Validating "New Retail" Startups in Indonesia (UPDATED)

New retail trying to connect merchants with technology. The goal is to make it easier for businesses to increase profits and reach a wider range of consumers. Conceptually, this approach tries to empower several features that have been previously applied to the system E-commerce to conventional retail. Not digitizing all business processes, but targeting certain aspects which is considered not optimal.

The four models above are now widely adopted by local startups with product lines or targeting a fairly diverse retail segment. The community, both from the side of traders and buyers, received the update quite well. It is proven by the business growth of many amazing new retail startups.

The beginning of the development of new retail in Indonesia

2014 Kudo (an acronym of Kiosk for Online Trading) was launched. The service at that time allowed anyone, especially shop owners to become Kudo agents and could sell various products in e-commerce. Buyers can choose the desired product and pay for the order to the agent.

However, along with the development of its business, Kudo focuses on advancing traditional warung in Indonesia so that they can serve a variety of products and services. The concept was quite successful in being applied, making Kudo used by 2,8 million business partners and becoming the largest agency service in Indonesia. After being acquired Grab, in 2019 they changed their name to GrabStall and reinforces commitment to empowering traditional warungs.

"Through technology, GrabKiosk expands the types of services offered by stalls such as credit and various bill payments, reduces stall business costs by making it easier for traditional stalls to order merchandise (wholesale), and provides access to additional business capital and financial services through money transfer services (domestic remittances) and micro-insurance and cash loans will be provided," explained the Head of GrabAgung Nugroho Kiosk.

After that some e-commerce followed, for example Tokopedia and Bukalapak Partners. Approach online-to-offline become the best bridge in the midst of broadband expansion and increasing digital literacy of the community.

Entering 2018, Kopi Kenangan debuted announcing funding of 121 billion Rupiah from Alpha JWC Ventures. The company will focus on this investment to increase business through technology, one of which launched applications for store search, ordering, payment support and loyalty programs.

The business model that is well-accepted by the market facilitates the flow of investment. After a few months, Kopi Kenangan announced a further 282 billion Rupiah funding from Sequoia and at the end of 2019 yesterday they booked series A funding from a number of investors, including Arrive, Serena Ventures, Caris LeVert and Jonathan Neman. They have managed to sell 3 million cups of coffee per month.

With similar products and approaches, there is also Fore Coffee, a startup assisted by East Ventures. Finally, they announced further funding of 118 billion Rupiah from East Ventures, SMDV, Pavilion Capital, Agaeti Venture Capital, Insignia Ventures Partners, and several angel investors.

"We use a variety of technologies, ranging from mobile applications that we made ourselves, as well as existing technologies, such as Moka to monitor payments, Member.id for the loyalty platform, and Go-Food. GrabFood and TravelokaEats as distribution platforms," ​​explained Fore Coffee Co-Founder & CEO Robin Boe explain the use of technology in startup.

Wahyoo also offers a new retail approach, targeting warteg by providing digital access to the supply chain. From the statement of Founder & CEO Peter Shearer, currently they have embraced at least 7000 partners from various regions. They have also secured seed funding from Agaeti Ventures, Kinesys Group, Chapter1 Ventures, SMDV, East Ventures and Rentracks.

There are still several startups that offer new retail concepts with various business approaches.

Have a chance to get momentum

The achievement of the number of partners, transaction value and capital flows received implies that new retail has been quite successful in validating its concept over the last few years. If analyzed more deeply, they are quite careful in placing their products into the right customer segmentation.

Take the example for startups with coffee products above, they see a "coffee coffee" trend among millennials. To an existing coffee shop, let's call it Starbucks, the price standard is quite high. Then they come up with coffee products at relatively cheaper prices, but with an improved customer experience.

This is also what startups like Kudo do, which focus more on targeting partners from rural areas.

The disbursement of the large investment obtained also allows players to carry out strategies"growth hacking" which have been successfully implemented by startups in other verticals, such as ride-hailing or fintech. They could increase traction with a series of promo programs or massive expansions at many points – and indeed all players are now heading in that direction.

With a wide market share, more mature players and more and more attracted investors; is new retail will be the next big thing in the following years?

Update: Additional information and comments from the Head of GrabAgung Nugroho Kiosk.