Warung Pintar Report: Solutions and Challenges in Warung Digitalization

Quoting Euromonitor data, there are 3,61 million retail businesses in Indonesia. This figure includes the warung business ecosystem that has existed for a long time and is very close to Indonesians. According to an internal survey Smart Shop, as many as 9 out of 10 Indonesians meet their daily needs in stalls, ranging from basic needs to ready-to-eat food. Not surprisingly, the value of traditional retail sales exceeds IDR 6 trillion every day.

Behind the huge potential of the warung, there are still many challenges faced by the stall owners. One Warung Pintar user, Esih said, previously to be able to continue to meet the needs of his merchandise stock, he had to stock up his own goods by shopping directly to agents. At least, he has to go to the nearest two to three agents because not all of his shop's needs can be met by just one agent.

An average agent can fulfill 30% of the total demand for merchandise. Even when shopping, Esih often has to stand in line to get stock of items that are favorite by many other stall owners. This makes him spend at least two to four hours outside the house. Other risks, such as road accidents, lost or damaged goods.

"When shopping at an agent, I have to spend time selecting merchandise, then lining up, and also bringing my own groceries," said Esih.

Another risk that is often not realized when shopping offline at wholesalers are the operational costs that must be incurred, namely Rp. 20 thousand to Rp. 30 thousand for one purchase, or almost Rp. 500 thousand for one month. These operational costs consist of gasoline costs, cigarette money, children's snacks, parking fees, and transportation tips. If accumulated, these operational costs are equivalent to 15% of total household income.

In the process of fulfilling the stock of goods, Esih did not get visibility of the actual market prices set by the producers. This is because everything is submitted by the market price mechanism. As a result, Esih often gets goods that are between 5% and 10% more expensive than the actual price. Not a few stall owners who in the end ask about the buying and selling prices in their community forums on Facebook and WhatsApp.

The problems above are not only faced by Esih, but also millions of other stalls when stocking merchandise. Stock activities, the majority of which are FMCG products, are important because more than 90% of shop sales come from sales of physical goods. This is the reason why shop as a micro business is very difficult to develop.

Warung Pintar Co-Founder, Agung Bezharie Hadinegoro, said that his party saw the above challenges as opportunities that were fully exploited by the FMCG market leader. Therefore, the company exists as a bridge for stalls and FMCG companies to connect with each other through a more transparent distribution channel.

"Warung Pintar provides a distribution supply chain that integrates technology in distribution channels, operations, to optimizing business potential. In the end, we optimize the roles and collaboration of the actors involved in the traditional retail supply chain," said Agung.

The company provides an application that shop owners can use for wholesale shopping, which provides a wide selection of suppliers, from big brand owners to Smart Wholesalers. This shopping system can adjust the needs of stalls both in terms of the type of goods, the number of wholesalers, road accessibility, delivery time, and payment flexibility. On the other hand, with the shopping system through the application, stalls do not require extra effort, time and costs for wholesale activities.

On the one hand, divide brand, principals and distributors, they can connect with stalls and wholesalers directly through Smart distributors to become direct suppliers to stalls. They can too monitoring sales performance, movement of goods and prices, and competitor performance. Data transparency can also be used as material for future business strategies.

One of brand the principal utilizing this solution is PT ABC President Indonesia. Through sales of their packaged drink lines, namely Nu Yogurt Tea, Nu Teh Tarik, and Nu Milk Tea, sales performance has increased by up to 50% each month. From July to September 2022, the number of stalls buying products from this company has increased by 90%. This increase also had an impact on PT ABC President Indonesia's market share of packaged beverage products and instant noodles, which reached 61%.

"In the future we will forge more partnerships with FMCG industry leaders to ensure complete stock at a more certain price. We will also continue to update the Warung Pintar application so that it remains relevant to the needs of skippers over time. We will exert all our efforts to empower warungs so that it can continue to grow in the midst of all economic conditions," concluded Agung.

Landscape of similar players

Apart from Warung Pintar, there are already several similar players who are focusing their solutions on digitizing the shop supply chain. They are:

1. Bukalapak partners Bukalapak partners currently provide more than 40 SKUs including payment of electricity and telephone bills, top-ups, game vouchers, insurance, tickets, game vouchers, e-wallet, remittances, investing in gold to the opportunity to earn more by becoming a logistics agent.

In the third quarter of this year, Mitra Bukalapak contributed 48% of Bukalapak's Total Processing Value (TPV). At the end of September 2022, 15.2 million shop owners and other MSMEs from across Indonesia were registered as Bukalapak Partners, which is an increase from 11.8 million at the end of December 2021.

The company also began to duplicate the potential of the warung business by expanding to the Philippines through brands SmartSari.

2. Ula Ula allows stall owners to order a wide range of products, from daily necessities, fresh food and staple foods, and clothing, and have them delivered directly to their stores. In published data, the majority of Ula users come from tier two to four cities that still lack access to logistics resources and infrastructure.

As of November 30, 2022, company announced layoffs of its 134 employees or around 23% of Uula's total employees spread across three countries. The company argued that the decision was made because it faced major challenges since the pandemic, such as market turbulence, commodity price volatility, supply shortages, regulatory changes, and rising crude oil prices. Therefore, steps for efficiency from various sides must be taken while formulating a new business strategy.

3. Warehouse AdaWarehouseAda positioning itself as a platform E-commerce B2B for producers, traders, wholesalers and retailers, to be integrated with the entire supply chain. It is claimed that the GudangAda application has currently been used by more than 1 million users and more than 200 brand the principal has joined the ecosystem.

There are three services offered, namely GudangAda where traders buy and sell, GudangAda Logistik which is an easy, safe and reliable order delivery service, and GudangAda Solusi which is a store cashier and stock management application for traders.

4. Trade This startup provides a variety of household needs, from groceries, fresh/frozen groceries, to fashion products, with delivery services on the same day and the next day. The business model used is shopping directly through the Trade platform, reseller, and third parties working with the company.

Since three years standing, The trade claims to have grown fivefold on an annual basis year-on-year in the first semester of 2022. In addition, there was a 60% increase in income for MSME actors in the Datangan reach villages. Currently, Dajian has more than 30 thousand active users with more than 500 thousand monthly shopping transactions through applications and websites.