Tech trailblazers: How Tokopedia is innovating in Indonesia

Tokopedia is a technology trailblazer and darling of the Indonesian innovation scene, a member of an exclusive group of “unicorns” or startups valued at over US$1 billion that also includes Go-Jek, Traveloka, Bukalapak and OVO.

Founded in 2009, the e-commerce giant serves more than 90 million active monthly users, in addition to over seven million merchants.

Aligned to the modus operandi of democratising commerce through technology, the decade-old business has yet to reach full potential given national e-commerce penetration currently stands at 5 percent.

To drive the local adoption forward, it is rolling out its digital, cloud, artificial intelligence (AI), machine learning and data technologies at a relentless pace to 97 percent of districts nationwide.

At Tokopedia, the term for such an endeavour is ‘Tech Modernisation’. “It’s a continuous revolution of adapting new technologies to allow us to be better and faster in a more financially optimised way,” said Herman Widjaja, senior vice president of engineering at Tokopedia and honoree at the inaugural CIO50 ASEAN Awards. “It always goes back to the need of our users and market, then the new technologies and innovations will follow accordingly. It’s also about understanding whether the innovations that we are considering are future-proof.”

Based in Jakarta, Widjaja oversees Tokopedia’s technology and data office, juggling the emergence of new solutions with ever-changing marketplace demands. “Our products and services have been evolving rapidly at massive scale, touching various aspects of our users’ life, from shopping, investment, to entertainment,” he said. “Technology leaders are faced with endless opportunities to continuously innovate and tackle real problems.”

Recent examples of innovation at work include Tokopedia Play, TokoCabang and Mitra Tokopedia, each created with consumer requirements at the core, complemented by the deployment of forward-thinking technologies.

Tokopedia Play is a video streaming platform allowing users to have interactive experiences through smartphones: consuming entertainment content, reviewing products, voting, receiving special offers and making purchases. According to Widjaja, users can simply shake their phone to access the platform.

To handle large-scale events such as Ramadan Ekstra, the first-ever online shopping festival in Indonesia, Tokopedia leveraged Google Cloud and AliCloud to provide uninterrupted service to shoppers and merchants, scaling up to attract more than 332 million visits and 73 million visitors during the Muslim holy month of Ramadan.

Transactions on 17 May 2019 alone equalled the total transactions from Tokopedia’s first six years of operations, he revealed.

Running such high-profile online events at scale helps the business acquire large numbers of new users at once. This then allows the provider to take share of an ‘e-tailing’ market in Indonesia forecast to grow from $5 billion in 2017 to $40 billion in 2022.

Tokopedia Play could only support 55,000 concurrent users at first, but it was rebuilt as a microservice on Google Kubernetes Engine in five weeks and is now able to support 1.5 million concurrent users.

Meanwhile, TokoCabang is a smart warehouse for sellers to help scale up distribution. “Using AI technology, Tokopedia can predict demand and provide information that can help sellers to store products in locations with higher demand,” Widjaja explained. “This enables buyers to get better access to the things they need, anytime they want while helping sellers to grow their business even more.”

The aim of the service is to boost same-day or one-day shipping figures from 70 percent to 90 percent in the upcoming years, with sellers charged a fee of 3,000 Indonesia rupiah (US$0.21) per sold item.

To bridge the online and offline retail worlds and help individuals start and grow businesses without having to migrate to a full e-commerce platform, the company launched Mitra Tokopedia. It allows them to buy products at wholesale prices and resell them, and provides instalment payment facilities for sellers. “They can start selling a wide range of digital products, from phone credit, Internet packages, electricity, TV cable vouchers, game vouchers and much more,” he said.

Top priorities for Tokopedia

Widjaja’s technology priorities include reinforcing the company’s core infrastructure. ”Routine maintenance is important to prevent technological damage,” he said. A reliable monitoring and sensor system in service operations can help with that.

Focusing on consumers by creating new products and solutions to meet their requirements, and  strengthening data platform capabilities are on Widjaja’s to-do list too.

