JAKARTA: Big corporations are beginning to focus on Indonesia’s small and midsize family-owned retail shops, known locally as “warung”, as the digital transformation (DX) wave continues to rise in the country.
Warungs account for 60% to 70% of the Indonesian retail market and their earnings could grow significantly once DX takes hold. Warung-focused startups are already attracting funds from giant investors.
Mitsui & Co, a leading Japanese trading house, will help warungs process orders for frozen food products starting later this year in partnership with Toko Pandai, a local payment service startup.
Mitsui recently had a freezer installed in a warung and is trialling an app-based order and delivery service for frozen foods.
The Japanese company will also tie up with Indonesian frozen food makers and logistics companies to provide up to 30 types of frozen foods, including processed meat and sweets.
Many warungs have refrigerators but few have freezers, which are also uncommon in households.
But the Covid-19 pandemic has seen the use of frozen foods rise, prompting Mitsui to try to tap into the nascent market with digitalised services, including online payments.
Other companies are also watching warungs. An investment company owned by Amazon founder Jeff Bezos recently funded Lummo, a startup that helps warungs transition to computerised bookkeeping.
Warungs sell light meals, cigarettes and other products, with an estimated 3.5 million of the mom-and-pop stores throughout the country.
The stores comprise the largest segment of the nation’s retail market that is forecast to reach US$242.7 billion in 2026, up about 80% from 2021, according to Mitsui & Co Global Strategic Studies Institute.
But digitisation has yet to gain traction with warungs, which usually pay wholesalers cash and face numerous problems, such as complicated cash management and delays in the collection of receivables.
Shopee, an e-commerce company belonging to Singapore’s internet giant Sea, began a service in 2020 that lets people pay for utilities and other services through warungs.
Indonesian e-commerce platform Bukalapak, which went public in 2021 as the nation’s first unicorn – a private company valued at US$1 billion or more – is promoting inventory order and management services for warungs.
In January, Indonesian e-commerce startup Sirclo announced a deal to acquire Warung Pintar, another local startup promoting DX for warungs.
Both Sea and Bukalapak have experience with digital banks, and using DX to collect credit information about warungs could help them expand their loan businesses – a likely prelude to a turf war that is bound to heat up in Indonesia.
Source: https://www.freemalaysiatoday.com/category/business/2022/03/27/indonesias-small-shops-attract-big-interests-amid-digital-wave/