Mapping Out “New Retail” and the Future of Commerce in Indonesia

February 28, 2022

The Age of “New Retail”

In recent years, “new retail” has become one of the hottest buzzwords among retail industry players. This term was coined back in 2016 by Jack Ma,founder of Chinese tech titan Alibaba, as a means to integrate online and offline shopping experiences. More pertinently, new retail also refers to the incorporation of more technology into each layer of the retail supply chain, and not just the final customer-facing stage. 

This tech-heavy business model initially arose as a way to accommodate verticals and industry players who were previously untouched by technology. By blending technology with multiple stages of the supply chain, new retail can also help accelerate the digital transformation of the overall ecosystem.

In Indonesia, new retail started to emerge in 2017, when Grab, the region’s largest ride-hailing company, acquired Indonesia-based online payment startup Kudo.2  Kudo was subsequently rebranded as GrabKios in 2019 and officially merged into Grab’s ecosystem.3 Specifically, GrabKios helps connect Indonesia’s small mom-and-pop kiosks, or warungs, to the digital economy.4

To date, a number of names have similarly emerged to leverage this business model. The new retail concept is most obvious in Warung Pintar, which has large ambitions of transforming and digitalising all aspects of traditional trade in Indonesia. Similarly, tech companies from other verticals are expanding their focus to the new retail sector, such as Mitra Tokopedia and Mitra Bukalapak.

Understanding the New Retail

New retail takes the power of digitalisation and big data beyond their current applications in e-commerce, creating new dynamics between consumers, brands or principals, wholesalers, and retailers in the physical commerce space. 

This plays out across several dimensions, such as improving supply chain and distribution logistics, providing value-added services to producers and retailers, and creating integrated shopping experiences for customers.5 This happens when companies blend aspects such as their digital payment solutions, logistics infrastructure, and customer interfaces with physical retail operations.

The potential of new retail is evident when we realise that unorganised channels still account for 74%, or US$267 billion, of retail in Indonesia. About 60% of unorganised channel operations is accounted for by warungs, according to RedSeer. Based on a 2018 Nielsen report, there are around 3.5 million warungs in Indonesia distributing US$128 billion dollars’ worth fast-moving consumer goods to their consumers.6

These numbers show that traditional retail channels, including warungs, still dominate the retail landscape in Indonesia. Furthermore, warungs are perceived not only as a retailer, but also as a digital hub and extension of the local community in which most consumers are unbanked and without any digital touchpoints.

This growing startup trend does not only occur in Indonesia, but is also emerging in other countries. We can look to India’s Kirana King, Philippines’ GrowSari, and China’s Ling Shou Tong as examples.

New retail businesses in Indonesia are essentially attempting to address a number of major issues pertaining to warungs. Within traditional retail channels, there are still many layers of processes present. In fact, traditional retail supply chains can have up to five layers of intermediaries between brands and their customers, capturing 20 to 25% of the value and leading to a longer distribution time for retailers.

Furthermore, fragmented information leads to difficulties in creating strategic, data-driven decisions. With many middlemen and the multilayered distribution process, traditional channels are plagued with a lack of transparency, resulting in asymmetrical flows of information. This can result in insignificant growth and lack of value for all parties. For example, warung owners end up not knowing the actual selling price of the projects they purchase, while brands do not get the full picture of where their products are distributed.

Challenges for Digital Adoption

Many technologies are trying to disrupt the market and promote digital adoption among stakeholders, whereas there are several players who do this by primarily targeting warungs. However, this generates a new challenge, as only a single player out of the entire ecosystem is digitalised, creating an unfavorable disruption in which the imbalance of the ecosystem can lead to more hesitation to adopt digital solutions.

Although new retail has been around for a while, its relevance has become amplified amidst the pandemic. Industry players have started to realise how critical the supply chain is for every stakeholder involved, how dire the present situation has become, and how current solutions — both conventional and digital — do not meet stakeholders’ needs.

The pandemic has led to a surge in digital penetration among micro-, small-, and medium-sized enterprises (MSMEs), especially warungs. Before the pandemic, 6 to 7 million MSMEs were using digital platforms; this number skyrocketed to 12 million in 2021.7 Warung owners’ have also become more curious about experimenting with digital solutions.

Therefore, the main focus of new retail industry players is to open up technology-based access and solutions for warungs. This can be seen from the various features facilitated by new retail business players, such as providing access to more business capital, offering financial services, and accelerating digital literacy.8

Impact on the Ecosystem

The presence of new retail startups — such as Warung Pintar, Mitra Tokopedia, and Mitra Bukalapak — can leverage this new niche to enhance their productivity.

For warung owners, they will gain a better collective understanding of market demand. For instance, product recommendations will help with managing their item inventory and streamline which products to stock more often.

For brands or principals, not only can they understand real-time market conditions, they can also reach underserved retailers. This adds much value, especially for brands with low outlet coverage.

For distributors, new retail will help increase warehouse management productivity by providing holistic inventory visibility, stock management predictions, and cost-efficient logistics delivery or fleet management.

Additionally, the impact on these end-to-end services will also help support the productivity of the middlemen involved, including wholesalers. They will be able to expand their market to retailers and improve business transparency.9

New Retail and Social Change

Aside from enabling digitalisation for all stakeholders in the trade, most new retail startups also have a tendency to go beyond simply helping businesses, brands or principals, and distributors achieve higher growth. New retail startups often exhibit social impact, creating positive spill-over effects for the community.

One notable case study is Warung Pintar. In 2021, the startup’s social return on investment (SROI) reached 131%, showing the vast positive social impact that Warung Pintar has had.

Based on Warung Pintar’s internal data, they have helped increase average daily income by 51%. After joining Warung Pintar, 25% of warung owners successfully rose above the poverty line.

Efficiency has been improved in all aspects as well. An additional one hour per day to family time was added after joining Warung Pintar, which is 15% better than other suppliers, and warung owners under Warung Pintar are 20% more cost-efficient, when it comes to delivery, operation costs, and inventory procurement. Furthermore, 54% of all warung owners under the startup are women, in which 75% are breadwinners who are able to generate household income, showing that the digitalisation of warungs is paving the way for more women to take up the mantle.

By providing end-to-end access and more opportunities for warung owners, the new retail industry will continue to generate larger impacts, especially given the Indonesian market’s enormous potential.

Parting Words

Stories like the above are becoming increasingly common across developing Asia. Tech solution providers have come to realise the important role that retailers play in rural communities, and hence continue lending them a ‘technological’ hand.

When it comes to hubs like warungs, they have every right to modernise while still keeping their value as the heart of local communities. From the industry perspective, warungs already play a crucial role in Indonesia’s retail ecosystem, as they have served as fulfilment hubs for decades.

Ultimately, this points to the need for brands and principals to leverage omnichannel commerce strategies, which allow them to tap on warungs in order to reach a broader customer base.

Click here to find out more about how Warung Pintar provides a one-stop solution for all warung needs:


SIRCLO neither provides regulated advice nor guarantee results. The materials we convey reflect general insight and best practice based on information currently available, and do not contain all of the information needed to determine a future course of action. Such information has not been generated or independently verified by SIRCLO and is inherently uncertain and subject to change. SIRCLO has no obligation to update these materials and makes no representation or warranty and expressly disclaims any liability with respect thereto.