In Indonesia, nearly 80% of all retail spending happens in warungs- small and independent family-run shops. These warungs can be found all across Indonesia and have been very much in the spotlight lately. Their problems, inefficiencies and need for digitization are well elaborated in many publications and tech articles. And yes these problems and need for digitization are very much true- I‘ve witnessed them first hand during my time in P&G and now at Ula providing the tech solution.
However, instead of focusing again on the warungs’ shortcomings, I’d like to shine a light on the many great things they have. I would like to provide my on-the-ground perspective and highlight their strengths (there are plenty), cultural importance and why we at Ula are so excited about the future of these warungs as they enter the digital age.
Warungs Are Very Efficient and Offer Convenience Everywhere
It is estimated that there are 3–4 million warungs evenly distributed across Indonesia, serving hundreds of millions of customers. These warungs have extensive area penetration and widespread coverage. You can always expect to see a warung on every street and corner, on small alleys, and within walking distance of your residential area. While their product selection is not as comprehensive as the supermarkets of today, they still manage to sell the most popular brands of beverages, packaged food, household products, etc, and even local brands. This is a very impressive selection considering these warungs are typically 3 by 5 meters stores manned by only 1 or 2 people!
Warungs Cater to the Masses
Warungs are the preferred retail channel for Indonesia’s economic pillar- the low and middle income classes. These warungs are crucial to their daily life. It is estimated that 70% of FMCG and 85% of grocery spending flows through these warungs
Even as modern trade rises in prominence, the total Indonesian total traditional retail market is still estimated to grow at a rate of $15B a year. As the disposable income of the low and middle income masses continues to grow, these warungs will continue to be a crucial retail channel for them. They will remain an affordable and effective distribution channel for the masses- retaining the crown as the most visited retail channel in Indonesia.
Warungs Are an Important Fabric of Indonesian Culture and Community
It’s not a stretch to say every single Indonesian has visited a warung. All of us have fond memories of buying beverages from the Ibu(s)/Bapak(s)who manage the stores or having hearty conversations with them while dining at their warungs. These small entrepreneurs do their best to serve you and treat you not like a customer, but a family member. Overtime, bonds form and they become central figures in binding the community together and their warungs become a community gathering spot. Especially important today in retaining the community spirit as the world becomes more digital and distributed.
Warungs Teaches us Important Life Lessons too
Operating these warungs are an entire generation of Ibu(s)/Bapak(s) who are highly entrepreneurial. These entrepreneurs have overcome all adversities, setting up their own stores during a time when opportunities were scarce and were able to raise their families thanks to them. They work extremely long hours and have operated their warungs for many years- showing a level of perseverance and dedication that we can all learn from. Even now during covid, they have remained open and became a supply lifeline for so many. Despite having such a massive positive impact in their communities, they have remained humble and continue serving all of us with big smiles. Try talking to these warung owners- you will find they have fascinating stories to share, and you have much to learn from them!
What It Means to Digitize Warungs at Ula
Considering all the strengths a warung has as a retail channel, it would be a folly for us to want to completely transform them. Why replace a channel that is already so good and effective? Instead, we want to empower these warung owners- working closely with them and giving them access to tools to simplify their work and amplify their impact.
At Ula, the warung owner will always be at the center of everything we do. Despite the rapid digitalization and rise of modern trade in Indonesia, these warungs will not disappear but will continue being a central part of Indonesia’s economy and the daily lives of Indonesians.
It is our job then to ensure we work hand-in-hand with these warungs and enter the digital future together.