Indonesia

Warung Tech
Review 2022:
MSMEs at the vanguard
of retail revolution
Table of Why Indonesia’s warungs are at the vanguard of the country’s next retail revolution
Key Findings
02
03

contents Chapter 1 Digitalisation of Retail in Indonesia 04

The Timeline 05
E-commerce leading the pack 08
Indonesia’s warung tech space 10

Chapter 2 Survey Results: Digitalisation powers up micro and small retailers 14

Who are the warung owners 15
The recurring O2O app user 19
Warung owners, banking and other financial services 26

Chapter 3 Meet the Mitras 34

Mitra profiles 35

Chapter 4 Analysis & Recommendations 37

Looking beyond the inflection point 38
What warung tech can learn from kirana tech 40

Chapter 5 Stakeholder Insights & Afterword 42

Stakeholder insights from Ovo, Suntory Garuda Beverage, XL Axiata, Coda Payments and Unipin 43
Mitra Bukalapak: Bringing Indonesia’s warungs to a 21st century business model 46

Authors, Methodology, and Disclaimer 48

Bibliography 49

01
Why Indonesia’s The Covid-19 pandemic and the proliferation of
hypermarkets and convenience stores are two
A big question is around the actual impact that
these O2O commerce models have on the

warungs are at
major challenges currently facing micro and small business performance of traditional retailers. Or
retailers (locally known as warungs or kios). The if they are helping to improve the FMCG supply
pandemic that hit Indonesia in early 2020 forced chain, as well as benefit other principals within

the vanguard of retailers to change their old ways, and fastrack their
digital transformation by adopting services offered
the O2O commerce landscape.

the country’s
by online-to-offline (O2O) commerce startups. The The objective of this study is to identify the
launch of many of these services predated the penetration level of O2O apps and their general
pandemic. But repeated waves of lockdowns and impact on warung operators; how these apps

next retail movement restrictions made it very difficult for

retailers who depended on a purely offline model,
help principals reach a larger audience; the real
business opportunities in the tech-enabled

revolution
leading to a surge in adoption. A healthy funding warung space; and forward-looking indicators
environment for e-commerce in general and O2O that may influence the evolution of this as yet
models in particular helped these services extend growing sector.
past the metros and tier 1 cities.
Also included are perspectives from some of the
Accessed using mobile applications, these O2O companies across categories who have used
services cover, among other things, FMCG product these O2O commerce enablers to address a
procurement, billing & payments, retail of digital wider audience, as well as from the ‘mitras’ or
products, insurance, and logistics. partners themselves — warung owners who can
bear testimony to the transformative potential
of these services.

This study is commissioned by Mitra Bukalapak

and conducted by DealStreetAsia's research unit.

02
Key findings:
01 Adoption at
inflection point 02 Riding pandemic
momentum 03 Positive user
feedback 04 Wide range
of benefits 05 Adoption equals
productivity

O2O commerce adoption among The penetration of wholesaler/ High approvals for O2O apps Adopters ranked the ability to DealStreetAsia’s Data Vantage
Indonesian MSMEs reached an O2O applications stood at 31% among adopters suggest there is “save time and money”, “ease of O2O Adoption Index suggests
inflection point during the based on a survey of 1,000 warung a clear case for the business transaction”, “competitive pricing” adoption levels rise in line with
Covid-19 pandemic period as operators in February 2022, of model to deliver value. 75% and access to “wider selection of the following: education level;
millions of retail warung operators whom more than half first adopted professed satisfaction with the products” as the biggest benefits of customer volume; sales volume;
turned to mobile applications to the apps in the past 24 months, apps, versus 23% who are neutral O2O apps. Nearly all adopters said and product restocking frequency.
overcome difficulties that suggesting a momentous change in and 2% who are dissatisfied. the apps have allowed them to
emerged with travel restrictions the level of warung digitalisation save money on procurements, with
and social distancing. during the pandemic. 96% noticing an increase in income
relative to before adoption.

06 Optimistic
outlook 07 Tech savvy
and frugal 08 High appetite
for borrowing 09 High levels of
sophistication 10 Some lessons
from kiranas

Adoption levels are higher among O2O app adopters have a greater The propensity to borrow is Warung owners show some level If Indonesia emulates the O2O
warungs that experienced tendency to save money compared higher among recurring O2O app of sophistication in the type of commerce model prevalent in
business growth in the past three to non-users and those that use users as 51% of people in this investment choices, which include India’s kirana tech space, the next
months and also among those such apps occasionally. The group plan to acquire loans in the mutual fund products, stocks, few years could see rising
that expect a positive business majority of respondents save up to next three months versus 33% of bonds, cryptocurrency and investments, mergers and the
outlook in the next three months. Rp500,000 (roughly $35) per week. occasional users and 22% of non-fungible tokens. largest privately owned player in
those who never use the apps. the space going in for an IPO.

03
1|1
Chapter 1

Digitalisation
of Retail
in Indonesia

04
 Timeline of digitalisation of retail in Indonesia
University of launched launched launched
Indonesia's
Indonesia Indonesia Indonesia's first The first licensed
welcomes launched its commercial ISP opened first online
first ATM first IP-based Internet Service Indonesia's first shop D-Net
machines network Provider internet café launched

1986 1988 1994 1995 1996 1999 2000 2004

launched launched launched launched launched launched

Apple Inc. Brought to

launched Indonesia
FMCG network the iPhone by Telkomsel

2013 2012 2010 2009 2008 2007 2006 2005

launched launched

launched launched launched launched launched IPO

by Bank Indonesia

2014 2015 2016 2017 2018 2019 2020 2021

Tokobagus
became
terminates terminates
shutdown operation in operation
Indonesia

* Gofood and Gomart are the first 020 model e-commerce by Gojek
** Mitra Bukalapak is 020 unit by Bukalapak Early Adopter Dotcom Boom Web 2.0 Industry 4.0

05
 1986 1999 2000 2007

Early Adopter Dotcom Boom

A period that offered a preview of the impending digital The internet started to make its presence felt, but was far
revolution. ATM machines were the first step towards a digitally from being universally accessible, hampered by high data
driven economy, severing the connection between a bank prices and expensive devices. Internet penetration in
branch and money. Indonesia stood at a mere 5.7% of the population in 2007
according to World Bank estimates.
Indonet began providing internet services in 1994 and
significantly enough, launched the first cybercafe a year later. The launch of Tokobagus took classified ads online —
While it’s tempting to disregard cybercafes as relics of a bygone it would be acquired and rebranded by global internet
era, they often served as the first point of access to the internet marketplace Olx in 2014.
for early adopters, given the high prices of desktops and
laptops — the hardware required for internet access. Some of the significant developments that impacted the
trajectory of the digital economy took place through this
The first websites launched included fledgling e-commerce period — prominently the launch of BlackBerry which
offerings. Like in many other markets of a similar nature, only a brought an unprecedented degree of functionality to
few of the early pioneers still exist — Bhinneka.com for mobile phones and iPhone which heralded the
instance. Many of the early pioneers did not survive. smartphone revolution.

06
 2008 2013 2014 2021

Web 2.0 Industry 4.0

Online businesses finally started to gain ground, backed by a A surge in investments, increased connectivity and rapidly maturing business
consumer base that was increasingly comfortable, shopping models have dominated this period. All of this was aided by a steep fall in data
and living online. Private capital investors began to bet on prices. In Indonesia, the price of 1 GB of data was pegged at $2.86 in 2016. By
companies that were creating bespoke solutions relevant to 2020, the price was down to $0.64 for the cheapest packages. Digitally driven
local/national needs, or ones that attempted to replicate models were not just accessible but here to stay. Last year saw Indonesian tech
globally successful models. startups raise a record breaking $9.4 billion in equity funding and debt.

