The working capital trap: Lessons from Indonesia’s first D2C generation

Indonesia's direct-to-consumer (D2C) and inventory-heavy startup sector evolved significantly between 2018 and 2026. Early platforms like Fabelio in furniture, food and beverage, fashion, and household goods encountered operational risks that venture playbook models didn't anticipate. Some platforms stabilized, others restructured, and Fabelio was declared insolvent in 2022.

The operational risk patterns seen in this D2C sector are not unique to this industry, but rather common in any business with a large gap between cash outflows and inflows.

The original D2C thesis was to leverage Indonesia's growing middle class, expanding e-commerce, and digital payments to skip traditional retail. However, three structural factors made this harder than anticipated: the extended cash conversion cycle, inventory as a leveraged financial product, and operational fragility at scale.

The cash conversion cycle for D2C businesses is longer than software businesses because capital is turned into inventory, then orders, and finally revenue. Inventory on a D2C platform is not just stock, but a leveraged position on consumer demand at a chosen price and SKU mix six to twelve months earlier. Inefficient operational systems can break down when scaling, leading to poor quality and customer experience issues.

The lessons from Indonesia's D2C generation highlight six key principles: viewing working capital management as the business model, understanding growth without unit economics as a trap, hedging inventory by treating it as a position on future demand, scaling operational systems before volume increases, and emphasizing founder accountability in physical businesses.

The Indonesian PKPU framework can provide a structured path to restructuring for viable businesses. Looking ahead, the D2C category in Indonesia is expected to persist, but with more capital-disciplined, operationally rigorous, and humble physical-goods-style business models.