Indonesia’s micro SMEs need a digital leg up. This company wants to help

Does history indeed repeat itself? For Jason Wang, founder and CEO of ecommerce firm Tapp, he thinks the answer is yes.

Much like how China’s economic boom led to the rise of tech giants such as Alibaba and Pinduoduo, Southeast Asia could do the same over the next five years, Wang believes.

Indonesia is a particularly promising market – the country has the biggest population and the largest economy in the region.

Coming from a venture capital background, Wang set his sights on the archipelago for potential opportunities. While studying the country, he discovered that many Indonesians were digitally capable and had a strong social media presence. However, “the commerce side had yet to pick up,” he says.

This meant that while consumers were actively using digital tools and services, many businesses in the country were not capitalizing on those opportunities. As such, small mom and pop shops locally known as warungs – which form a large component of the country’s economy – were at risk of losing customers to large ecommerce firms.

Indonesia’s warungs make up roughly 70% of sales in the country’s grocery market / Photo credit: Tapp

“These shops have been here for years and built a lot of social capital, but their businesses are getting attacked by ecommerce giants taking transactions away from them,” says Wang. “Many people’s livelihoods depend on it, and I wanted to help these merchants and micro SMEs be successful.”

With that idea, he founded Tapp in 2014 and went on to officially launch it six years later.

Developing the model

Early on, Wang and his team were on the ground personally conducting surveys and speaking to business owners to understand their pain points.

The CEO quickly found that one of the major issues – especially for warungs in rural communities – was the huge gap in the supply chain between manufacturers and retailers. Many business owners had to go through several layers of intermediaries just to get the products they needed. As a result, some of these rural sellers paid up to 200% more than their counterparts in other places like Jakarta, says Wang.

Jason Wang (center), founder and CEO of Tapp, visits the company’s warehouse in Jakarta / Photo credit: Tapp

This is a prevalent issue in Indonesia – other sectors have seen similar challenges.

For example, a study found that just getting onions from a farm to the local market involved a minimum of three intermediaries. In the timber market, “the industry supply chain and price at each distribution point are ‘kept in the dark,’” the report adds.

“It’s an extremely fragmented market with prices all over the place,” Wang points out.

To bridge this gap, Tapp developed a platform to connect both ends of the supply chain. Through its app, micro SMEs can go online to purchase stock directly from suppliers. This not only helps them lower costs, but it also allows manufacturers to provide direct warranty and quicker delivery.

And instead of charging margins on the products sold on its platform, Tapp generates revenue through a membership model, allowing the firm to pass on the cost savings directly to merchants and help them compete against larger ecommerce platforms.

“Today, I can comfortably say that we’ve got a mandate to bring in products 20% cheaper than their competitors,” Wang says.

Meeting practical and aspirational needs

Once Tapp identified the problem and solution, it wanted to make sure that it could serve its customers and their communities well.

One of the steps it took was figuring out what products store owners actually needed. That’s when speaking directly with these stakeholders came in handy, as Wang and his team were able to note the types of products commonly sold and identify what the company should focus on.

According to the CEO, Tapp covers roughly 3,000 stock-keeping units, which broadly fall under five segments: electronics, beauty and personal care, footwear and apparel, prepaid electricity and phone credits, as well as stationery and lifestyle products.

“At the moment, these are the products that really work for [sellers],” Wang says. “We do things not to look cool but because we’ve captured data through understanding what they actually sell in stores.”

Additionally, the company is educating warung owners on how to improve their businesses through digitalization.

To do that, it established a ground team of around 100 field agents, who teach store owners how to capitalize on digital technologies. For instance, the team advocates creating group chats on WhatsApp with local consumers and residents and posting sales or product information on those channels.

Wang and a Tapp educator (right) drop by a local *warung* / Photo credit: Tapp

Wang shares that even younger locals – some as young as 16 years old – who want to make some extra money have benefited from these efforts.

“We helped a girl sell mostly digital products like phone credits, and what she did with the profits was to buy bus tickets to school every day,” says the CEO.

“At that moment, we knew we were doing something right.”

Expanding its scope

As Tapp continues to grow, one area that the company is looking to address is the financial inclusion gap for micro SMEs, especially with regards to getting loans.

“Like any business, credit scores are based on tax returns and financials. Unfortunately, many of these guys don’t have it recorded, so you have to do it through tech and data collection,” says Wang.

Being on Tapp’s platform means that merchants now have a record of transactions, which provide a lot of information about their business. Those details help store owners apply for loans from financial institutions.

Further, many merchants that Tapp works with require microloans ranging from 500,000 rupiah (US$32) to 2 million rupiah (US$128) per month. However, these amounts are typically too small for banks to work with.

With Tapp in the picture, however, many of these microloans can be consolidated into a single portfolio, which would fulfill a higher baseline amount that financial institutions can provide.

This is something that the company is actively looking at, and it’s partnering with other firms – such as local fintech company Maucash – to help address these needs.

Tapp’s work in this area has caught the attention of private and public partners, who have invited the firm to discuss policy matters. This has helped Tapp get support from local and national government bodies in both Australia and Indonesia and has granted the company access to both countries’ economic zones.

The firm is also on the lookout for other possible ventures that would work well with its business.

“If you can get me to work with Alibaba, I’d love it,” Wang laughs.

“Ultimately, our philosophy will remain the same: doing what we can to make the merchants successful.”

Currency converted from Indonesian rupiah to US dollar: US$1 = 15,658 rupiah.

Tapp is an ecommerce platform that helps micro SMEs commercialize their networks with local communities through a digital platform. Its goal is to leverage existing user behavior data and community relationships to open up the benefits of digital commerce to underserved communities.

To find out more about Tapp, visit its website.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.