This era saw ecommerce gaining ground with the launch of E-commerce emerged as one of the leading categories when it came to funding. The
firms like Bukalapak, Lazada and Tokopedia. Physical first O2O e-commerce business model came from MatahariMall, backed by a $500
commerce got a fillip too with grocery chain SRC. million investment by the Lippo Group, according to media reports at the time.
MatahariMall envisioned a buy online pickup offline model and had ambitious plans
E-commerce businesses matured and started expanding of cornering 20% of the e-commerce market in Indonesia by 2020. MatahariMall
beyond metros. E-wallets launched with Doku in 2013, ceased to exist as a distinct entity in 2019.
bringing financial inclusion and a suite of services to a
previously unbanked / underbanked population. The Warung tech was incubated by Mitra Bukalapak. It resulted in a surge in startups
internet became more accessible thanks to inexpensive tackling one or more aspects of building an O2O business model that would
Android based smartphones and dropping data prices. The digitalise and modernise traditional trade.
launch of e-commerce enabler Sirclo points to the growing
maturity of the sector. Among the big vindications of these business models was Bukalapak’s IPO last year.

07
E-commerce GMV per sector
(in Billions USD)

leading the pack Source: Google, Temasek, Bain & Company

+18%

The digitalisation of retail is the biggest contributor to Indonesia’s digital economy, E-commerce
which grew by 49% year-on-year to $70 billion in terms of gross merchandise +52%
value in 2021. This makes it the largest in Southeast Asia, according to the 104
e-Conomy study from Google, Temasek, Bain & Company. All key digital sectors
experienced double digit growth last year with e-commerce leading the pack. It
closed the year with an estimated $53 billion in GMV, up by 52% year-on-year. 53
35
% of internet users who have made at least one purchase online 21
Source: Google, Temasek, Bain & Company 2019 2020 2021 2025

97%
90% 81% 80%
80%
71% 68%

Transport Online
& food +25% media +25%
Singapore Thailand Malaysia Indonesia Vietnam Philippines SEA

+36% 16.8 +36%

15.8
Indonesia saw 21 million new digital consumers from the start of the pandemic until the
first half of 2021. Of the new users, 72% are from non-metro areas — indicative of 5.7 5.1 6.9 4.3 6.4
growing penetration across the archipelago. Approximately 80% of Internet users have
3.5
made at least one purchase online as of June last year. 2019 2020 2021 2025 2019 2020 2021 2025

08
Top destination for Indonesian companies such as Bukalapak, GudangAda, Ula
and TaniHub were among the largest e-commerce

e-commerce investment
fundraisers in the region’s private capital market in 2021.
Bukalapak also raised $1.5 billion from its IPO in August.
Online marketplaces (B2C +C2C) such as Bukalapak
generated the most investments in the region, with $1.4
billion in private capital investment.

Apart from being the largest digital economy in the region, Indonesia has consistently served as the preferred Dominated by Indonesian startups, online grocery is the hot
destination for venture capital investments into e-commerce. The country contributed 41% of total equity funding new sector in Southeast Asia’s e-commerce landscape.
into homegrown e-commerce startups in Southeast Asia last year, according to DealStreetAsia’s DataVantage. Investments grew by five times in terms of deal count and
7.8 times in terms of total proceeds collected in 2021.

Overall, the e-commerce sector will continue to serve as the

main growth engine in Indonesia’s venture capital space.

Growth of equity deal E-commerce deal volume (inner circle)

Fundraising in Indonesia 222
Source: DealStreetAsia’s Data Vantage and value (outer circle) per market
across sectors
Source: DealStreetAsia’s Data Vantage
4% 2%
+46% Indonesia
+2.7X 7%
5% Value
6%
Singapore 41% Volume
12%
9% 39%
78 114 2.66 Vietnam
2021 138 $9.44B
14%
0.99 Malaysia
134

2020 2021 2020 2021

Philippines
35%
27% $3.11B $3.43B
Volume Value (in billions USD) Thailand 2019 2020 2021

09
Indonesia’s warung Digital products:
Phone credit,

tech space
Internet data,
gaming voucher
Fintech:
e-money topup,
remittance,
When Bukalapak first launched Mitra Bukalapak in 2016, it had a relatively simple Wholesale money transfer,
mandate — offline payments for online purchases. Within just a few years, it has FMCG & other billing, bookkeeping
grown to connect almost 10.4 million MSMEs with an incredibly diverse range of household
goods
products and services. It can also be credited with inventing ‘warung tech’ - a catchall
descriptor for a vast assortment of services offered by startups who aim to modernise
and digitalise Indonesia’s vast, unorganised retail sector.

Whether they began operations modernising traditional retail kiosks like Warung
Pintar, or offering accounting services like Lummo (formerly BukuKas), the goal that a
number of these firms are gunning for currently is to offer an “end-to-end solution”. Travel tech: Warung Fintech

Tech
A suite of services that will address the needs of warung owners, consumer product ticketing, booking lending
companies, telcos, financial service providers and even gaming and entertainment
firms. To say nothing of offering the end consumer a more convenient experience —
whether they are in the market for soap or a money transfer.

There are wildly varying estimates about the total number of warungs in Indonesia,
made even more difficult by the fact that anyone can start a store to serve a
neighbourhood or locality. Over 60% of the workforce is accounted for by the
Logistics:
‘informal economy’ according to estimates from the International Labour drop off point Wealthtech:
Organisation. In a speech at the G20 summit in Rome last year, President Jokowi put Digital gold,
the number of MSMEs in Indonesia at 65 million. mutual fund

Another testament to the size and clout of the space is the massive funding that
‘warung tech’ firms have drawn in from private capital investors. We start with the
state of play when it comes to key categories that warungs are involved with: FMCG Insurtech
retail, telco, fintech (e-payments), fintech lending, gaming, wealthtech products,
insurance, logistics and travel tech.

10
Retail Despite the pandemic, the total sales value of modern grocery retail, which
is defined by packaged foods, soft drinks and alcoholic beverages, still
managed to grow. The value reached $42 billion, up by 4.95%
year-on-year, or equivalent to 16.8% of total household consumption on
food and beverages for the year.
Indonesia’s retail industry is dominated by traditional retailers. As of 2020, the total number
of these retailers stood at 4.47 million, slightly down from 4.51 million in 2019, according to
an estimate by Euromonitor, perhaps due to the Covid-19 pandemic. Retail sales value of alcoholic drinks,
soft drinks and packaged food
Pandemic aside, the growth of traditional retailers has been stagnating. In contrast, modern (in millions USD)
retail stores, a format dominated by convenience stores, have been growing at 6.5% on Source: Euromonitor
average from 2015 to 2020. Mostly led by brands such as Indomaret and Alfamart, the total 34.174
number of convenience stores reached 36,146 by 2020, up by 38.5% relative to 2015. 31.577
29.600
Packaged 28.033
food
29.318
25.083

Number of grocery retail outlets by channel in Indonesia 7.877

7.641
Source: Euromonitor Soft 7.526
drinks
7.398 7.477
2015 2016 2017 2018 2019 2020 6.814
Traditional 4,593,483 4,589,788 4,574,208 4,546,222 4,512,891 4,474,316
719
Convenience stores 26.102 29,142 31,460 32,701 34,715 36.146
Alcoholic 651
beverages 637
Supermarkets 1,319 1.341 1.377 1,400 1,428 1,457 527 589
510

Forecourt 550 611 651 685 728 730 2015 2016 2017 2018 2019 2020

Hypermarkets 299 314 333 330 336 337

Based on the retail sales of major modern retailers, traditional retailers
contribute roughly 60% of total retail sales of modern grocery products.

