find it still cheaper in comparison to do both the online and offline. To give a perspective: we have been doing business in Bekasi, which is just beside Jakarta, for four years. The growth has been okay, but not fantastic. And we have grown digital advertising 2x or 3x to basically capture the users there. But the sales didn't go up. There's a limit. But once we build experience centers in Bekasi, apart from the fact that our experience center generates sales, the online also goes up easily 2x within a one year period. We have enough data to understand which areas and which regions require this kind of both online and offline sales and marketing strategies.
Understood. Clearly so much of the value proposition is improving people's domestic lives. And on that topic, I have a personal question for you. What is your favorite hobby, sport or pastime these days?
DIMAS PRIAWAN 22:29
So the only sports that I can do right now: I've been riding a bike. Before that I used to play badminton but right now it's quite impossible. And during my free time I like to go fishing. I used to do a lot of photography as well, but those two are quite impossible. Right now, it's just biking and occasionally just going fishing, Alan.
A man of many interests. Great! Dimas, really impressive how Dekoruma has been able to grow through thick and thin. One for instance could cite any number of reasons why 2020 could have been a pretty disastrous year. I know Houzz for instance had a very lumpy year last year. It's that's really impressive that you've driven through the pandemic with such steady growth. And I'm very much looking forward to checking in with you guys over time as you continue to grow and diversify. Thanks again for joining us Dimas.
DIMAS PRIAWAN 23:14
Thank you, Alan. Thanks for the opportunity, and stay safe.
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