He is also placing emphasis on the wider use of AI as an effective way for Tokopedia to improve and personalise services, alongside the optimisation of technology execution from a financial perspective. “We measure our success based on the impact that we are making on our users,” he said. “It’s about solving customer problems in a creative and financially optimised way and making our products and services better for our customers day by day.”

From a wider business standpoint, and at the direction of the CEO, Widjaja said the overriding priority for Tokopedia during the next 10 years is to remain laser-focused on ensuring individuals and business owners become a ‘technology enterprise’. “In other words, to achieve our mission, transforming everyone to become an ‘e-commerce enterprise’ will not suffice,” he confirmed.

“We have to be able to build an ecosystem that can provide real solutions for every profession in Indonesia, where they can be a ‘technology enterprise’ through Tokopedia so that they will continue to be relevant as time progresses. That being said, infrastructure becomes a key element in building a super ecosystem.”

Indonesian innovation

As a born-and-bred Indonesian business, reaching evaluated unicorn status, Tokopedia’s impact on the national economy continues to grow. For example, in 2018, the business created 10.3 percent of new job opportunities across the country, and its marketplace lists over 250 million products.

To operate at that scale, Tokopedia is deploying analytics and AI. “AI with all its capabilities of machine learning, demand prediction and search personalisation has become one of the most disruptive technologies in history,” he observed. “It changes the way we solve problems and conduct processes, in a good way, making everything become more efficient and effective. It’s incorporated in our daily lives from predicting what we can say next in an email, the feeds we’re seeing on our social media, to choosing our most favourite music genre.”

In e-commerce, the company is using it for supply-demand prediction. Widjaja said AI helps predict future sales from historical data to make informed decisions based on customer needs, warehousing needs and personal preferences. “Another example is search personalisation,” he said. “We leverage AI to help us optimise user experience with informed and more personalised recommendations.”

Aligning growth with talent

By 2022, more than 61 percent of GDP (gross domestic product) in Indonesia will be digitalised, with growth forecast in every sector. According to IDC findings, such a shift in market dynamics will drive US$78 billion in IT-related spending during the next three years.

Despite the upward trajectory, Widjaja cautioned that the rapid development of the technology industry remains proportional to the increasing need for digital talent within the country. “In my opinion, the availability, readiness and maturity of digital talent is one of the main keys to realising an ecosystem of technology industries that are more advanced and capable of global competitiveness,” he said.

The company created Tokopedia Academy to develop future digital talents internally. “Through our regular conferences, hands-on workshops, government and university partnerships, Tokopedia Academy aims to provide access for everyone to learn to contribute to the development of Indonesia’s economy through technology,” Widjaja explained.

The business also collaborates with University of Indonesia through the launch of Tokopedia UI AI Center of Excellence, the first AI deep learning development centre in the country which leverages the supercomputer capabilities of Nvidia. Its aim is to encourage academics and researchers to use technology.

“Data talents are quite challenging to find. As a developing market, we are facing new demands in terms of developing these skills to fill the gap,” he said. “It’s also challenging to find IT talents with relevant and prominent soft skills, such as communication skills and leadership.”

Widjaja said the idea of majoring in Computer Science and Engineering didn’t occur to him until he had finished senior high school.

Fast forward more than 15 years and the industry executive has held U.S.-based technical roles at Amazon, Facebook, Google and Microsoft, before joining Tokopedia in May 2018.

During his tenure at Microsoft, Widjaja learned about operating systems and how technology developed, understanding that an engineer must have the ability to lead and sell ideas for 10 years.

After managing Kindle Book and indulging in cross-platform development at Amazon, he was invited to develop Facebook’s Oculus VR, before moving on to Google to learn the mechanics of AR.

“Following 13 years of experience with the technology giants, I decided to return home to the growing Indonesian market,” Widjaja said. “The technology industry is always challenging, exciting and impactful, there’s never a dull moment or a mundane task.

“Technology is a perfect combination of art and science. The ‘art’ part is where exciting things happen where we are always on the move to solve hard problems in a creative, effective, scientific and cost-effective way.”