11
Telecommunications Gaming
Driven by infrastructure development and smartphone adoption, the total number of Indonesians spent $1.5 billion on mobile games in 2021, the eight largest globally
internet users in Indonesia grew to 196.7 million in 2020 (73.7% of population) from according to gaming market intelligence provider Newzoo. Gaming voucher retailers
171.2 million in 2018 (64.8% of population) in 2018, according to a biannual survey by in Indonesia that we interviewed believe that the estimate does not include vouchers
Indonesia’s Internet Service Provider Association. sold via e-commerce platforms, including O2O merchants. These retailers believe the
total addressable market of gaming vouchers in Indonesia should be double Newzoo’s
In 2020, four Indonesian telecommunication providers — Telkomsel, XL Axiata, Indosat, estimate. They are confident that in the long run, the O2O model will surpass online
and Smartfren Telecom — booked a combined revenue of Rp 150 trillion (roughly $10.5 marketplaces in terms of revenue contribution to gaming voucher retailers.
billion), according to their financial reports.
Source: Newzoo
Data business has become a major contributor to the telecommunication companies’
financial performance. Interviews with stakeholders suggest that the mitra channel Market/region Global Mobile game App Store Google Play
rank revenues revenues revenues
contributes up to 30% to the total sales of telco digital products in the ecommerce space.
China 1 $31,368.7M $11,400.0M $0.0M

Data sales dominate telco revenues United States 2 $14.779.9M $9,555.6M $4.969.8M
Source: Company annual reports
Japan 3 $12.385.3M $8.862.2M $3.329.9M
Telco revenue (in trillion IDR) % Data sales to total revenue
South Korea 4 $4.207.5M $1,339.4M $2.766.0M

91.1 95% India 5 $2.249.1M $224.0M $1,968.6M

87.1 92%

82% United Kingdom 6 $1.599.8M $924.2M $614.0M

77% 71%
26.1 27.9 Germany 7 $1,522.5M $607.1M $844.3M
26.0 59% 63%
25.1
56%
7.0 9.4 Indonesia 8 $1,511.2M $209.9M $1,265.6M

2019 2020 2019 2020 Canada 9 $1.342.5M $790.3M $513.7M

Australia 10 $1,097.8M $703.8M $362.7M

Telkomsel Indosat XL Axiata Smartfren

12
Fintech Fintech lending
The addressable market for O2O players when it comes to fintech is difficult to Bank Indonesia estimated that the credit gap for MSMEs stood at
calculate due to lack of visibility into real market data and the ever-expanding Rp1,605 trillion ($112 billion) last year as the banking sector could only
services offered by these platforms. Warung owners who were interviewed for provide Rp1,135 trillion ($78.9 billion). Even with the participation of
this study said e-wallet top-up and money transfers are two of the most popular fintech lending firms, the credit gap remains substantial. As of
fintech services among their customers, largely due to their limited access to December, the total outstanding loans distributed by peer-to-peer
banking services as well as the competitive cost involved. These transactions are firms for both productive and consumer loans only reached Rp 30
essentially being carried out using e-money, which is broadly defined as money trillion ($2 billion). O2O applications have a role to play in helping plug
transacted on e-payment platforms that are operated by fintech firms or banks. the financing gap by partnering with banks and fintech lending firms.
The total value of e-money transactions reached Rp 305 trillion (approximately
$21 billion) in 2021, up by 49% year-on-year and 43 times what it was in 2016.

Monthly e-money transaction value (in billion IDR) Outstanding banking loans to MSMEs (in trillion IDR)
Source: Financial Services Authority Source: CEIC

Medium
40.000 450
Small
35.000 400
30.000 350
25.000 300
20.000
250
15.000 Micro
200
10.000
5.000 150

Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021

13
1|1
Chapter 2 | Survey Results

ONLINE
SHOPPING
Digitalisation
STORE

Powers Up Micro
& Small Retailers

14
Who are The 58% 7%
In a relationship
35%
Single/ divorced/

Warung owners?
Married
but not married widowed/ separated

41%

55% 45% 29%

Male Female 19%
8%
3%
Through this study, which was carried out in February 2022, 18-24 25-34 35-44 45-54 55+
we identified 1,000 warung owners or operators across Tier 1
to Tier 4 cities in Indonesia. The respondents are 45% female Age Marital status
and 55% male, at least 18 years of age and up to 55-year-old
and over. Most of our respondents (41%), are between 25 to
35 years of age, and 58% are married. About half have been
running their business for more than three years. Due to its
large population, Java remains the main geography where
most warungs operate, with capital city Jakarta and its
satellite cities contributing 26% of total respondents.
3%
Kalimantan
15%
Sumatera
26%
Jabodetabek

24% 30% 8% Others

17% 15% 4%
Banten
9% 4% 16% 10% 15% 4%
2% Jawa Jawa Jawa
Bali
Barat Tengah Timur
<1 1 2 3-5 6-10 11-20 >20

Years of experience Location

15
At least 39% of warung Number of customers per day
21%
operators earn less
less than 10

33% 10-20

than minimum wage 8% 31-40

19% 21-30

8% 41-50

In reference to Indonesia’s 2008 Law on Micro, Small and Medium Enterprises, we 4% 51-60
classified 82% of all respondents as micro enterprises, namely those with annual
2% 61-70
sales of up to Rp280 million ($19,400), 17% as small enterprises (annual sales
higher than Rp280 million and up to Rp2.8 billion - approximately $194,000), and 1% 71-80
1% as medium enterprises (annual sales higher than Rp2.8 billion). At least 39% of
warung operators earn less than the average minimum wage in the country, Rp2.7
1% 81-90 59%
Have another source
million ($187), from their business. That said, 59% of these warung operators have 2% 91-100 of income apart
other sources of income, while the rest are entirely dependent on their sales. from the kiosk
3% Over 100

Income per week (in million Rupiah)

Warung revenue per week (in million Rupiah)

39%
37%
23% 31%
13% 10% 8% 10%
5% 6% 6% 5%
2% 1% 1% 1% 2% 1% 1%
0 1 2 3 5 10 15 20 30 50 0 0.5 1 1.5 2 3 5 10 20

16
Most warung owner allocate up to
Rp1 million per week for restocking
Due to the nature of their business, the most common product restocking cycles happen every once
a week to once in every two weeks. 29% said they restock every day, while 13% said they restock
once a month. When asked to calculate their weekly budget allocation for restocking, 38% cited less
than Rp1 million, 27% cited Rp1 to 2 million ($139.21) and 12% cited Rp2 to 3 million ($208.81).
33%
Once a week

16%
Restocking budget per week Once in
every
(in million Rupiah) two weeks Restocking
frequency

13% 29%
once Nearly
38% a month 9% everyday
Less
27% than
once
a month
12%
9% 8%
2% 2% 0% 1% 1%
0 1 2 3 5 10 15 20 30 50

17
 31%
Proliferation of 36%
Customers
failing to

convenience stores Tough competition

with modern
pay debt

cited as biggest convenience store

challenge
27% 20%
Unfavourable Limited
location access to
Warung operators cited many challenges facing their business. These
include customers failing to repay their debts, unfavourable locations, 23% financing
limited kiosk space and other realities such as eviction threats and Limited
extortion. But chief among their concerns is the mushrooming of kiosk
modern retail stores, particularly convenience stores such as space
Indomaret and Alfamart. It lends support to the view that traditional 7%
retailers are in need of digital leverage to power their business and 9% Don't know 6%
Product how to Other
survive increasingly tougher competition. manage
sourcing
finance
4%
Permit & 4% 3% 1%
regulation Don’t know
how to Red tape & Eviction
grow & extortion threat
improve

18
Recurring users Do you use wholesaler/O2O apps to restock your
products and to access other warung related services?
make up 31% of (Example: Mitra Bukalapak, GudangAda, KlikIndomaret)

total respondents 12%

Yes, nearly
every day
36%
More than half the respondents in this study have tried using wholesaler or I have 11%
never Yes, at least
O2O apps at least once. But in terms of market penetration, we define this used it once a week
by the number of warung operators who use O2O apps at least once a before
month. These recurring users make up 31% of total respondents. A quarter of
8% Yes, at least
total respondents used the app occasionally or rarely, while 9% had stopped once a month
using it entirely. The respondents who had never used the apps stood at
36%. As expected, adoption rate is higher in Java relative to other areas. Tier
1 adoption is predictably higher due to market sophistication. Interestingly
25%
enough, Tier 4 is also relatively high, likely due to weaker traditional I have used it before,
9% Yes, but rarely

supply-chain networks, which in turn drives up the appeal of warung apps. but stopped using.

