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Indonesia’s street-side eateries to become the next sector to digitize

Written by Khamila Mulia Published on 

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There are over 40,000 local eateries in Jakarta generating monthly incomes of USD 3,000 each. Tech firms are tapping the sector.

Located on the outskirts of South Jakarta, Musrifah has been operating her traditional Indonesian food eatery for about ten years. She sells local home-cooked dishes such as crispy yellow fried chicken, fried fish, spicy hard-boiled eggs, and many more.

In 2017, a representative from Jakarta-based startup Wahyoo came to her outlet to offer her the option to join the platform as a merchant partner, providing Musrifah with a mobile app where she could purchase basic supplies at competitive prices, among other services. As grocery shopping makes up the largest monthly operational cost for her business, she gladly accepted.

“Items sold from the Wahyoo app are relatively cheaper than those at grocery stores. Wahyoo’s couriers will send the products to my store without delivery fees, and I get points every time I shop, which can be redeemed for discounts,” Musrifah told KrASIA. Using the service, Musrifah said she can save up around 15 to 20% of operational costs.

Musrifah’s shop is just an example of the latest trend in Indonesia where neighborhood stores, or warungs, are digitizing some of their services and operations thanks to the support of local startups. Casual street-side eateries like Musrifah’s, known as wartegs, or warung nasi, are also becoming part of the trend.

Watch this: Here’s how Indonesia’s mom-and-pop shops are going digital

Wartegs potential and challenges

Wartegs are usually simply furnished stores with one or two wooden tables and benches, sometimes with a small fan, and they usually cater to middle and low-income groups. Musrifah sells a wide range of generously-sized dishes at cheap prices, usually ranging from IDR 10,000 (USD 0.68) to IDR 15,000 per portion (USD 1).

There are over 40,000 wartegs in Jakarta alone, according to Mukroni, the head of Warteg Nusantara, a community for eateries owners that currently has 6,000 members in Greater Jakarta. One small warteg can serve up to 100 customers a day, collecting revenues from IDR 1.5 million a day to IDR 45 million per month, which categorize these shops as micro, small, and medium business (MSMEs), Mukroni said. 

From online grocery platforms to tech giants like Gojek and Grab, tech companies are starting to target local food MSMEs.

In August, Gojek launched a new website for MSMEs with a range of digital solutions from Gojek’s ecosystem including business management application GoBiz, e-wallet GoPay, food delivery app GoFood, and e-commerce service GoShop.

Meanwhile, Grab introduced GrabMerchants, an all-in-one platform for MSMEs providing services such as wholesale grocery procurement, marketing features, and others functions.

Online grocery platforms such as Wahyoo, Happy Fresh, Kedai Sayur, and Chilibeli, offer food merchants the option to purchase ingredients and necessary supplies directly from their stores, while accounting apps such as Buku Warung and Buku Kas assist owners with optimizing their administration and finances.

Musrifah’s warung nasi in South Jakarta. Musrifah has been partnering with Jakarta-based startup Wahyoo since 2017.

However, reaching out to wartegs is no easy task for tech companies, as these street-side eateries present unique challenges compared to other MSMEs businesses.

For instance, most wartegs owners are and digitally illiterate. Also, many of these shops are operated by different owners under a rotating system, locally known as Aplusan, complicating long-term business decisions and partnerships.

“Wartegs have been around for quite some time in Indonesia but not all of the owners are tech-savvy. Some existing mindsets related to the supply chain have not been the most cost-effective and efficient. I think these are some of the opportunities to take wartegs to the next level,” Yansen Kamto, founding partner of VC firm Kinesys Group, told KrASIA.

Take Musrifah, for example, although she joined the Wahyoo platform almost three years ago, she only uses the platform’s grocery service, without benefitting from other functionalities such as the bookkeeping feature, simply because she “doesn’t need it yet,” Musrifah told KrASIA.

Food delivery platforms such as GoFood or GrabFood also face cultural challenges when trying to incorporate these shops under their delivery services. “We only have a buffet menu. Diners choose their own dishes and the size of the portion they want. Meanwhile, in those food delivery platforms, we need to make package menus for users. It looks complicated to me and I don’t have workers to help me with it,” said Edi Misan, owner of a warteg in Tangerang, a city in the province of Banten, Indonesia.

Relatively untapped market

Compared to traditional neighborhood shops, the warteg segment is relatively untapped, despite growing efforts from the tech community.

Wartegs and retail warungs are quite different in a few aspects. One example is that wartegs typically require daily replenishment for the stock inventory, especially for fresh items and vegetables,” Kamto said, adding that wartegs usually sell fewer products than warungs.

Wahyoo’s CEO Peter Shearer visiting one warteg partner. Courtesy of Wahyoo.

However, Wahyoo has been targetting exclusively the warteg segment, with the purpose of creating an entire supply chain for these food businesses, according to the firm’s founder and CEO Peter Shearer.

“Wartegs have a lot of potentials. They already have their own space and kitchens, which should be utilized maximally,” Shearer said. 

Besides proving online options such as grocery deliveries, the startup is also promoting the use of wartegs as micro cloud kitchens. Wahyoo is collaborating with restaurant chains to expand their delivery range by utilizing wartegs partners as cloud kitchens. To date, Wahyoo is working with 13,500 merchant partners, according to the firm.

“We have many chains that can use wartegs as kitchens. By working with wartegs, we can provide online catering to offices at low prices, probably under IDR 15,000,” said Shearer. “The form of partnership is flexible, restaurants can get warteg’s workers to cook the food for them or simply rent the kitchen and bring their own team to cook there,” Shearer continued. 

Read more: The race to digitize neighborhood stores in India and Indonesia

The startup also expanded into the food and beverages (F&B) space through a second business line focused on street food, named Ayam Goreng Bikin Tajir (AGBT). Wahyoo’s wartegs partners can buy the right to use the AGBT franchise for IDR 2 million (USD 135), getting access to AGBT’s merchandising and menu, mainly KFC-style fried chicken. “Wartegs can place AGBT’s cart in front of their outlets to attract more customers,” said Shearer, adding that they can also sell these food products on platforms as GoFood or GrabFood.

In addition, Wahyoo also wants to equip wartegs partners with digital services to allow the eateries’ customers to recharge their phone credits or make bill payments, similar to what startups such as Bukalapak, Warung Pintar, and GrabKios by Kudo are doing with warungs. 

Despite the vast potential, Shearer is clear about the challenges the firm faces in effectively modernizing wartegs business across the country.

“We have limited manpower to ensure merchants utilize our services optimally. There is still a communication barrier, but we continue improving our services through online and offline community engagement programs. This is definitely a long game. Wahyoo just started and there’s still so much more we can explore with wartegs partners,” he said.

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