Empowering Rural Communities and Revolutionizing Tier 3- 4 Commerce
Every week, rural Indonesian store owners travel miles through rugged terrain to stock their “warungs” with everyday essentials. Limited access to these goods drives up costs, and the logistical struggles impact not just businesses but entire communities.
Dagangan Indonesia, a digital platform founded in 2019, is on a mission to change this reality, enabling rural communities to access affordable goods right at their doorsteps. Previously having to close their shop for several hours just to travel and restock, shop owners now can save cost both from transport and the opportunity cost of lost sales.
Through localized logistics and a community-focused approach, Dagangan is empowering the local economy across Indonesia’s Tier 3 and 4 regions.
In 2023, the number of MSME in Indonesia is recorded at around 66 million. MSMEs’ contribution reaches 61% of Indonesia’s Gross Domestic Product (GDP), equivalent to IDR 9,580 trillion (Source: KADIN)
Berdaya Talk is an initiative that explores the stories of change makers and the initiatives they have developed to support sustainable development in Indonesia. This time, we are joined by Ryan Manafe – Co-founder at Dagangan Indonesia.
How did the idea to found Dagangan came about?
Dagangan’s story is rooted in a desire to give back to the country. Having been instilled a strong sense of patriotism through his education journey since a young age, Ryan ended up not pursuing his dream career as a fighter pilot for the Indonesian Air Force, but contributing for Indonesia in many other ways.
Before Dagangan, I built my career in renewable energy for 5+ years as the CEO of SUN Energy and business consulting in McKinsey, and along the way, saw firsthand how isolated many of these regions are from essential goods and services. That experience shaped the “why” behind Dagangan: to make life easier for people in rural areas by using an efficient logistic model to bring goods directly to them.
Challenges in Reaching Indonesia’s Tier 3-4 Regions
Indonesia’s rural areas face structural challenges that make distributing goods difficult, including weak infrastructure, limited digital literacy, and logistical hurdles.
This has led Dagangan to implement a hub-and-spoke operating model (40 of these hubs as of the writing of this article), which helps consumers to buy basic necessities, as well as assisting large producers, both nationally and internationally, to reach areas that were previously difficult to reach due to logistical constraints.
This model has proven to be a game-changer, addressing several core obstacles:
- Logistics Constraints: Dagangan’s consumers live on average 10 km from the nearest wet market. They have to go on motorbikes, take care of the children, and have to do that to buy everyday things every 2 days. This reality often requires lengthy, costly journeys for basic supplies. Dagangan’s hub-and-spoke model reduces the cost and time required to reach rural markets, helping brands , both locally and internationally, reach this rural market.
- Local Trust and Relationship Building: Dagangan collaborates closely with community leaders, local businesses, and MSMEs to foster trust and credibility within rural communities. These partnerships facilitate smoother entry into new markets and ensure community members feel comfortable using Dagangan’s services.
- Low Technological Adaptation: Rural communities are often resistant to adopting unfamiliar digital tools. However, at Dagangan, they’ve built a trusted, localized team offering personalized support to help residents transition to digital services, providing the confidence they need to embrace new technologies.
Connecting Brands to the Heart of Rural Markets
Serving tier 3 and 4 cities in Indonesia is a whole different ball game compared to tier 1 and 2 cities. In urban areas, the willingness to pay comes directly from the consumer. Urban residents are often willing to pay more for the convenience of quick doorstep deliveries, which makes urban-focused platforms financially viable. In rural areas, however, it’s a different story.
For Dagangan, the primary clients willing to pay for access to these remote markets aren’t the rural consumers themselves; they’re the major brands – Unilever, Coca-Cola, GarudaFood, and other FMCG giants. For these companies, high volume and deep market penetration are everything. Their business thrives on reaching the widest audience possible, and tier 3 and 4 cities represent an enormous growth opportunity.
But there’s a catch: deep rural penetration has traditionally been dominated by local incumbents like Indofood, Wings, and Mayora. These brands have already built strong distribution networks and local connections over decades. For new entrants, the high costs of setting up a distribution network in rural areas pose a significant barrier. The cost of land is rising, and adding multiple layers to the distribution chain drives up prices and inefficiencies.
That’s where Dagangan steps in. By partnering with these brands to improve their rural distribution, Dagangan not only helps them reach remote areas but also provides them with valuable data on local shopping behaviors. This data transparency is invaluable for brands looking to understand rural consumers, allowing them to fine-tune their marketing and improve their outreach.
Dagangan, in essence, is bridging the gap between big brands and rural communities, making a traditionally hard-to-reach market accessible and sustainable for both sides.
Success Stories: Transforming Lives, One Warung at a Time
Take Yuliati, a warung (small shop) owner near Mount Merapi that lives 25km from the city center of Yogyakarta province (8 hours drive from Jakarta), who previously was making around IDR 500k-600k daily.
But since teaming up with Dagangan, her daily earning shot up fourfold up to IDR 2 million! Dagangan infrastructure ensures she gets quality goods at prices that keep her customers happy.
Dagangan’s hub-and-spoke model reduces logistical costs by 40-60% and supports over 100,000 MSMEs like Yuliati by delivering goods at 12% lower prices.
To ensure these efficiencies are sustainable as they expand, they leverage data analytics, strategic planning, and partnerships with over 100 brands. benefiting both store owners and their customers.
Embedding Sustainability into Dagangan’s Model
Dagangan has implemented several initiatives to ensure its operations align with the United Nations’ Sustainable Development Goals (SDGs), including:
- No Poverty (SDG 1): Dagangan’s logistics model simplifies supply chains, making goods accessible and affordable in underserved areas.
- Gender Equality (SDG 5): By empowering housewives to start businesses, Dagangan fosters economic independence among women, while promoting equal employment opportunities within the organization.
- Decent Work and Economic Growth (SDG 8): With over 800 local hires since its founding, Dagangan creates valuable employment opportunities in rural areas.
- Reduced Inequalities (SDG 10): Dagangan bridges the urban-rural divide, providing fair access to quality goods and competitive pricing to over 100 million people.
- Climate Action (SDG 13): The company’s adoption of electric vehicles within its distribution network has reduced carbon emissions by up to 30 tons ( that’s equivalent to 15 flights from Jakarta to Amsterdam)
Expansion Plans and the Road Ahead
Dagangan has established a strong presence across West and Central Java, prioritizing areas with dense populations but poor access to essential goods. The company’s strategy is twofold: scale up operations across Java and diversify its product offerings to address a broader spectrum of consumer needs.
By expanding its hub network and leveraging its BNPL program, Dagangan aims to drive significant economies of scale, making its model more efficient and impactful as it reaches new communities.
Building a Foundation for Rural Commerce of the Future
As urban markets approach saturation, Dagangan sees rural commerce as a crucial frontier for growth.
By combining digital tools with traditional supply chains, Dagangan is creating an omnichannel model tailored to rural consumers, enabling brands to enter untapped markets more effectively.
The company’s data-driven approach and deep expertise in rural consumer allows it to provide FMCG brands with insights into their behavior, helping these brands make informed decisions about expanding in these regions.
Lessons Learned from building Dagangan
- Discipline: Managing logistics across rural communities requires strict operational discipline to ensure efficiency and customer satisfaction
- Monetizing Value: Dagangan has mastered the art of monetizing essential services while keeping them affordable, driving revenue while supporting community development.
- Focus on Value Creation: Every initiative is guided by the impact it will have on rural communities, ensuring that Dagangan stays true to its mission of empowerment.
If people want to learn more about Dagangan where can they find you?
Learn more about Dagangan and their works here:
Share this article
Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
