Rural expansion could spark life into Indonesia’s warung startups

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Hi readers,

Last week, I visited several warungs (the term for mom and pop stores in Indonesia) in Jakarta. They all said they had regular distributors or agents to supply their shop’s products.

Penny, for instance, has been running her business for 27 years. She is reluctant to switch to another supplier and especially about learning how to order products through an app.

Although my sample size is very small, this might show why it’s so difficult for startups looking to digitalize warungs to compete against traditional players in urban areas. However, startups like Dagangan and Super actively focus on rural areas, which might be the key to their survival.

Many principal brands and traditional distributors have not yet entered rural towns, which could be an opportunity for these startups. However, the task of digitalizing warungs beyond Tier 3 cities won’t be easy either.

For companies looking to do so, the challenges range from low digital literacy and inadequate supply chain infrastructure to educating residents about their services.

With thin margins on FMCG products and potentially high operational costs, an efficient approach will be key for startups to survive and thrive in this sector.

These firms might be viewed as “outsiders” when they come to rural areas, so their approach will need a capable hyperlocal strategy.

— Jofie Yordan, journalist at Tech in Asia

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