Credit card adoption in Indonesia is still very slow, with only 13.4 million credit cards issued up until 2012, which makes up a 4.5 percent penetration rate with most holders having two credit cards. The advantage in having one is that there are some online stores offering installment payments if you pay via your credit card. Indonesian e-commerce site Kreditmart looks to offer similarly convenient installments for everyone, even if they don’t have a credit card. The site’s been operational since 2008 and co-founder Chintya Fransisca believes that they are the first one to offer such services in the country. How does it work?
Kreditmart sells a wide variety of expensive goods, including heavy machinery, construction vehicles, and electronics. Some of the products cost as much as IDR 20 million (US$2,056), and you can choose to buy those products via installment program.
Kreditmart cooperates with numerous leasing and multi-financing companies to take care of the company’s credit payments. They will also help Kreditmart in screening installment applicants and to remind them about payments. Customers can then get a plan for how much money they’ll need to pay every month, according to the number of months and the down-payment options available on the site. Some of the installment plans can cost you an additional 20 percent interest rate, but others have a zero percent interest rate.
Chintya explains that, just like at a bank, customers need to first submit documents about where they live, where they work (they must have a job), and about their family.
There is always a risk that customers run away with their goods, but it has been minimized thanks to the said screening process. She also believes that a lot of people who apply for credit payment online already have good financial background and are working at good companies. They also have good characters. She doesn’t imply that they are all angels, but the risk is low.
Getting back to business
Kreditmart has seen impressive sales as the company recorded an average of IDR 700 million ($72,000) sales revenue every month in the first two years with around 350 monthly credit customers. That number is achieved after the company rejected 30 percent of credit applications.
But during that time, Chintya said that they were busy with the other online shops and didn’t put too much focus on Kreditmart. The team then decided to get back to running Kreditmart again after seeing a few big companies venturing to similar e-commerce businesses, and Kreditmart just started selling its goods again last month and has recorded IDR 100 million ($10,280) month’s revenue already, which is a nice start.
In the future, Kreditmart hopes to offer its own credit facility outside its partnership with the aforementioned finance companies. They hope that by doing that, customers can get easier approval and, in return, generate greater revenue. She also hopes that this plan can lower Kreditmart’s interest rate for a few products. Chintya believes that the risk to offer their own credit services is manageable.
The team plans to build more warehouses at big cities in Indonesia so that they can lower the delivery cost for some of their large products. The focus this year is to cater to customers in Java island.
Kreditmart’s pros and cons.
This is the first time I’ve heard about Kreditmart, and it looks like the company’s credit payment system is working very well. There are still a few places on the site that look a bit messy, like its FAQ page, and some product categories that are still empty. Chintya explains to us that they are still building the website, but it looks like it is progressing very slowly.
I also compared the prices on Kreditmart with other Indonesian e-commerce sites and found that generally Kreditmart’s products are more expensive. On the other hand, Kreditmart has a few products that are difficult to find on other sites like supermarket refrigeration cabinets and construction tools. Of course, if people or small businesses are looking to purchase online goods via installments but don’t have a credit card, then Kreditmart is an attractive choice.
Besides Kreditmart, a few Indonesian online shops are starting to offer similar installment payments too. Gadget e-commerce site Bhinneka and Bintang Mandiri being the two of them. So far, Kreditmart is a self-funded project, and the team is open to potential partnerships.
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