The tech adoption and supply chain are identified as challenges for the e-grocery sector: EV-DCI report 2022.
Born and raised in the hustle and bustle of Indonesia’s capital, Jakarta, James Rijanto recalled a big shift trend of the venture, which used to revolve around the manufacturing industry to the new F&B and lifestyle concepts.
Fast forward to today, F&B has become a cornerstone industry for Jakarta. Not only food and beverages, but the industry also offers a place for recreation and gatherings. However, James said, classical problems have yet to be resolved. These include getting reliable access and supply of products, dealing with excessive different suppliers, inconvenience, and lack of transparency on ordering & invoicing. These challenges have called him to establish Pasarnow.
In 2019, James, together with other Pasanow founders – Donald Wono and Cindy Ozzie, to transform the grocery & supply chain of grocery products in Indonesia. The founders have a vision that the platform will be an everything store for all F&B businesses in Indonesia, providing them with full-stack solutions for all their kitchen & product supplies needs.
“Our mission is to help F&B businesses to grow at scale by solving their daily pain points surrounding getting consistent & reliable product supply, having a convenient ordering & billing process, and getting access to a wide variety of products at competitive prices,” James said.
East Ventures, Indonesia’s leading venture capital firm, has invested in Pasarnow since 2021. Co-founder and Managing Partner of East Ventures Willson Cuaca believes that Pasarnow comes to tackle the F&B, especially the grocery challenge, by eliminating inefficiencies in the process through its data-driven business model.
The platform connects the farmers to suppliers and customers (B2B and B2C) to secure the supply chain of grocery products. It turns out that Pasarnow also provides better alternative market access for farmers and suppliers by shortening the fragmented supply chain and eliminating the many middlemen.
Farmers are predominantly located outside metro areas without direct access to customers. Generally, they sell their products to the small traders or intermediaries, who will sell to a giant trader, moving to the wet market, and finally to the customer. This conventional supply chain process harms the farmers’ margin & affects their income. Another fact from Statistics Indonesia (BPS) in 2019, approximately 20,7 million or 75% farm households owned less than 1 hectare of farming land. The situation made them not have the ability to scale the production and supply chain on an individual basis.
Pasarnow works with groups of farmers, which have around 50-250 farmer members per group, helping them to increase their income and achieve the scale of operations required to be sustainable and profitable. Pasarnow farmers said that they can increase the selling price 20-30% higher than the prices offered by the intermediaries or the wet markets.
Today, over 1,000 farmers have collaborated with Pasarnow through their farmers’ groups all over Java (West, Central, & East Java), Bali, and Kalimantan. Meanwhile, the app operates in Jakarta Greater Area, Bandung, and Surabaya. The firm also works with suppliers ranging from brand principals to SMEs with quality products.
Tech adoption and complexity of the supply chain are challenges for e-grocery startups
The grocery industry is a potential sector that boosts Indonesia’s economy. The grocery market could be worth US$ 169.4 billion in 2022 – up from US$ 140.2 billion in 2019, a research firm IGD estimated. The country is also projected as the fourth-largest grocery market in Asia in 2022 – after China and India in the second and third place. Moreover, online grocery retail will also expand from 0.3% in 2020 to 0.5% in 2022.
However, technology adoption and the operation complexity of the end-to-end supply chain are major challenges to transform the grocery industry to the big cities outside Jakarta.
“Not everyone in Indonesia is tech savvy, and finding the right technical solution that’s not too complicated but equally useful has not been easy. It also takes time to educate the users to understand why they should change their habits, using the technology compared to the traditional way,” James said.
This aligns with findings from the East Ventures – Digital Competitiveness Index (EV-DCI) 2022, the lack of digital literacy, limited funding and startup investment access, are the main factors that made MSMEs slow to adopt the digital platforms. Only 25% of Indonesia’s MSMEs had used online platforms for their businesses.
Moreover, Indonesia’s unique geography has been a logistical challenge to provide robust internet connections to the MSMEs scattered across the country. As a result, there is a lack of digital adoption, especially for MSMEs located in the less-developed areas of Indonesia. The report found, there is still a large discrepancy between Jakarta and other provinces regarding workers’ utilization of online platforms to conduct sales. For instance, Sulawesi has a score of 14, much lower than Java’s score of 49 in 2022.
The EV-DCI report also identified some factors that turned a slow adoption on B2B commerce. These factors are: a slower adoption of digitalization in enterprises compared to the C2C segment and a higher operational complexity compared to the B2C or C2C space. B2B transactions have higher price value, requiring more advanced technical capabilities, such as real-time inventory information, quote requests, and the flow of procurement approval.
To overcome the challenge of tech adoption, Pasarnow applies several steps that make customers adopt the technology, from utilizing purchasing apps to digitizing the warehouse system with the management tool and fleet system.
Regarding simplifying the operations of the supply chain, Pasarnow will develop a transport management system to track the products from end to end, so it can ensure the products are delivered on time and in excellent quality for the optimum cost.
Improving the supply chain for a sustainable food supply
Despite being the largest economy in Southeast Asia, Indonesia is a lower middle-income country and still faces challenges regarding limited food access, malnutrition, climate change, and vulnerability to natural hazards. According to World Food Program data, about 270 million of the total population, approximately 22.9 million people, cannot meet their dietary requirements, and 30.8% of children under five are stunted.
Pasarnow helps to bring a positive impact to Indonesians by reducing food pricing fluctuations and scarcity of natural products. The firm has set hubs close to customers. The hubs are equipped with cold chain storage, lowering logistics costs and ensuring product freshness. Pasarnow also utilizes the collection centers, which allow farmers to drop off all their goods in a central location near them and is also cost-efficient.
By supporting Pasarnow, East Ventures believes it can leverage more good impacts in securing the food supply and reducing the scarcity so that the nation can achieve its Zero Hunger target in 2030.