November Newsletter 2020/05

  1. Why startups are targeting traditional trade in Indonesia and how they are reshaping the retail landscape

Indonesia has become an attractive prospect for regional startups looking to expand, and similar to India, a growing number of startups have been targeting the country’s informal market, looking to digitise Indonesia’s traders and supply chains.

Traditional trade focus: Indonesia’s retail economy remains mostly traditional, with many intermediaries driving up prices. Modern convenience store chains such as Alfamart and Indomaret have been expanding rapidly, but informal traders such as mom-and-pop stores, kiosks, and food carts contribute close to 70% of total retail sales. In the capital Jakarta, 60,000 informal street food carts provide cheap meals to hungry consumers on the go, and there are an estimated four million warung or neighbourhood retailers in the country.

Limited technology: Many informal retailers employ limited technology, and in many cases don’t even have an email account. Warungs have yet to digitise their businesses, and most traders still rely on large notebooks or pieces of paper, to log transactions and keep track of short-term customer credit.

Internet connectivity: Only 55 percent of Indonesia’s population is connected to the Internet, and about 10 percent of Indonesians regularly shop online. But with a growing number of internet-enabled smartphones, online shopping holds great potential. However, most shoppers continue to shop at their local neighbourhood store, and warung’s large footprint and close working relationships with customers, make them an ideal pick-up point for online shoppers.

Online payments: Online payments remain one of the biggest obstacles for ecommerce players in Indonesia — a country where only about 4% of the population had a credit card in 2017. Cash is still king, and low credit card penetration means that many shoppers often have to pay offline for purchases. This creates a barrier for ecommerce growth, but also opens the door for an online-to-offline (O2O) strategy focused on warung. But e-wallet usage has been growing rapidly in the past two years, and startups such as GOPAY, OVO, Dana, and LinkAja, are expanding their footprint in the country.

Who are the key players reshaping the market?

Bukalapak enables shops to order goods from its platform — cutting out middlemen and reducing costs. To win over more customers, Bukalapak is adopting an online-to-offline (O2O) approach — recruiting warungs to become O2O agents.

GrabKios is a digital app from Grab that empowers warung to become more organised and help them grow their business. GrabKios partners can order products via an app, sell digital products such as mobile top-ups, provide bill payments, offer money transfers to any bank, register grab drivers for a commission, and offer gold saving for customers.

GudangAda is focusing on Indonesia’s B2B supply chain, and the company has created a B2B ecommerce platform in Indonesia — connecting wholesalers directly to retailers.

Warung Pintar is on a mission to digitise street vendors and warung. The Indonesian startup helps revamp their stores with a bright yellow designed kiosk, and connects them with technology that includes a digital point-of-sale system, free Wi-Fi, and LCD screen. The startup has also launched a B2B ecommerce platform for warung.

KitaBeli is leveraging Indonesia’s love fair with social networks. The social ecommerce platform enables consumers to buy essential FMCG goods in a group or within their social circle.

Chilibeli is another community-based social ecommerce startup — connecting farmers, suppliers, and consumers through its network of agents or sellers.

BukuWarung is looking to digitise the country’s micro and small businesses, and launched a bookkeeping app that allows traders to record financial transactions and accept payments online.

Image credit: Warung Pintar

2. ShopUp is setting its sights on Bangladesh’s 4.5 million mom-and-pop stores

ShopUp is a Bangladesh B2B digital commerce platform servicing micro and small entrepreneurs. The startup offers what it calls a full-stack of services that include a wholesale marketplace, warehousing and last-mile logistics, and working capital.

Raised capital: The company recently raised $22.5 million from foreign investors, co-led by Sequoia Capital India and Flourish Ventures. It plans to deploy the raised capital to strengthen its partnerships with manufacturers and expand its tech infrastructure. ShopUp has raised about $28 million to date from investors and merged with Indian ecommerce platform Voonik earlier in the year. The company has opened an office in India’s Bengaluru to hire tech talent.

COVID growth: ShopUp has seen a rise in demand amid COVID-19. Neighbourhood stores’ weekly transactions increased by 8.5x between April and August on the platform, and their RedX’s last-mile logistics team is processing 13x more daily parcel volume than it did in April.

Image credit: ShopUp

3. Route-to-market in emerging markets: Framework and key steps

A Route-to-market or go-to-market is a plan of an organisation using their inside and outside resources, such as a sales force and distributors, to deliver their products to the outlet base and services their customers.

Four phase approach: The Supply Chain Lab divides the design and roll-out of a route-to-market plan into four phases. Each phase comprises several building blocks, supported by analysis tools and key enablers.

What factors do you need to take into consideration? To develop a route-to-market plan, you need to take into consideration internal and external factors. In emerging market countries, special attention should be given to key issues such as infrastructure and regulatory environment that could affect your route-to-market design and implementation.

Framework: For a complete framework and steps to design and develop a route-market plan, see our Route-to-Market presentation (220+ slides). It discusses each step in analysing, designing, piloting, and scaling a route-to-market model to service micro-retailers, and includes 18 tools to analyse the market and design processes. The presentation also includes 35 case study snapshots of companies and startups in Africa, Asia and Latin America — employing business models to service customers in emerging markets.

4. Other news

Tokopedia struggles to incorporate informal traders: Uneven technological penetration and technology infrastructure gaps in Indonesia have hampered Tokopedia’s efforts to add warungs (kiosks) to its online-to-offline (O2O) platform.

Reliance’s JioMart has an edge in the informal retail sector over its competitors, according to Goldman Sachs: JioMart has already launched in more than 200 cities, leveraging Reliance Retail’s store network, and its partnerships with kirana stores across 20 cities. 

Mr Price has launched a container store in South Africa — aimed at township shoppers: The clothing retailer says shoppers are increasingly looking to shop close to home. The first container store was launched in Illovo in KwaZulu-Natal. 

India’s Jumbotail raised capitalJumbotail, an online wholesale marketplace for food and grocery products focused on kirana stores, has raised $11 million in series B2 funding led by Canadian venture capital fund Heron Rock.

Indonesia’s wartegs the next to digitise: Indonesia’s street-side eateries are to become the next sector to digitise. There are over 40,000 local eateries or wartegs in Jakarta generating an average monthly income of USD 3,000. Tech firms such as Wahyoo are targeting the sector.

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