How Bukalapak empower Indonesia’s Warung to compete with modern retailers
Together we stand, one warung at a time #WarungNaikKelas
This is Bu Wiwin, a young mother from Surabaya, Indonesia. She is the owner of ‘Warung Kopi Bu Wiwin’, a small kiosk that sell groceries, daily supplies, and also coffee. In Indonesia, we have millions of small kiosks or ‘Warung’ as we call it, but the number has dropped steadily in the past few years .
If you ask any Indonesian about whether they think traditional Warung could survive against the modern retailers, most of them would say no. It’s a sad fact but a not surprising one.
In Indonesia, we heard it on the news and we saw it ourselves how traditional Warung were forced to close their business as their customers flocked into the new more modern retailers. Some cities like Padang even decide to make a regulation that limit the development of new modern retailers in order to protect the traditional market and Warung.
While this regulation could certainly help the traditional warung, it doesn’t solve the fundamental problem : Why customers are going to the modern retailers instead of Warung ?
We can identify several reason why modern retailers are more attractive to customers than Warung. They are cheaper, more cozy, and have way more items and services than Warung. Based on how free market works, customer will go to the company who provides the best services and in this case, the modern market offer much better value than the traditional warung. So, unless we help traditional Warung to improve their service, it will be very difficult for them to compete with the modern retailers.
How It All Started
Started from a special project with just 8 members, Mitra Bukalapak experienced a rapid growth and now become an integral part of Bukalapak.
The Minimum Viable Product
You may only see or heard about Mitra Bukalapak product recently. However, it’s not a recent project as it seems. Mitra Bukalapak is the result of long product development project that was started around two years ago.
It started as a simple feature in Bukalapak App called as ‘Juragan Pulsa’. The feature allows our user the to sell e-Voucher (phone credit, data plan, electricity voucher, and game voucher) to their friends and colleagues. If they manage to sell at least 100.000 worth of E-Voucher in a week, they would get 5% of cash back to their balance.
Juragan Pulsa was a very simple feature, developed in just under a month by one of our team. Looking back now, it was the ultimate MVP. It did one hell of a job as a MVP to validate whether our idea has any merit in real life.
We kept it as simple as possible and saw how people would react to it. We put some effort to promote the feature, not big but enough to get people attention. We had no idea that our small and simple product would become so big in just two years and could potentially disrupt the retail industry.
Two months in and the result was available. Since it was just an experimental project, we had to make a decision whether to continue with this project or move ontry to find another special project. We turn to our data and surprisingly, the result was much better than what we expected. As a result, we decided to continue the project and formulate what we are going to do next.
I don’t blame you if you’ve never heard of Mitra Bukalapak until recently. You may see the banner in front of some Warung, but aside from that, the only place where you can get the information about Mitra Bukalapak is from Bukalapak Mitra Website which was not widely promoted. Until recently, there was almost no PR and no marketing for Mitra Bukalapak, an intentional action from us.
There are several reason why we decided to stay under the radar in the past 2 years. First, Mitra Bukalapak is one of our experimental project and like most experimental projects, there is a big risk attached to it. It won’t be good for us if we heavily advertised the product and in the end it turns out to be a failure.
Second, we want to focus on developing a good product and understand our user, not to be distracted by external factor that has nothing to do with building a good product. Rather than spending money on marketing or having a talk in a seminar, we prefer to visit our Mitra and have a conversation to understand their behaviour and needs. One thing that we really need to understand is their perspective on technology since most of our user are old and not familiar with apps.
Third, the most obvious reason, we want to keep it away from our competitor as long as we can do it. It’s no secret that the battle in Indonesian commerce landscape is fierce and as one of the biggest player, we always look for a way to differentiate ourselves from our competitor and to always have something interesting coming up. Even though being first mover does have several advantages, we need to keep our cockroach mentality and keep moving as fast as possible so we can to maintain our position.
Like I said in the beginning, we need to do something if we want to help Warung. There are at least two additional value that we offer to Warung so they have a better chance to survive againts the modern retailers.