All Java Outside Java Tier 1 Tier 2 Tier 3 Tier 4

Recurring user 31% 32% 27% Recurring user 39% 30% 24% 34%

Occasional user 25% 24% 25% Occasional user 24% 24% 27% 21%

Lapsed (no longer a user) 9% 9% 6% Lapsed (no longer a user) 9% 8% 9% 13%

Never used 36% 34% 42% Never used 28% 39% 40% 32%

19
Rapid adoption and Impact of O2O apps
on cost saving
Benefit of using
O2O apps
%

positive feedback Time saving and

money saving
28%

Ease of transaction 28%

96% 4%
Positive No impact
The adoption of warung apps truly exploded during the pandemic years. Close to two-third impact Competitive 26%
of users claim they first adopted O2O apps in the past 12 months, and 80% in the past 24 price points
months or so. This period also coincided with a number of new players entering the market,
as social distancing measures and travel restrictions ushered in new ways of doing business. Ease of product 22%
delivery
Most users claim O2O apps have allowed them to save procurement costs. Consequently,
96% of users also reported an increase in net income after adoption. O2O apps clearly help warung Allow to access 20%
operators reduce business expenses online customers

Wider selection 13%

of products
Impact of O2O apps Market intelligence 13%
on weekly net income (popular products)

Allow for diversification 12%

of business
23%
16% 16% 16% Useful for accounting 12%
96% /bookkeeping
10% 4%
8% 7% Positive No impact
Clear product
impact 8%
3% return policy

less than 3 3-6 7-11 1 2 3 4 more than 4

months years
Access to financing 4%

About a half of users see up to Other 0%

Time frame as user of O2O apps 10% increase in net income

20
 Drawbacks of O2O
27% Delivery delays

14% Hard to get financing approval

High satisfaction 19% Limited product options

rate among users

17% Not enough locally produced goods
39% Lack of discount/marketing programs
15% Uncompetitive pricing
Most users reported fairly positive perception on the warung
24% Unreliable/faulty app
apps with 75% expressing satisfaction. Users appear to demand
more marketing programs from their favourite O2O apps, but 1% Other
this is not the main driver of loyalty. As suggested by the
following, when choosing which O2O apps to use, price
5% None
competitiveness matters more than marketing gimmicks.

Considerations factors in choosing O2O

Satisfaction level 26% Discount/marketing programs

Very satisfactory 18% 10% Ease of access to financing

Satisfactory 57% 14% Potential to diversify business

Neutral 23% 37% Price competitiveness

Unsatisfactory 1% 30% App reliability

Very unsatisfactory 1% 18% Speed of delivery

15% Size of customer base
26% Variety of products
0% Other

21
 Reason - never used wholesaler / O2O apps
7%
Plenty of room
Incomplete product

It's more practical to shop

44%
for growth
directly at the wholesaler store

28% Shipping costs seem expensive

With 36% of total respondents having no experience of

19% The price of the product looks more expensive
using warung apps, coupled with 25% who use these apps
only occasionally, there is plenty of headroom for deeper 17% The shipping process seems long
market penetration and a higher quality of adoption. Most
non-users said it’s more practical to shop directly at the 9% The ordering process is complicated /don't know how
establishments run by wholesalers. Shipping cost is a
concern, according to 28% of non-users, while 29% cited
not being able to determine product quality firsthand as the 15% Concern about the product quality
major reason for not using warung apps for procurement.
Given the right market education programs, these negative 29% Can't see the condition of the product directly
perceptions could change. Nearly half of the non-users said
they may consider using O2O apps in the future.
11% Worried that the item I ordered did not arrive at my place of residence

21% Worried that the item sent was damaged or wrong

Consideration to use in the future
3% Not recommended based on reviews / reviews on the internet
13% 38% 48%
No Maybe Yes 21% Don't know about wholesale apps or purchasing apps

7% Others

22
O2O apps serve as an Education
level appears
indispensable tools to influence
adoption level
National Index: 0.37

for growth
0.41
0.33

For the purpose of this study, we cross pollinated survey findings to identify
statistical relationships between variables that may influence the adoption rate
Below University or
of O2O apps in Indonesia. The relationships are represented in the form of University above
indices that range from 0 to 1, with 0 indicating zero adoption and 1 indicating
100% adoption of daily usage. The indices are useful to compare adoption levels
within different survey variables such as geographic location, size of business,
financial performance, forward-looking expectations and more.

Level of experience appears

Adoption level higher in Tier 1 and Tier 4 cities chart to influence adoption level
Java than outside Java above national average
National
Index:
0.37
National Index: 0.37
0.43
0.40 0.39 0.40 0.40 0.39
0.38
0.38
National
Index: 0.31 0.35
0.33 0.37
0.36
0.33
<1 1 2 3-5 6-10 11-20 >20
Java Outside Tier 1 Tier 2 Tier 3 Tier 4
Java years of business experience

23
 Adoption level rises in line Adoption level rises in line
with the number of customers with the sales volume

0.82

0.73
0.62
0.57 0.57
0.69
0.57
0.46 0.51 0.45
0.47 0.42
0.38 0.47 0.49
0.42
National National 0.41
Index: Index:
0.37 0.37

0.33 0.34
0.27 0.28

<10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100 >100 <1 1-2 2-3 3-5 5-10 10-15 15-20 20-30 30-50 >50

number of customers per day sales volume in million Rupiah per week

24
 Businesses with higher Adoption level is higher Adoption level is higher
restocking frequency tend to among warungs that among warungs that
have higher levels of adoption experienced business expect to see business
growth in the past 3 months growth in the next 3 months

0.68 0.68

National Index: 0.37 National Index: 0.37

0.66
0.43
0.42 0.47
National 0.43 0.39
0.33 0.35
Index:
0.37
0.37 0.31 0.32
0.27
<1 1-2 2-3 3-5 5-10 10-15 15-20 >20 lower just the higher lower just the higher
same same

weekly restocking budget in million Rupiah per week 3 month revenue change 3 month sales expectation

25
 Mode of saving money National
At the bank 72%

At home 40%

Banking At the cooperative 8%

penetration On e-wallet/e-payment app 44%

among Never save money 3%

retailers Banking services adoption rate

Banking penetration among warung

operators stands at 72% according to our
study. This compares to the latest estimate
from Indonesia’s Financial Services Authority
that noted a 60% penetration in 2019 among
all citizens, 15 years of age and above. While 76% 72%
40% of those surveyed keep their savings at 69% 66%
home, 44% consider money stored in their
e-wallets as part of savings. Location-wise
small retailers in Tier 1 cities clearly have
better exposure to banking services.

Tier 1 Tier 2 Tier 3 Tier 4

26
O2O users Amount of saving per week
are more (in thousand Rupiah)

inclined to 28% 28%

save money 11% 13%

7% 5%
2% 2% 2% 2%
0 100 200 300 500 700 1000 1.300 1.500 2.000
Our saving index shows that the adoption of O2O
has a correlation with the ability to save money
among small retailers. As shown in the following Savings amount index
figure, warung retailers using O2O applications have
a greater likelihood of saving more money compared National Index: 0.3
to those who do not use or only occasionally use
such applications. The index for these recurring O2O 0.39
users is at 0.39, in a range in which 0 means
Recurring
respondents made no savings at all and 1 indicates user 0.27 0.24 0.25
100% of the respondents could save Rp 2 million Occasional I have I have never
(roughly $139.21). Based on the survey, the majority user used it before, used it
but stopped before
of respondents saved up to Rp 500,000 (roughly using
$35) a week. When it came to business loans, 42%
said the process to acquire these was relatively easy
versus 21% who found it difficult.

