In Indonesia, it is easy to stumble upon some mom-and-pop stores commonly known as warung on the side of streets or corner of residential area and business district. These warungs often sell daily necessities like snacks, candy, cigarette, soap, and mobile phone credit. Established in November 2017, startup PT Warung Pintar Sekali (Warung Pintar) - literally translates into ‘smart kiosk’ - is trying to upgrade these micro entrepreneurs. Painted bright yellow and accentuated with black, which makes it being pretty eye-catching from afar, this warung 2.0 is equipped with technology and features that enables them to adapt with digitations and cater changing consumer needs.
“The number of warung across Indonesia reached nearly 3 millions, and around 70% of the people are still onto general trade. So it’s just logical to grab that opportunity,” says Agung Bezharie Hadinegoro, 29, Co-founder and CEO of Warung Pintar, referring to a report by Nielsen.
Prior to founding Warung Pintar with other co-founders: COO Muhammad Harya Putra and CTO Sofian Hadiwijaya, Agung himself was an associate at venture capital. He thinks that SMEs are always very interesting for having large numbers, yet being underserved and lacking technological products, which motivated the trio to bring solution to these micro-businesses.
In December 2018, Warung Pintar expanded from greater Jakarta area to Banyuwangi, East Java. Agung claims to have 1,200 warungs in total per end of January. He aims to reach at least 5,000 by this end of year and focuses on upgrading more warungs within Java first. Despite already receiving more than 10,000 partner applications every month from all over Indonesia, these applicants must first pass Warung Pintar’s standard assessment on their location - such as their land legality and clear payment record; as well as on the market share itself - the traffic, GDP per capita, and density in the neighborhood.
When a warung becomes a partner, they are obligated to use the module and platform as prepared by Warung Pintar. Warung Pintar provides early capital for entrepreneur to open or upgrade their warung and lend equipments such as Wifi router, mobile charging station, LCD TV, and CCTV. The startup also educates the owner to operate all the features and services they could offer to their customer. Aside from common FMCG products, the warung can now also offer digital and financial products, such as mobile phone credits, train and plane tickets, to motorbike credit that can be purchased through cashless payment.
Warung Pintar is planning to extend further these warungs’ feature with the recent series B funding worth $27.5 million, which they sealed in mid January 2019. Jumping in to the list with other previous seed investors (including SMDV, Vertex, Pavilion Capital, Line Ventures, Digital Garage, Agaeti, Triputra, Jerry Ng, and EV Growth) is mobile payment system OVO, which will help the startup to provide further financial inclusion to warungs, such as in easy access to funding, inventory, and payment. Ostensibly, Warung Pintar is sophisticating services between stores and customers, but the fundamental principle lies on how Warung Pintar as a platform aggregates these warungs so that big companies are able to tap into the retail community and therefore work with them as well.
“What we do is basically embedding technology in order to generate data, and when it is generated, everything is much smarter. Both warung and companies can be benefited because everything is aggregated,” explains Agung.
From the generated data, companies can see which of their products are selling well in which area and understand the market situation. And when they want to increase their market share in certain area, they can advertise through Warung Pintar - as traditionally warungs have always been an informal advertising channel. From this ad placement on their TV and internet service, warungs will get commission as their additional revenue. Warungs are also benefited in terms of procurement. It’s a compulsory for the warungs to buy their inventory from Warung Pintar, however the prices will be cheaper since Warung Pintar is able to negotiate bulk price with producer.
“On our financing part, we are able to disperse loans quickly with lower risks to our warung, because we have already known our warungs’ transactions, traffic, and cash flow registered on our database,” explains Agung.
Warung Pintar has several revenue streams. It takes margin from the goods inventory sold to the warungs, and platform fee from transactions and advertisement. In terms of revenue, Agung hints that they are growing much higher than 20% month-on-month, and states that it is not yet their objective to be profitable this year as they have always prioritized of scaling very quickly first. The warungs however, which daily sales varies from Rp 300,000 to Rp 5,000,000, are already profitable, and on average they have had 40% increase of income - per December 2018. Majority of the products sold are FMCG, but Warung Pintar plans to expand sales of non-FMCG products this year.
Leveraging from technology makes everything more efficient for warung, which basically distinguishes their model to that of convenience store. And therefore, Warung Pintar doesn’t feel as much as directly competing with convenience store.
“We see from the perspective of business model, distribution, products sold, and the behavior of those who come to warung, which is more community-based,” Agung says.
He also says that the inbound growth of applicants represents Indonesian’s highly positive perception on entrepreneurship, as reported by Global Entrepreneurship Monitor 2018, as well as the growth of digital literacy. What Warung Pintar does is therefore simply, yet crucially, accommodating this enthusiasm by providing them the capital needed and increasing their capacity in the process.
“We want to be the golden standard for micro-businesses. So when one thinks about quitting job and build warung, they will build warung pintar instead of the normal conventional one.”