Offline Programs are Getting Tech Players More Customers in Indonesia
By empowering agents or small kiosks, tech players including e-commerce firms are helping bridge the formal and informal economies.
In a small 2×2 meter kiosk along Jakarta’s Radio Dalam street, Romana provides digital payment services to her customers by using the GrabKios platform. She offers several services, including phone credit top-ups, OVO credit-top ups, bill payments, and domestic remittance services for customers. The 37-year old has used GrabKios [previously named Kudo] since 2017.
Since becoming a GrabKios agent, Romana has been able to complete transactions totaling a maximum of IDR 20 million (USD 1,427) a month, compared to below IDR 10 million a month previously as a phone credit seller before joining GrabKios. Her income is largely derived from selling phone credit, and facilitating bill payments, as well as domestic remittances.
“The profit is not big, it ranges from IDR 500 to IDR 13,500 (USD 0.04 to USD 0.96) per transaction, depending on the service. Compared to other players’ products, GrabKios is much cheaper and easier to use,” Romana said.
She admitted that she did not have a banking account in the past and used to pay via Indomaret, an Indonesian convenience store chain, before she joined GrabKios. However, after becoming an agent, she opened a bank account, which has made it easier for her to perform transactions.
Meanwhile, Rofiatun, a mother of three, joined Tokopedia’s offline agent program Mitra Tokopedia in 2o18. Mitra Tokopedia empowers agents operating small kiosks or mom-and-pop stores by helping them use Tokopedia’s platform to increase their product sales. By becoming an offline agent, Rofiatun has been able to purchase products such as snacks and beverages at slightly lower prices for her kiosk.
“Although the product prices are quite similar or slightly cheaper than those from traditional distributors, I can use the profits for my children’s allowances. This way, I can help my husband who works as a Grab driver, to earn more income. Moreover, I can transfer money to my family, even in small denominations, on my own,” Rofiatun told KrASIA.
People such as Romana and Rofiatun, who belong to the middle-to-low income segment, may not have tapped digital platforms if these services had not directly benefitted their lives.
Indonesia is the largest internet economy and most populous country in Southeast Asia. The country’s internet economy is estimated to be worth USD 40 billion in 2019.
More than half of the country’s total adult population are now using mobile internet. Furthermore, according to the Global Digital 2019 report from We Are Social and Hootsuite, Indonesia is also among the top countries in the world by mobile internet usage. Its users are connected to mobile internet for approximately four hours a day, while the global average is three hours and 13 minutes.
However, few Indonesian users use mobile internet for productivity, the report said.
Empowering kiosk operators to reach more customers
Empowering warungs [mom-and-pop stores] and small kiosks has become a way for e-commerce and tech players to reach more customers, especially those who are from the middle-to-low income segment, and who mostly do all their transactions offline.
“The offline retail portion in Indonesia is still huge. Indonesia retail e-commerce is below 4% of the country’s total retail sales. The remaining 96% is still offline. Hence, we believe an agent network is the most effective model to capture this market,” said Agung Nugroho, chief executive officer and co-founder of GrabKios.
He added that using technology alone makes it impossible to reach middle and low income earners, who are less technologically savvy. Through warungs, the firm expects that technology will penetrate this segment.
Nugroho added that he is doing this because he believes in helping people through financial inclusion.
Kudo [before becoming GrabKios] was a pioneer in empowering traditional retailers since 2014, prior to merging with Grab in 2017. It was founded by Albert Lucius and Agung Nugroho. Today, GrabKios is available in 505 towns and regions, with 2.6 million users across Indonesia.
GrabKios approaches agent candidates through sales or marketing staff, so it is easier to earn the trust of the locals. Nugroho said that there are no specific requirements to become an agent, apart from the fact that candidates should have a warung or kiosk for selling products.
GrabKios equips the warung owner or agent with technology to help the agent’s customers order goods and manage transactions. Moreover, the agent program offers some additional business opportunities, such as airtime top-ups, bill payments, travel tickets, money transfers, and the registration of Grab driver-partners. The company claims that a warung’s revenue increases by as much as 30%–40% after adopting its system.
E-commerce unicorns have joined the fray
Many tech players are entering the middle and low income segment, which has room still to grow. Therefore, other tech companies including e-commerce unicorn players don’t want to miss out on the market.
SoftBank Group-backed Tokopedia and Shinhan Financial Group-backed Bukalapak entered the offline world last year. The platforms named their agent programs ‘Mitra Tokopedia’ and ‘Mitra Bukalapak’, respectively.
Tokopedia’s assistant vice president of new retail Adi Putra said that Mitra Tokopedia complements its existing consumer base, and expects to eventually serve the full range of customers that the platform can reach.
“We hope Mitra Tokopedia bridges the online and offline world for partners spread across various cities in Indonesia while preserving Indonesia’s neighborhood-based culture. Synthesizing both online and offline retail will result in powerful synergy, that will help achieve the mission of democratizing commerce in Indonesia through technology,” Putra told KrASIA.
As of October 2019, there are around 350,000 active Mitra agents for the platform. Putra said that Tokopedia’s 30 digital products will gradually be made available to Mitra Tokopedia partners, thus encouraging traditional retail players to contribute more to Indonesia’s digital economy.
Edward Buckingham, a professor of management and director of engagement at Monash Business School said that engaging with agents is an effective way for tech and e-commerce players to penetrate rural areas.
“The cost of logistics and transactions to reach them [rural areas] is high, but if they partner with local people or get them to become agents, especially those who have good social networks, it will be easier. The agent can become the bridge, and the solution between the informal and formal economies,” Buckingham told reporters on the sidelines of the Fintech Summit in Jakarta, in September.
Furthermore, tech players should be able to successfully prove that their business models are more efficient than that of other players. They also need to provide opportunities to their customers [agents] to use their networks to increase the latter’s standard of living.
However, Buckingham foresees that empowering agents will not be a long-term plan for tech players. He thinks Indonesians will be tech savvier in the near future. Hence, customers will not need agents as the middlemen for connecting with companies. They will eventually reach out to companies directly, hence tech players’ business models need to evolve.
- This article first appeared on KrASIA. It’s republished here as part of our partnership.