27
 Debt servicing %
Personal loan from friends & family 14%

Business loan from bank 21%

Business loan from loanshark 2%

Mixed Business loan from P2P lending 10%

appetite Loan from cooperative 10%

for loans
Consumer loan (mobile phone, electronics, etc) 7%

Car loan 6%

among Credit card loan 7%

retailers Motorcycle loan 10%

Mortgage loan 10%

Pawnshop 6%

Others 2%

I don't have debt 39%

28
Among all respondents, 39% claim they are free of debt, with Applied for loans Did not apply for loans
the rest servicing a variety of loans. To finance their business, (past 12-month, non P2P) (past 12-month, non P2P)
warung owners appear to be more exposed to the banking
sector relative to loan sharks or P2P lending firms. In part, this 61% Tier 1 39%
has been enabled by the government’s micro credit program,
56% Tier 2 44%
locally known as Kredit Usaha Rakyat, which does not require
collateral for business loans up to Rp50 million ($3,500). Only 55% Tier 3 45%
8% of borrowers in our survey acquired loans above this value.
59% Tier 4 41%
National Index: 57% National Index: 43%

Perceptions
about
loan
acquisition
34% Amount of business loan
28% (in million Rupiah)

15% 13% 13% 14%

9% 11% 9% 11% 10% 10%
7% 7% 8%
Very Easy Neutral Difficult Very
easy difficult 0 1 2 3 5 10 15 20 30 50

05
29
Higher appetite for
loans among Yes

43%
Intention to borrow money
57%
No

recurring O2O users

Tier 1

35% Tier 2 65%

29% Tier 3 71%
27% Tier 4 73%
In line with the relatively more advanced financial inclusion in major cities, warung National Index: 35% National Index: 65%
operators in Tier 1 and Tier 2 have higher propensity to borrow, our study finds. In
Tier 1 cities such as Jakarta and Surabaya, 43% of respondents are planning to
borrow money for their business in the next three months. Borrowing appetite is also
higher among warung operators who are recurring users of O2O apps. Within this
group, 53% plan to borrow in the next three months versus 33% among occasional Yes Intention to borrow money No
users and 22% among those who never use O2O apps. The amount of money sought
by those who plan to borrow varies greatly, with 14% seeking between Rp5 million 51% Recurring user 49%
(roughly $348) to Rp 10 million (roughly $696).
33% Occasional user 67%

33% Lapsed 67%

Amount of money intended to borrow
I have used it before,
(in million Rupiah) 33% but stopped using 67%
I have never
22% used it before 78%
12% 14% 14%
9% 10% 7% 8% 11% 9% National Index: 35% National Index: 65%
5%
0 1 2 3 5 10 15 20 30 50

30
 Health insurance penetration among warung owners Investment product owned %
and operators is relatively on par with the government’s
official data on the penetration of its universal Bank deposit 14%
healthcare program, which stood at 85% of total
population as of November last year. The universal Bonds 2%
healthcare program is split into two groups:
BPJS Kesehatan, which covers the informal sector Cryptocurrency 19%
workers; and BPJS Ketenagakerjaan, which covers
workers in the formal sector. Only 22% of total Diamond & other precious gems 3%

Decentralised respondents subscribe to private life insurance versus

13% who subscribe to private health insurance services. Gold & other precious metals 30%

access Jewelry 20%

to other
Insurance product owned %
Mutual fund products 21%
Universal healthcare (BPJS Kesehatan) 61%

financial
NFT 8%
Workers social security (BPJSTK) 22%
Pension fund 12%

products
Private life insurance 22%
Real estate 32%
Private health insurance 13%
Stocks 18%
Motorcycle insurance 11%
Other 1%
Car insurance 9%
I don't own investments. 22%
Education insurance 9%

I don't own insurance. 23%

31
Amid Revenue
changes higher

pressures,
(Past 3 months)

O2O users
0.54
43% just the
same: 0.44

performed
0.5 0.39
31% 0.38
26% 0.41

better lower
Recurring
user
Occasional
user
Lapsed Non-user National
lower just the higher
same
Based on our index on revenue change, respondents who are higher
regular users of O2O applications are experiencing better
financial performance compared to three months ago. The index
stood at 0.54, in a 0 to 1 range where below 0.5 indicates less
revenue obtained, at 0.5 signifies no change, and above 0.5
means a positive change in the revenue compared to three just the
0.51
months earlier. The average expectation index for revenue same:
0.5 0.44 0.44
performance stood at only 0.44, reflecting 43% of respondents 0.41 0.4 0.49
who indicated lower revenue and 26% who said they observed 0.45 0.44
0.43
no change in revenue compared to three months ago. 0.38
lower
Jabodetabek Jawa Jawa Jawa Sumatera Banten Bali Kalimantan Others National
Barat Tengah Timur

32
O2O users are Sales
expectation

more optimistic
higher
(Next 3 months)
0.82
0.81
0.79 0.79

on sales 68% just the 0.74

performance
same:
0.5

21%
lower
11% Recurring Occasional Lapsed Non-user National
user user
lower just the higher
same
Our sales expectation index shows that recurring users are
more optimistic that they will be able to sell more in the 0.88
higher
next three months compared to the current sales volume.
The sales expectation index for this group of retailers 0.85
0.83
stood at 0.82, in a 0 to 1 range, in which below 0.5 0.77 0.77 0.77 0.79
indicates pessimism regarding an increase in sales, 0.5 0.75 0.82
signifies an expectation of no change, and above 0.5 0.78
just the
signals an anticipation for higher sales. Among all same:
respondents, retailers in the Banten area are the most 0.5

optimistic, with a sales expectation index at 0.88. Breaking

down the survey’s responses, most retailers expect the
lower
increase at between 5% and 10% in the next three months.
Jabodetabek Jawa Jawa Jawa Sumatera Banten Bali Kalimantan Others National
Barat Tengah Timur

33
Chapter 3

Meet
The
Mitras

34
 Ako Regina
residing in Pinrang of residing in Ogan Komering Ulu of
South Sulawesi Province South Sumatra Province

I have been using the mitra application for about two years. I used several applications I currently have several applications, including O2O and e-payment. I use many because
before, but Mitra Bukalapak has various bonuses and gifts. I prefer it and have there are some products that are unavailable in one application. I need the apps to meet
stopped using similar applications. the demands of my customers: for example, to pay a gas supply bill.Among O2O
products, the most popular are phone credit top-ups, followed by electricity tokens.
The wholesale feature in mitra has helped me a lot. I have run my warung for over 10
years now, selling consumer goods, including cosmetics. For the last two years, I have Here in Ogan Komering Ulu, I live in a house provided by the company where my
also used the wholesale application to get easier access to more products, such as husband works. It’s a bit remote, about 30 minutes to the closest village and eight hours
bottled beverages, packed instant foods, and other household goods. I still source and from the provincial capital of Palembang. I offer and sell mitra products to others living
restock products for my warung from offline wholesale agents because some products in our company compound. However, I also have an agent in the nearest village. So, we
are unavailable for delivery to Pinrang on Mitra Bukalapak. have a kind of collaboration, in which this agent will serve clients from the village. The
agent could not become a direct mitra and use the app, because she lacks the capital to
Most of my clients ask for phone credits, money transfer services, electricity start. Often, to begin using some of the apps, we need a balance so that we can process
payments, and game vouchers. It is difficult to generalise how many people come to the services our clients want.
my warung, but it may be around 20 per day. It depends on various factors, including
promotion or discount programs. For example, teens came in droves during the last The agent and I share the profits from our collaboration. The mitra app enables me to
promotion related to Free Fire. help others as well.

My clients are happy with my services because I offer less expensive products I also expect to be able to use the mitra’s wholesale application in the near future. I
compared to other payment points in the area. So, the mitra app not only provides me cannot start a physical store in a company compound where I can sell wholesale
with various products but also helps me secure more customers because I offer products. But still, I will be able to use the wholesale feature to order goods that can be
affordable products or services. sold by my agent in her village.

I also offer services related to e-payment. I have several applications installed on my The other thing I fancy while using O2O is the app often has bonus programs. If we hit
gadget, such as DANA, OVO, GoPay, and ShopeePay. The most popular is DANA a certain level of transaction volume, we become platinum level and rank the highest
because many people pay their bills through this app. among our peers. Other O2O also have similar programs where collected points,
through transactions or playing games, can be exchanged for discount vouchers.

