Lots of funding, but not enough FMCG faith in Indonesia's 'Mitra model'

Startups like Mitra Bukalapak wanted to shake up the way small retailers procure products to sell. They shook up a whole lot more, including their relationships with brands. B2B startups can scale, but how far can they go without the support of FMCGs?

Between 3-4 million traditional retail outlets in Indonesia sell the same products over and over to their customers, accounting for 80% of all retail sales volume, or US$90 billion

Startups believe that changing up the way traditional retail outlets source products is a big opportunity. But their interventions are angering FMCG brands

There’s a lot of resistance, both from the top of the supply chain as well as the retailers themselves, who are comfortable with the status quo

But with fresh funding for many of the startups in this sector, the search for a business model that fits continues. They must learn to collaborate with brands and distributors

A substantial 80% of fast-moving consumer goods (FMCG) retail sales volume in Indonesia comes from here. Cigarettes, coffee, instant noodles, soft drinks, detergent, you name it, you can find it at a ‘warung’.

Warungs, which are small shops, amounted to as much as US$90 billion of retail sales in 2018, according to a report by investment consulting firm CLSA. But they’re not as organised as supermarkets, and there’s a long and convoluted chain of distributors, wholesalers, and retailers keeping them stocked.

It's a warung world

Of an estimated 3-4 million retail outlets in all of Indonesia, only 50,000 are considered modern retail, meaning supermarkets and convenience store chains.

AUTHOR

Nadine Freischlad

Nadine is based in Indonesia. She covers Southeast Asia's super apps, the changing nature of work and employment, and other structural shifts happening as a result of digital disruption.

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