Why Indonesian Street Vendors Are Going Digital

Why Indonesian Street Vendors Are Going Digital

The nasi goreng vendor on the corner of Jalan Sudirman in Jakarta has been selling fried rice for twenty years. He takes cash. He knows his regulars. He keeps his supply chain in his head. But last year, he started accepting QR code payments. Then he joined a delivery platform. Then his supply chain performance improved by a measurable amount.

This is not a story about tech utopia. It is a story about what happens when 64 million micro, small, and medium enterprises (MSMEs) in a single country start using digital tools not because the government tells them to, but because the numbers actually work. The question is: do they work for everyone?

Kilay, Simamora, and Putra (2022) wanted to answer that question with data. They surveyed 164 Indonesian MSMEs, ran regression analyses, and interviewed experts to find out exactly how much e payment and e commerce services actually improve supply chain performance. Their answer: yes, but the devil is in the ten indicators that still score low.

Here is what the research reveals about a digital transition happening on the streets of the world's fourth most populous nation.

What 164 Businesses Revealed About Going Digital

The research team collected data from MSMEs across Indonesia that had adopted some form of digital payment or e commerce. They measured supply chain performance using indicators like order accuracy, delivery speed, inventory turnover, and customer satisfaction. Then they ran multiple linear regression to isolate the effect of digital adoption.

The headline finding: both e payment and e commerce services have a positive and significant influence on supply chain performance (Kilay et al., 2022). This is not a small effect. The regression coefficients were statistically significant at the 0.05 level, meaning the relationship is real enough that you would not expect it to happen by chance.

But the authors did something more useful than just proving digital is good. They identified the ten indicators where MSMEs still score low, which represent the actual bottlenecks to full digitization. These include things like internet connectivity in rural areas, digital literacy among older vendors, and trust in online payment systems.

The study is not perfect. The sample size of 164 is modest for a country with millions of MSMEs. The authors acknowledge this limitation. But the consistency of their findings across different types of businesses and regions makes the pattern hard to dismiss.

The Supply Chain That Nobody Sees

To understand why this matters, you have to understand how Indonesian street vendors actually work. A typical warung (small shop) or kaki lima (street cart) operates on thin margins. They buy ingredients daily. They sell until they run out. They have no inventory system beyond what fits in their head.

When a vendor adopts e payment, something interesting happens. They get a digital record of every transaction. That record tells them what sells, when it sells, and for how much. They can use that data to order smarter. They can track which suppliers are reliable. They can even predict how much to buy tomorrow based on today's sales.

This is what the authors call supply chain performance improvement. It is not about flashy technology. It is about replacing guesswork with information. The study found that e payment adoption directly improves order accuracy and inventory turnover (Kilay et al., 2022). Vendors who accept digital payments stock out less often. They waste less food. They make more money.

E commerce adds another layer. When a vendor joins a delivery platform like GoFood or GrabFood, they expand their market beyond the people who walk past their cart. They can sell to office workers three kilometers away. They can sell during rain when foot traffic drops. The study found that e commerce adoption improves delivery speed and customer satisfaction, but only if the vendor can actually fulfill the orders (Kilay et al., 2022).

This is where the bottlenecks emerge.

The Ten Indicators That Keep MSMEs Stuck

The authors identified ten indicators with low scores that slow down digitization. These are not abstract problems. They are the daily reality of millions of vendors.

• ▸Internet connectivity in rural and peri urban areas remains unreliable. A vendor in Yogyakarta might have good signal. A vendor in eastern Indonesia might not.
• ▸Digital literacy varies wildly by age and education level. Older vendors who have run their business for decades without a smartphone are not going to adopt QR codes overnight.
• ▸Trust in digital payment systems is low among vendors who have been scammed or who know someone who was scammed. Cash is tangible. Digital money feels abstract and risky.
• ▸The cost of digital infrastructure, including smartphones, data plans, and transaction fees, eats into already thin margins.
• ▸Integration between e payment and e commerce platforms is poor. A vendor might accept payments through one app and manage orders through another, with no connection between them.
• ▸Customer demand for digital options is uneven. Some neighborhoods are cash only. Others are fully digital.
• ▸Government support programs exist but are poorly communicated. Many vendors do not know about the training or subsidies available to them.
• ▸Supplier readiness is inconsistent. A vendor might go digital but their supplier still operates on cash and paper receipts.
• ▸Data privacy concerns make vendors hesitant to share their transaction data with platforms.
• ▸Maintenance and troubleshooting are difficult. When a payment terminal breaks or an app crashes, there is no one to call.