35
 Ranti Afrimen
residing in Karawang, residing in Tangerang of
Bekasi of West Java Province Banten Province

I had been planning for years to run a warung. But, I had no money to start and my I used to be an agent for money transfer and was initially not impressed with
husband's salary was enough. But the pandemic hit and the company where my mitra applications because I already had a business platform. But, the money
husband works had to shut down. All 400 workers, including my husband, lost their transfer platform had problems and made me want a backup.
jobs. I prepared for the worst and sought an opportunity to support us, including by
downloading mitra applications. My shops offer complex products and services. I began only with phone credit
top-up, added photocopy services and stationery. I expanded to incorporate
I only started my warung business in July 2020 because I was waiting for my money transfer, which has surpassed my other business.
husband’s severance pay. We had no savings, so severance pay was the only way to
start. My current warung is our house’s terrace. In a month, I can have money transfer transactions worth over Rp 1 billion
(around $70,000). It’s profitable since the fee for money transfer is low
We are doing a lot better now. I sell consumer goods such as staple foods, packaged compared to other platforms.
detergents, and soaps. I source them from a nearby outlet and also use Mitra
Bukalapak’s wholesale feature to get products that are out of stock at the market. But there have been pressures because of the pandemic and the average
transaction is down to only about Rp 600 million (roughly $43,730) a month.
The features of mitra apps that I use the most are money transfer, phone credit top There has been a 40% decline compared to before the pandemic. It’s partly
up, data top up, electricity payment, and BPJS (health insurance). because my shop is located near shopping malls and universities which have
not been disrupted by the pandemic.
In my area, I am the first to provide money transfer services. I also use other money
transfer apps because I need additional equipment such as the EDC machine from The mitra business helps me sustain.The wholesale feature has helped a great
BRILink. Here, many people ask whether they can withdraw cash from my warung as deal and I use it to restock consumer goods. It allows for orders to be delivered
well. I have applied to be an agent so I can help people asking for these services. to our door with just some clicks on the app. I no longer need to go to offline
wholesale agents, waiting in line for an one hour, to bring the purchased goods
back to my warung.

36
1|1
Chapter 4

Analysis
and
Recommendations

37
Looking beyond
the inflection point High approvals

The O2O concept first emerged in Indonesia in the mid-2010s, but the levels High approvals for O2O apps among adopters suggest there is a clear case for
of adoption appear to have reached an inflection point during the pandemic. the business model to deliver value to all stakeholders. 75% professed
The once-in-a-century global event has disrupted how people do business. satisfaction with the apps, versus 23% who are neutral and 2% who are
dissatisfied. They said the ability to “save time and money” and “ease of
Millions of warung operators turned to mobile applications to overcome transaction” are the biggest benefits.
difficulties that emerged with travel restrictions and social distancing. At the
same time, new players were entering the warung tech space to seize the The adopters also said they benefit from more competitive price points.
opportunity to solve challenges faced by MSMEs during the pandemic. These Consequently, nearly all adopters said the apps have allowed them to save on
two major trends explain why more than half of new adoptions of O2O apps procurement costs, with 96% noticing an increase in income relative to before
occurred in the past 24 months. adoption. As the Indonesian economy enters an era of high inflation due to the
rise in energy and commodity prices, price competitiveness will be a critical
Penetration level, which is defined conservatively in this study by the number factor in the strategy of micro and small businesses.
of recurring users, stood at 31% of total warung population in February 2022.
Clearly, there is ample room for future growth. The speed at which new In our survey interviews, we also note that adopters have benefitted from
adoption will take place, however, will hinge not only on market education, having access to a wider selection of products and services via the apps. They
but also on the ability of O2O service providers to expand their logistical have been able to diversify their businesses beyond retailing FMCG to offering
reach for FMCG distribution. This is especially challenging in an archipelagic digital products and services such as phone credit and internet data top ups,
country, riddled with poor connectivity both on land and in between islands. gaming vouchers, money transfers and bill payments, as well as becoming
agents for insurance services and drop off points for logistics services.
Given this condition, penetration growth is likely to remain concentrated in
Tier 1 and Tier 2 cities across major islands in the near-to-medium term. Having transactions being done digitally has also instilled the ability and the
However, digital products and services may be able to spearhead market habit among warung operators to better manage their bookkeeping and
penetration faster in Tier 3 and Tier 4 cities. Internet access is less of a accounting, allowing them to monitor business performance.
concern for the development of O2O services in Indonesia as penetration is
already well above 70% of total population since 2019.

38
No room for complacency

The above findings suggest that O2O apps have been The branchless banking program has enjoyed success, Insurance should also be the next growth category for
fairly effective in fulfilling the needs of warung adding 25.8 million new savings accounts in less than O2O apps. Although the insurance industry in
operators in their digitalisation journey, but further five years. However, the total value of these deposits Indonesia is already operating on a significant scale,
improvements are required. Access to financing is only 0.13% of the total savings in the banking with total written premiums expected to reach close to
remains a big issue for most warung operators. Only system. A study published by University of Indonesia’s $18 billion in 2021, penetration levels are still low for a
4% of adopters cited access to financing as one of the Institute for Economic and Social Research in April country of over 270 million people. For example, as of
main benefits of O2O apps. 2021 finds that low savings is not reflective of the December 2020, only 12 million Indonesians have life
financial capacity of Laku Pandai customers or them insurance policies. The change in lifestyle and spending
The appetite for business loans is certainly high being “too poor to save”. Instead, the issues are: lack patterns that has been ushered in by the pandemic will
among warung operators. Close to 60% of all survey of identifiers for agents and their locations such as have a long lasting impact. Coupled with the rising
respondents said they had acquired loans for their uniform and signage; no loan facility through agents; awareness of health risks, these changes should
business in the past 12 months. The propensity to and lack of incentive to add savings. The study also increase traction for micro insurance products with
borrow is higher among recurring O2O app users as highlighted the limited features of the mobile small premiums and limited scope of coverage.
51% of people in this group plan to acquire loans in applications used by Laku Pandai agents.
the next three months versus 33% of occasional users The timing is ripe to deepen insurance penetration.
and 22% of those who never use the apps. This is Considering warungs are stationary and easily O2O service providers can work with insurtech
likely due to the fact that recurring users tend to have identifiable, they should be able to address the first partners to offer protection to warung owners and
faster business cycles, a larger customer base and problem that prevents high quality customer recruit them as agents to collect policies through
bigger revenues. engagement. Secondly, O2O platforms can member-get-member schemes, which have proven to
supplement Laku Pandai by serving as a gateway for be effective in Indonesia.
There is a clear need for O2O service providers to loan distribution, whether via partnerships with
offer a feature that will enable warung operators to consumer financing companies, cooperatives or
access financing. But there also exists an opportunity fintech lending firms.
for warung operators or O2O service providers to
create synergies in the branchless banking system —
namely the joint initiative between banks and the
government to improve financial inclusion through
employing citizens as banking agents in a program
called Laku Pandai.

39
What India’s 01
kirana-tech The dominant presence of JioMart

startups can Even before it took on the mantle of modernising traditional trade in India,

tell us about Reliance had already established itself as a dominant force in Indian retail.
Its network currently spans over 14,400 stores across categories like

warung tech
groceries, consumer electronics and fashion.

In early 2020, Reliance received over $12.8 billion in funding from a clutch
of investors including Facebook, KKR, Vista Equity Partners, Mubadala
Investment Company, General Atlantic, Abu Dhabi Investment Authority
Indonesia is not the only market grappling with (ADIA) and Silver Lake, for a stake in Jio Platforms. A subsidiary of Reliance,
modernising and digitalising a large traditional trade Jio Platforms includes JioMart, its e-commerce venture. JioMart currently
market. There’s little that separates India’s kirana works with half a million kirana stores. It allows these store owners to place
stores, estimated to be 13 million strong, from direct orders for consumer goods, at up to 15% lower than the prices
Indonesia’s warungs. They share many similarities: tiny offered by pre-existing distribution networks, according to a report from
family run enterprises, with a wide assortment of daily Reuters.
staples on offer.
This has resulted in a massive exodus among kirana store owners, away
But there are some significant differences in size, scale from traditional distribution systems. These stores collectively account for
and investments when it comes to firms driving the $700 billion of the approximately $900 billion Indian retail market. It has
digitalisation agenda in India. Some of the recent also fomented tension between consumer goods companies and traditional
developments in the business in India could offer an distributors who are unable to manage either the rates or the speed of
insight into its possible trajectory in Indonesia as well: delivery that kirana-tech firms like JioMart have brought to the mix.