Warung’s core business is selling daily supplies to the neighbourhood. Things like coffee, cigarettes, snacks, and personal hygienes. To maintain their inventory, they usually buy the items in two ways: either going to a wholesale store or buying it from the distributor sales agent that periodically came to their store. This process has been going for years and with the availability of today’s technology, it’s time to introduce a more efficient process.
The current ordering process has several opportunities for improvement. First, Warung tend to sell items at higher price compared to modern retailers because of their position at the end of the supply chain. They buy items from wholesale stores while modern retailers have a direct access to the principal. The modern retailers get the benefit from the economics of scale, thus the cheaper price. As the alternative, Warung could sell the item with the same price, but they will get a lower margin.
Second, for Warung who buy their items from sales agent, the items selection are usually limited. As a consequence, a Warung need to have several sales agents if they want to provide various items. For example, let say a Warung need to order 10 different items, sometimes they need to contact 3 different sales agent to get what they need. Moreover, their knowledge about a new products is highly dependant on the sales agent. If the sales agent didn’t offer the new product, they wouldn’t know if this product is exist.
By joining Mitra Bukalapak, Warung could buy their items from Bukalapak which act as a distributor with direct access to principal. We could offer items at cheaper price compared to the one at wholesale store due to our economics of scale. Moreover, Warung could also buy many items at once using our app which make the ordering process easier than ever. They will now get instant access to all available items and if there is new product available, they will be notified and will be able to order it right away.
Another value offered by modern retailers that is not available at most Warung is the availability of virtual product. In modern retailers, you can buy all sorts of virtual product, from phone credit, data plan, electricity voucher, train tickets, and many others. Thus, the modern retailers become one stop service, you can get anything that you need there, leaving warung far behind.
Well, not anymore
Using Mitra Bukalapak app, Warung now also has the ability to offer virtual product as well. There is no additional fee for Warung to sell virtual products and they can do as soon as they join Mitra Bukalapak without any additional requirement.
The availability of virtual products directly affects Warung’s revenue. As they now provide virtual products, their loyal customer who used to buy virtual products in other place will spend their money in the Warung instead. They can also reach new customers like travellers or drivers who sometimes needs to buy phone credit or data plan.
We have a very different customer demographic compared to our marketplace business and most other startups. While the majority of user in technology company are millennial who are very tech savvy, our users are the old guys or usually known as baby boomers.
Do you know who are they? Well, they are the people who are in the same generation as our parents. Wait….what? Our parents? Yup, now you know how challenging our job is, right?
I‘m sure’ some of you must have some experiences in teaching your parents on how to use a computer or a smartphone. How was it? Was it challenging? A simple task like sending email that you can do in seconds, it could 5 or even 10 minutes for them.
But honeslty, you can’t blame them since they didn’t grow with it. For them, it’s the a new complicated stuff that was used by the young generation. We have to undestand that in their age, it’s very difficult for them to learn new things. That’s why it’s very important for us to make our app as simple as possible so they don’t feel overwhelmed and intimidated. It was not an easy job and still is.
We have to give credit to our researchers who had worked very hard to understand how our users interacts with technology. They run a week long research session in several cities to interview and observe their behaviour. It was an exhausting, tiring, and challenging experience but the result was crucial as it become our fundamental guide in designing the interaction of our Mitra Bukalapak app.
The Road Ahead
While we’ve solved many problems in the past 2 years, our road ahead won’t be getting easier.
Competition started to heating up. Two years ago when we started, we were the only companies in the industry, but now companies are showing left and right. The appearances of these new competitors are evidence that the industry that we build is legit. It validates the business that we’ve been doing and give us even more energy to maintain our position as market leader.
Apart from the competition, we also still have to solve many challenges to achieve our vision in empowering Indonesian warung, to help them to grow and be at the front row of technological advancement. These challenges are here to not discourage us, in fact, it’s become our source of energy. We believe that while the road is not easy, it will be worth.