How Mitra Bukalapak Helped Indonesia’s Warung Move to a 21st Century Business Model
By digitalizing the business model of traditional mom-and-pop stores in Indonesia, Mitra Bukalapak invented one of the region’s hottest fintech sectors — warung-tech.
As recently as a decade ago, Indonesia’s millions of mom and pop stores (warungs) were still operating on a traditional business model that had not changed for over half a century. That all changed with the launch of Mitra Bukalapak in 2016, which played a pioneering role in connecting mom and pop stores to the digital economy.
The journey started with a 2016 conversation between our team at Bukalapak and a warung owner. After a series of successful initial iterations, the opportunity was deemed too big to ignore.
We recently spoke to DealStreetAsia to share more about the origins of Mitra Bukalapak. It started as a pilot to address the pain points of offline retailers. We wanted to bring positive, sustainable value to all players in the chain rather than create disruption for its own sake. Since then, Mitra Bukalapak has expanded to cover multiple supply chains and helps warungs offer a vast assortment of products and services.
The Mitra model marked a significant shift for Bukalapak which had previously focused exclusively on e-commerce. Mitra Bukalapak has emerged as a moat for the parent company. In a country where e-commerce companies invariably gravitated towards urban centres, over 70% of Mitra Bukaapak’s orders come from the significantly larger non-tier 1 market which represents a much bigger opportunity. According to Nielsen, Mitra Bukalapak is the dominant player among online-to-offline platforms in Indonesia, with 42% of warungs using its app.
Estimates of the number of warungs in Indonesia vary, but what is obvious is the transformative impact of digitalization on warungs. The chance to play an active role in this transformation was what drew me to Bukalapak. Bukalapak satisfied my urge to execute, deliver and see results firsthand. I didn’t want to analyze a roller coaster from a distance, but to actually go through the ups and downs.
The birth of “Warung-tech”
I joined Bukalapak in 2018, when Mitra Bukalapak was working on its mid to long-term version. The overarching objective was to give a Mitra (“partner” — in this case, the warung owner), the same resources and opportunities as a modern retailer. The team quickly realized Mitra Bukalapak could not be treated as an extension of e-commerce. It’s an end-to-end journey and lifecycle: acquiring Mitras, introducing them to the features of the apps, ensuring awareness, and eventually making them conscious of the value we offer. Mitra Bukalapak aimed to move the goalposts from a promo-driven short-term approach. The focus shifted to improving sales and helping warung-owners earn a better living.
The lack of tech savvy among the Mitras made this particularly challenging. Many of them had never used or even seen an app before. And so, we created an exclusive community called Juwara which connects warung owners. This community form has grown to be a venue for a candid discussion on the app, the sharing of tips and tricks, as well as a feedback mechanism to discuss problems. A filtering process ensures the team at Mitra Bukalapak can zero in on an issue that needs active intervention.
Its success is reflected in the massive influx of warungs to our network, particularly throughout the pandemic. Our partners faced challenges in retaining offline traffic. Warung owners were also reluctant to head out to restock their products. In response, Mitra Bukalapak unleashed a suite of products including direct delivery to warung owners. They were educated on selling and marketing better and in the use of basic SaaS tools to connect with the consumer via social media. Customer loyalty is a solution that works, and that is how we are able to retain the largest market share.
Mitra are of course only part of the equation. We have engaged with brand owners to consistently introduce new products and engage better with warungs. We help tailor the message so Mitras do not get overwhelmed by information. We run campaigns and programs with a number of brands and are continuously looking to work more closely with them.
Taking on competition
The massive growth in the space has drawn in fierce competition, a clear sign of a healthy market. This includes well-financed e-commerce companies, as well as a host of specialist smaller companies offering a suite of warung-tech solutions.
However, Mitra Bukalapak has retained our leading edge by offering more benefits than anyone else. The assortment our Mitra can offer to customers multiplies immediately after they join — especially virtual and financial products. On registering, a store can instantly access 42 digital products that can be offered to its next customer.
Being part of Mitra Bukalapak gives these stores bookkeeping and CRM tools that boost efficiency. It helps retain offline customers and gain new ones. The Mitra has been able to improve their revenue by multiples when they join versus when they rely on a conventional supply chain.
We believe competition is healthy and we carefully monitor innovations from other companies. Our dominance of the sector continues to validate our focus on delivering long term value for our Mitra and all our stakeholders.
The road ahead for the Mitra model
We are excited to make an even greater positive impact on warung owners and their families over the next five years, helping even more Mitra to improve their income and lift their families out of poverty.
Our focus on non-tier 1 cities means there is still much more room for us to grow. There are millions of unexplored potential Mitras across Indonesia’s thousands of islands, and we look forward to helping them embrace the digital age.