40
02 03 04
Other industry giants India’s largest B2B A measured
building war chests marketplace approach to expansion
and consolidating prepares for an IPO works best
The Indian market is also showing signs of Udaan which claims to be India’s largest B2B In August 2020, Indian digital bookkeeping startup
consolidation. Reliance picked up a 25.8% stake in marketplace with three million retailers and 25,000 Khatabook launched an app that served a similar
delivery focused startup Dunzo for $200 million sellers on its platform intends going in for an IPO purpose for the Indonesia market called BukuUang
early last year. Other companies based in India have this year. Founded in 2016 with a sharp focus on the – part of a post Series B global expansion plan
built up warchests to take on Reliance. This includes kirana space, it was one of the fastest companies to which was to include Bangladesh and Pakistan.
hotels-to-airlines conglomerate Tata which was attain unicorn status. It has raised $1.4 billion so far Media reports indicate that Khatabook staged a
gunning for a $2.5 billion investment in digital from investors including Lightspeed Venture quiet withdrawal from Indonesia.
services, including e-commerce last year. It acquired Partners, DST Global, GGV Capital, Altimeter Capital,
a majority stake in Indian e-grocery chain Big Basket Tencent Holdings, Moonstone Capital Partners, and The exit of Khatabook from the Indonesia market
for $200 million. Octahedron Capital. underscores a critical issue that the country’s
homegrown warung tech platforms will have to
The Walmart-owned Flipkart was reported to be grapple with as they contemplate taking their
raising over $1 billion last year. Among its targets offering overseas. A similar market is no guarantee
was working with over a million kirana partners. of a model created for a different country
Flipkart and Walmart also invested $145 million in being embraced.
online grocery NinjaCart in December 2021.
For most Indonesian firms, going wide and deep
Amazon acquired kirana-tech specialist Perpule for within the home market is more of a priority than
approximately $14 million to consolidate its overseas expansion. It’s an obvious choice
position in the space. considering the sheer size and scope of the
domestic opportunity, and numerous segments to
choose from outside of consumer goods retail.

41
Chapter 4

Stakeholder
Insight /
Afterword

42
 Suntory Garuda Beverage OVO
Ong Yuh Hwang Eddie Martono
CEO and President Director Chief Operating Officer

Suntory Garuda Beverage (SGB) has O2O services can boost sales by helping us OVO works with many O2O platforms A study by CORE Institute revealed that
worked with many offline channels expand nationwide, while reducing including Mitra Bukalapak and GrabKios. 84% of MSMEs felt they had benefited
including wholesalers, retailers, and cafés. distribution costs. Via the data captured, We have over 8 million offline top up with higher sales, connection to a wider
We are also exploring online channels we can analyse purchase patterns, trends, points and 1.2 million QR code Indonesia ecosystem, and increased digital
(e-commerce) including O2O, with and other important information. Working standard (QRIS) merchants, of which 99% literacy, which in turn creates growth
e-commerce spend in Indonesia increasing with Mitra Bukalapak can help the spread are MSMEs, located in all 34 provinces for digital payment providers.
by over 40% in 2021. of our products nationwide. including remote areas.
Education remains the biggest hurdle.
Our consumption is huge in rural as well Education and marketing effort must be Since expanding our O2O partnerships in We regularly hold marketing,
as urban areas, through our retail sales carried out because O2O is still 2021, transactions show a strong positive socialisation and promotional programs
network. O2O helps us strengthen nascent.Traditionally, warungs have trend which we expect will continue in for services and products offered
reach, expand the market, and focused on offline channels due to a lack of 2022. O2O has enormous potential, since through our ecosystem.
enhance performance. human resources and budgets. However, the majority of transactions still involve
with O2O, a warung with relatively low cash and are driven by MSMEs. A special program called ‘Chat Cis Cus’
We have partnered with Bukalapak since marketing outlay can leverage these Onboarding MSMEs has the potential to helped digitalise offline food merchants.
2019 to strengthen availability and Mitra services to expand sales channels. We can bring these businesses into the digital Via cashback and promo support, we
Bukalapak is an O2O pioneer focused on conclude that warungs are positively economy. It helps warungs and others encouraged consumers to support these
supporting small traders. impacted by the adoption of O2O. During expand the scale of their activities. vendors. It helped MSMEs maintain
the pandemic, many Indonesians opened business during the pandemic – some
Indonesia has one of the world’s largest warungs nationwide which helped expand Digital platforms such as OVO can help even expanded. Our payment use cases
retail networks. Distribution is a key FMCG distribution. This can be further increase SKUs for both digital and physical include food, ride hailing, gaming, phone
challenge which impacts the ability to developed by nurturing warungs as goods. Going beyond payments, they can credits, tuition, investments, and more.
forecast demand accurately. Digitisation e-commerce partners. provide financial services that enable Following Covid-19, we saw a 267%
will help transform the industry supply MSMEs to run their businesses more jump in new users.
chain and lead to higher levels of efficiency. efficiently and tap into resources to
grow faster.

43
 XL Axiata Coda Payments
Junius Khoestadi Mariana Willianti Denise Hartono
Group Head-Indirect Head of Online & e-Payment Country Manager,
Channel Management Indonesia

At XL Axiata, we want customers across Currently, our digital sales are between Coda Payments has been in Indonesia for To live up to our mission of offering the
all levels of society. We have traditional 12%-13% of total business and O2O over a decade enabling digital content best value, experience and entertainment,
distribution channels, offering credit accounts for 30% of that segment. But providers to monetise revenue by providing we need to go to where our customers are.
top-up,, but with O2O, everyone can digital products are only part of the access to popular local payment methods With Mitra Bukalapak’s network, we can
become an agent. It thus addresses a business. Subscribers must be acquired via to gamers and consumers of digital tap into Tier 2 and 3 cities in Java,
huge pain point. a starter pack. So far, we don't have O2O content. Our catalog spans across gaming, Sumatera, Kalimantan and East Indonesia
partnerships that can play such a role. music, video, and lifestyle. In 2021, as part where cash still has primacy.
O2O helped during the pandemic, when Many O2O outlets focus mainly on FMCG. of our offline strategy, we decided to
counters for phone credit top-up shut The mitra model has yet to resolve issues partner with platforms like Mitra Our website generates the bulk of our
down. We were worried that related to distribution of a telco’s physical Bukalapak to supply games and digital revenue, because it’s historically how our
cash-oriented customers would find it products. We are still in the trial phase of content via their warung network audience has accessed our services. We
difficult. But more collection points were creating such a store on Mitra Bukalapak. throughout Indonesia. partnered with Mitra Bukalapak in 2021.
created. Customers who previously only We are also eager to explore partnerships Because it is a new source of revenue for
encountered an outlet one kilometre such as for XL Home where we converge Warungs and offline touchpoints are still a us, its contribution remains small so far.
away, found warungs selling our products home entertainment with a telecom starter part of everyday Indonesia life to purchase But we have the opportunity to go big as
within close proximity. We saw a shift in pack. As a telco, we are used to bundling “sembako” (basic needs) and traditional we have connected with a point of
customer penetration from traditional to products like combos on calls and data. If products. We understand that the FMCG distribution through the warung networks.
traditional plus modern including O2O. we can also bundle with non-telco and telco industries generate at least 50% We have decided to double down on this
products, for instance FMCG, it will align and 60% of their sales respectively from partnership with O2O platforms since we
with warungs that sell these every day to a traditional markets. know that players from other industries get
regular customer base. significant revenue from traditional
offline markets.

