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Accelerating Indonesia’s rural economy through social commerce


Dagangan is using innovation, technology, and community to provide access to necessities in the country’s rural areas.


Despite booming growth in Southeast Asia, the disparity between urban and rural areas remains vast. Because of the mobility infrastructure already available in urban centres, their rural peripheries are viewed as less viable destinations for access to FMCG products and services. This has resulted in lacklustre supply chain mobility, lower population density, and a lack of logistic infrastructure, making it tough for businesses to capture the market. Trust also remains a big issue in rural areas, making it difficult for FMCG suppliers and manufacturers to penetrate rural areas.


Muntayah, a 41-year-old entrepreneur who owns a shop in Krincing Village, Magelang Regency in Indonesia, is one of the many small-time entrepreneurs who have to deal with these challenges. As a wife and mother of three toddlers, Muntayah struggles with time management issues when it comes to purchasing inventory goods for her business. Typically, it would take her approximately 10km to restock. Muntayah is just one of the many entrepreneurs facing this problem in rural Indonesia. The country has more than 65 million Micro, Small and Medium Enterprises (MSMEs), with over 60 per cent of them managed by women — many of whom are experiencing similar challenges.


Like Muntayah who make up the majority of entrepreneurs in rural areas, women managers and entrepreneurs face various obstacles running MSMEs in Indonesia. From having limited access to networks and capital to other constraints like being unable to focus on developing the business due to the many responsibilities carried on one’s shoulders — MSME entrepreneurs in rural areas disproportionately experience more challenges than their urban counterparts. This then impacts the end consumer — with higher prices and fewer basic daily necessities to choose from.


Leveraging technology and community to bridge the rural-urban gap

Dagangan is an Indonesia-based social commerce platform focused on accelerating and empowering rural communities by providing access to daily necessities at affordable prices. We also call this ‘rural commerce.’ This is done by establishing a tech-enabled hub-and-spoke network, which helps consumers buy necessities.


In a nutshell, a hub-and-spoke network connects every location through a single intermediary site called a hub. This distribution paradigm is a form of transport topology optimisation in which traffic planners organise routes as a series of “spokes” that connect outlying points to a central “hub.”


This is all asset-light as suppliers send their products and goods to our hubs located across Indonesia. Our “community leaders” who are trusted and influential in their rural areas then promote the products and services to our resellers or MSMEs to sell the goods to the end consumer. Resellers can purchase through our community leaders or the Dagangan platform.


Dagangan supports the entire supply chain from large producers, both nationally and internationally, reaching areas that were previously difficult to reach due to logistical constraints to empowering local entrepreneurs which includes community leaders and resellers like Muntayah.


At present, the company has 40 hubs across Indonesia’s rural landscape that streamlines service delivery to consumers and efficiently allow producers to overcome their logistic and geographic limitations. This enables an easier supply chain of high-quality and affordable daily goods. In Dagangan’s Impact Report 2021, the company outlines how it has made a positive change in the operations of 25,000 rural communities through its sustainability framework.


Of the 75,000+ villages in Indonesia across 514 districts, Dagangan has now reached nearly 40,000 villages in the Special Region of Yogyakarta, Central Java, and West Java. More than 30,000 communities, including retail buyers, warung owners, and MSME entrepreneurs, now have access to high-quality products that are sold through their platform at an affordable price. This is nearly half the rural population of the largest country in Southeast Asia.


Solving challenges in logistics infrastructure

In an interview with Ryan Manafe, CEO and co-founder of Dagangan, e27 discovered that among the issues that the startup aims to solve is the limited logistics infrastructure in rural communities. This limitation greatly hinders the growth and movement of buyers and sellers of local products; preventing sellers from reaching their target market and limiting buyers from accessing more diverse resources.

Dagangan also helps establish solid connections with local communities, local entrepreneurs, and MSMEs in rural areas that play important roles in interacting with local residents. This encourages businesses to explore what suppliers have to offer and creates an organic network of buyers and sellers supporting each other.


The company aims to close the equality gap between the rural and urban communities by empowering community leaders and resellers in rural communities with its tech-enabled products and services.


When Muntayah was introduced to the Dagangan applications at the end of 2019, she was immediately drawn, especially because she no longer needed to physically go to the market to shop for various items to sell in her store. All she needs is to buy them through the Dagangan applications, and the goods will be delivered to her the next day without additional shipping costs.


In addition, the prices offered in the Dagangan applications are also more affordable than what is on the market. “Now inventory shopping becomes much easier and cheaper. I can do it even without leaving the house and closing the store,” she said.


Yuliati, also an entrepreneur from rural Indonesia, also feels that her business has become smoother and easier ever since she used Dagangan applications. Not only that, but her sales turnover also increased because more items could be sold in her store at a cheaper price. “So many people around here shop at my store because the price is cheaper,” said Yuliati.


Yuliati has been using the Dagangan applications for a year and a half. Previously, her business stalled because some of the e-commerce she used to deal with did not give the expected results. When she finally used Dagangan, her business began to grow. “I only had 1.5 million in capital (roughly 100 dollars) to buy items in the shop before. Now my turnover has increased to 44 million,” Yuliati explained.


The mixture of digital expertise and community engagement is in line with the company’s mission to develop the local economy in Indonesia through the transformation of traditional economic activities.


A long-term vision toward sustainability

Dagangan operates within a sustainability framework in line with the United Nations Sustainable Development Goals (UN SDGs). The startup is actively striving for the fulfilment of these SDGs including efforts to reduce poverty, create jobs for economic growth, and contribute to addressing climate change issues. All of this is within the context of supporting rural communities to overcome structural barriers to their own growth.


To do this, the company provides support for Indonesian MSMEs similar to those managed by Muntayah and Yuliati. Through its applications and community leaders, entrepreneurs can save the time needed to buy items they could both use and offer in their stores such as basic necessities and other household needs.


“We expect to accelerate economic equality by paving the ways for the rural communities to access their basic needs efficiently. They now have the same opportunity as urban communities, completely meeting their daily needs affordably, without incurring additional shipping and logistics costs,” said Manafe.


“We provide a same-day delivery service and bring the convenience of shopping for daily necessities similar to urban cities to rural areas,” Manafe said. “We aim to build a sustainable, inclusive, and integrated digital economy ecosystem, and we hope that our efforts can significantly contribute to accelerating the rural economy in Indonesia.”


For more information, check out Dagangan’s impact report: https://blog.dagangan.com/dagangan-creates-positive-impact-for-25000-of-rural-communities/


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Dagangan is one of our portfolio startups in Plug and Play APAC. As an in-house venture capital, our goal is to fund the teams that are building the defensible businesses of the future. By leveraging our capital, our network of VCs, and our corporate partners, we give our portfolio companies an unfair advantage. Find out more about our upcoming Investor's Day here!

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