Small businesses in Indonesia make up a large part of the economy. These mom-and-pop establishments total over 4 million, and their hold over the Indonesian economy has given them a leg up when it comes to emerging investments trends in Indonesia.
The small neighbourhood shops, known as warungs, are often considered the beating heart of the economy because of their dominance of the fast-moving consumer goods (FMCG) retail transactions space. There is now a growing trend towards digitalising these operations with investors finding great value in the once overlooked sector.
The digitalisation of warungs
Many startups have been eyeing up various warungs as future money-makers. One of the country’s most successful eCommerce companies, Bukalapak, has recently presented warungs with a new way to help customers by offering banking facilities. The Indonesian startup will provide small merchants with the tools to open bank accounts for its customers who may not otherwise have access to financial services in this highly underbanked country.
It was also recently announced that Microsoft chipped in an undisclosed sum, along with other investors, to an investment pool of $100 million USD to help Bukalapak grow. The funding aims to help further the startup’s goal to give both consumers and merchants a better buying experience.
Another eCommerce giant, Tokopedia, has joined the drive towards the digitalisation of warungs, and recently announced that they were in talks to secure a $350 million USD investment from Google and Temasek Holdings Pte. Fellow Indonesian unicorn Gojek also recently launched its GoToko service to help warungs digitally connect with manufacturers and grow their businesses.
For small businesses in Indonesia, having the ability to record sales, collect debts digitally, and keep track of all financial aspects of their company, can have a huge impact on how they function and aid potential growth. However, currently, their bookkeeping services have remained largely offline. Some startups in the region are aiming to change the way business owners manage their purchases and incoming profits. One such company, the bookkeeping startup BukuWarung, recently announced that it had secured capital from investors across the globe after their convocation from the U.S tech accelerator Y-Combinator. This investment will help them to grow and reach even more warungs in the country.
BukuKas has also thrown its hat into the ring when it comes to providing bookkeeping assistance for small shops in Indonesia. It raised $9 million USD in a pre-Series A funding in August of 2020 to enhance its digital bookkeeping services, designed to make financials run smoother, and increase the success of the small business in the region.
Tech and the mom-and-pop scene
The current lack of digitalisation in Indonesia makes the area a certified hotspot for future investments and advancement. Up until now, warungs have had to focus all of their supply chain efforts on traditional forms, but Ula aims to change the way they do business. The young startup got a major boost with $10.5 million USD in seed investment in June 2020. Ula gives mom-and-pop shops the ability to manage stock better and obtain some capital.
Street food vendors are also feeling the impact of this latest trend in investment. One particular startup, Wahyoo, aims to digitise how roadside sellers operate and keep track of their business. The company helps vendors to save money on supplies and offers a loyalty points system for vendors to win prizes and promotions. This small business secured $5 million USD in a Series A Funding round in August 2020.
An investor hotspot
The COVID-19 pandemic could irrevocably damage the economic prosperity in the region. However, the recent digitalisation of small and medium-sized enterprises (SME) in Indonesia has ignited a steady stream of activity and attention from all types of tech startups. According to the World Bank, SME enterprises in Indonesia accounts for around 89% of the workforce and 57% of the country’s overall GDP.
With the floodgates beginning to open on the tech scene in Indonesia, the importance of the small businesses in the region has never been more apparent. Many Indonesians still prefer to shop at their local grocery store and make face-to-face interactions, and that’s impossible to do through eCommerce. In light of that, many startups and investors have looked at how to enhance digitalisation throughout the region while supporting, not disrupting warung services.
The currently emerging investment trends in Indonesia are focusing on ways to enhance traditional styles of shopping experiences instead of replacing them altogether. As small businesses in Indonesia make up a large portion of all retail experiences, and this is unlikely to change anytime soon, getting involved in the success of warungs is a wise strategy for investors hoping to get in on the ground floor of the growing fintech and eCommerce scenes.