These ten indicators are not independent. They interact. Poor connectivity makes digital literacy harder to build. Low trust makes integration less valuable. The authors argue that solving any one of these in isolation will not work. You need open innovation and systemic solutions (Kilay et al., 2022).

What Open Innovation Actually Looks Like for a Street Vendor

The authors propose something they call open innovation. This is not a buzzword. It is a specific strategy for solving the ten bottleneck indicators by involving multiple stakeholders: vendors, platforms, government agencies, banks, and telecom companies.

For example, to address digital literacy, the authors suggest that training programs should be designed by vendors themselves, not by tech companies who have never run a food cart. A vendor who learns from another vendor learns faster. Trust transfers.

To address connectivity, they propose that telecom companies offer subsidized data plans specifically for MSMEs, with the government providing tax incentives in return. This is not charity. It is a market based solution that aligns incentives.

To address integration, they suggest that e payment and e commerce platforms share APIs so that a vendor's sales data flows automatically into their inventory management and ordering systems. This would reduce the cognitive load on vendors who currently have to juggle multiple apps.

The authors are not naive. They know that these solutions require coordination that is hard to achieve in practice. But they have empirical evidence that the payoff is real. Every percentage point improvement in supply chain performance translates directly into higher revenue and lower waste for vendors who are operating on razor thin margins (Kilay et al., 2022).

The Human Cost of Going Digital

There is a story the data does not tell. The authors measured supply chain performance, not vendor well being. A vendor who adopts digital tools might improve their inventory turnover but also feel more stressed. They might earn more money but also feel surveilled by the platform. They might reach more customers but also lose the personal relationships that made their business meaningful.

The study does not address these trade offs. That is not a flaw. It is a boundary. The authors are clear that their focus is on supply chain performance, not on the full human experience of digitization.

But as a reader, you should hold this tension. Digital adoption is not costless. The vendors who succeed in the transition are not necessarily the ones who were struggling before. They might be the ones who were already doing well and could afford the smartphone, the data plan, and the time to learn.

The authors found that e payment and e commerce services have a positive influence on supply chain performance, but they also found that the distribution of benefits is uneven (Kilay et al., 2022). Vendors in urban areas with good connectivity benefit more than vendors in rural areas. Younger vendors benefit more than older vendors. Vendors with higher education levels benefit more than those with less formal schooling.

This is not an argument against digitization. It is an argument for targeted support. If the government wants MSMEs to go digital, it needs to provide the infrastructure, training, and safety nets that make the transition possible for the vendors who need it most.

What This Actually Means

The research by Kilay, Simamora, and Putra (2022) offers concrete lessons for anyone involved in the digitization of small businesses, whether in Indonesia or anywhere else.

• ▸Digital adoption improves supply chain performance, but only if the basics are in place. Connectivity, literacy, and trust are prerequisites, not nice to haves. A vendor who cannot get a reliable internet connection will not benefit from the fanciest e commerce platform.
• ▸The ten bottleneck indicators are the real problem. Solving any one of them helps, but solving them together is transformative. The authors identify which indicators to prioritize and in what order.
• ▸Open innovation works when it is designed by the people who actually use it. Training programs, payment systems, and integration tools should be co created with vendors, not imposed on them.
• ▸The benefits of digitization are real but uneven. Policy makers need to target support to the vendors who are most at risk of being left behind: older vendors, rural vendors, and vendors with low digital literacy.
• ▸Supply chain performance is not the only metric that matters. The authors measured what they measured. But vendors also care about stress, autonomy, and dignity. Future research should ask whether digital adoption improves or undermines those things.

The nasi goreng vendor on Jalan Sudirman is still frying rice. He still knows his regulars. But now he also knows his numbers. He knows which dishes sell fastest on rainy days. He knows which suppliers deliver on time. He knows how much to buy tomorrow because he knows how much he sold today.

That knowledge is the real product of digitization. It is not the QR code. It is not the delivery app. It is the information that turns a guess into a plan. And for millions of Indonesian vendors, that information is finally within reach.