44
 UniPin
Ashadi Ang Poeti Fatima
Chief Executive Officer General Manager - Business

UniPin products are distributed through It turns out that UniPin has users even in From the data and a growth perspective, This is just the beginning. We believe that
various channels. We divide them into the eastern part of Indonesia (red: where O2O has performed sufficiently so far. mitra business will get bigger and reach all
three, which are our own website, e-wallet apps are used less frequently). We consider this an opportunity because over Indonesia and ease gamers to top up
e-commerce marketplaces, and mitra. The Previously, we relied on help provided by it means expanding our outlets and touch their games.
division is based on where the Indomaret (red: Indonesia’s convenience points. We do expect that O2O can beat
transactions for game vouchers take store chain), which has more than 19,000 the e-commerce segment in the future. But, we still need to convey the message
place. For e-commerce, for example, the outlets nationwide so far. However, we that we are available via mitra. If the
transactions occur on the application, not sometimes face difficulties reaching areas We expect the same with sales through strategy is actually a sales campaign, we
through our website. The majority of that restrict modern retail stores such as modern retail store, Indomaret, which will definitely do it, on a regular basis. We
revenue comes from game voucher Indomaret. Through mitra, we now can connects to offline clients but is not need to create something that educates
purchases through our website. It is reach users in these areas. similar to O2O. As of now, sales through and attracts the mitra to sell game
because users are most familiar with our the modern retail store touch points vouchers. I cannot tell the exact total
website. We only started with We still have plenty of room to grow, probably still contribute more to UniPin, number of mitra selling our vouchers, but
ecommerce marketplaces in 2019, and because we currently have tapped only compared to O2O like mitra. It’s partly I can share that the number has reached
mitra even later. We also have a 30% or 40% of the gamers market. because we have been with Indomaret over 5,000, maybe tens of thousands, as
partnership with ride hailing firm Grab. since the very beginning in 2011 and we we speak.
We grew by over 200% in 2020 and 2021 benefit from such attachment. It is now in
The mitra network essentially solves pain during the pandemic, just in terms of people’s minds that they can go to
points for UniPin because they (red: mitra) revenue. Earlier, the growth was less than Indomaret to purchase UniPin’s vouchers.
touch the grassroots level, the 100% a year. Previously, we could only But, with the O2O model we can be
unbankable, and unbanked market. gauge market penetration from our own available on a platform used by millions of
Through the mitra network, we manage data. Now, we can get an idea from the users. For example, there could be 2.5
to untap a new market for ourselves, mitra as well. With so many gamers in the million stores on Mitra Bukalapak,
especially in areas outside Greater field, it is clear that mitra are very although not all of them will sell UniPin’s
Jakarta. We used to only cater to users in impactful and significant. products. We have mitra from other
big cities who have access to e-wallet and partnerships as well.
the like.

45
Mitra As recently as a decade ago, it was
business as usual for Indonesia’s warungs –
The Mitra model marked a significant shift
for Bukalapak which had previously

Bukalapak:
mom and pop stores that dot the focused exclusively on e-commerce. Over
archipelago. These shops worked on a the years, it has become a moat for the
business model that was fundamentally parent company. In a country where

Bringing unchanged for over half a century. e-commerce companies gravitate towards
urban enclaves, over 70% of Mitra

Indonesia’s
The first glimmers of change could be seen Bukalapak’s orders come from the
in 2016, with what started as a significantly larger Non-tier 1 markets
conversation between a team member at which represent a much bigger

warungs to a Bukalapak and an offline merchant. After a

series of successful initial iterations, the
opportunity. Per a survey from Nielsen,
Mitra Bukalapak has cornered a leading

21st century
opportunity was deemed too big to ignore. share among O2O platforms in Indonesia,
Eventually Mitra Bukalapak was formally with 42% of warungs using its app.
launched and has played a pivotal role in

business model bringing warungs into Indonesia’s

digital economy.
The size of the opportunity is hard to pin
down but what is obvious is the
transformative impact of digitalisation. The
Speaking about the origins of Mitra chance to participate in this transformation
Bukalapak, Howard Gani, CEO of Buka was what drew Gani to Bukalapak, from
Mitra Indonesia said, “It started as a pilot to Bain & Co. Bukalapak satisfied his urge to
address the pain points of offline retailers. execute, deliver and see results firsthand.
We wanted to bring positive, sustainable Gani said, “I didn’t want to analyse a roller
Mitra Bukalapak value to all players in the chain rather than coaster from a distance, but to actually go
Howard Gani create disruption for its own sake.” Starting through the ups and downs.”
Chief Executive Officer with a couple of categories, Mitra
Bukalapak is now a part of multiple supply
chains and helps warungs offer a vast
assortment of products and services.

46
The birth of Taking on The road ahead for
‘warung tech’ competition the Mitra model

At the time Gani joined in 2018, Mitra A filtering process ensures the team The massive growth has drawn fierce Mitra Bukalapak considers the next
Bukalapak was working on its mid to zeroes in on issues that need active competition, a clear sign of a healthy five years a horizon for some of its
long-term vision. The overarching intervention. Its success is reflected in market. In the fray are well financed long term goals. What keeps the team
objective was to give mitras the same the massive influx of warungs through rivals with an e-commerce motivated is the impact it has made
access and information as a modern the pandemic, particularly due to the background, and specialist firms on the lives of warung owners. Some
retailer. The team quickly realised movement restrictions and drop in offering a suite of warung tech have been lifted out of poverty and
Mitra Bukalapak could not be treated offline traffic. Mitra Bukalapak solutions. However, where Mitra are able to educate their children.
as an extension of e-commerce. Gani unleashed a suite of products Bukalapak has an edge is the benefits
said, “It’s an end-to-end journey and including direct delivery to warung on offer. Gani said, “When warungs Mitra Bukalapak intends to go beyond
lifecycle: acquiring mitras, introducing owners. Mitras were educated on join, the assortment they can offer to Tier 1 towns; and wider in terms of
them to the features of the app, selling and marketing better, and in customers multiplies immediately – addressing other verticals that have
ensuring awareness, and eventually the use of elementary SaaS tools to especially virtual and financial yet to be impacted by digitalisation.
making them conscious of the value connect with consumers via social products. On registering, a store can Gani said, “The non-tier 1 cities have
we offer.” Mitra Bukalapak aimed to media. Gani attributed customer instantly access 42 odd products that not been made aware of the solutions
move the goalposts from a loyalty to “Solutions that work.” He can be offered to its next customer.” we offer. Down the line — whether it
promo-driven short-term approach. added, “That is how we are able to takes three years or five — they will
The focus shifted to improving sales retain a significant proportion of Being part of Mitra Bukalapak gives be more digitally savvy in
and helping warung owners earn a market share in major industries.” these stores bookkeeping and CRM understanding what is available and
better living. tools that boost efficiency. Gani said, how it helps.” With a lot of the ground
Mitras are of course only part of the “It helps retain offline customers and work already complete, Mitra
The lack of tech-savvy among the equation. Mitra Bukalapak has gain new ones. The Mitras have been Bukalapak has positioned itself to be
mitras made this particularly engaged with brand owners to able to improve their revenue by a large beneficiary once this happens.
challenging. Many of them had never introduce new products and engage multiples when they join versus when
used or even seen an app before. And better with warungs. Gani said, “We they rely on a conventional supply
so, Mitra Bukalapak has created an help tailor the message so mitras do chain.” Mitra Bukalapak actively
exclusive community for warung not get confused. We run campaigns monitors the competition and the
owners called Juwara. It has grown to and programmes with a number of innovations that they bring. But Gani
be a venue for candid discussion, the brands but are hoping to work more was clear that some of the newcomers
sharing of tips and tricks, as well as a closely with them. We’ve already built had more of a short-term focus.
feedback mechanism. quite a good track record.”

47
Author
Andi Haswidi
Methodology Disclaimer &
Head of ASEAN Research,
DealstreetAsia
This study adopts mixed methods, which include: direct
terms of use
interviews with warung operators and principals in the
warung space; literature review; quantitative analysis of
proprietary and third-party data; and an online survey of All rights reserved. No part of this publication may be
warung operators using YouGov panel. reproduced in any form or by any means—graphic, electronic,
or mechanical, including photocopying, recording, taping, and
Survey target group & coverage: 18 years and above; information storage and retrieval systems—without the
Editor express written permission of DealStreetAsia Pte Ltd.
warung operators in Indonesia; all socioeconomic status; and
Ravi Balakrishnan nationwide coverage.
Editor, Content Strategy Contents of this publication are based on information from
DealstreetAsia sources believed to be reliable, but accuracy and
In this study, warung operators are defined as: those whose
business involves retail FMCG and/or digital products such as completeness cannot be guaranteed. This material does not
phone credits and Internet data packages: and whose purport to contain all of the information and is not to be
business can be classified or limited into micro (up to Rp 280 relied upon as such or used in substitution for the exercise of
million in annual sales - approximately $19,400), small (Rp280 independent judgement.
million to Rp2.8 billion - approximately $194,000) and
medium enterprise (Rp 2.8 billion to Rp 50 billion - COPYRIGHT © 2022 by DealStreetAsia Pte Ltd.
Contributor approximately $3.4 million).
Raras Cahyafitri
Data Analyst, Total sample size of 1000 respondents: Greater Jakarta (256);
DealstreetAsia West Java (156); East Java (150); Central Java (100); Sumatra
(150); Banten (38); Bali (40); Kalimantan (30); Other (80).

48
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49
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