Indonesia: Buying and Selling
Indonesia has been experiencing a consistent growth rate for a few years, which has been reflected by a rise in incomes (including disposable income) thus increasing overall household spending. As many of Indonesia’s low-income consumers continue to move into the middle-income segment, they are becoming increasingly sophisticated in their spending habits and product choices. While this means an expected increase in expenditures in many sectors, companies also require more differentiated and segmented product offerings to attract these new consumers. While traditional retail channels still dominate the market, modern retail continues to gain ground, led by the growth of convenience stores. Indonesia’s retail market is characterised by its immense size. While it brings countless opportunities to consumer business companies in the form of a huge and ever expanding middle class, digital consumers, as well as rapidly urbanising cities outside of Jakarta, a multitude of challenges - such as the high cost of serving across the expansive archipelago - still exist. The main drivers for online shopping are lower prices and ease of searching for products. Online shopping is not very popular in the country yet, as most consumers prefer to make purchases in person. Additionally, infrastructure is still underdeveloped, which makes deliveries challenging outside the main cities. However, e-commerce has been growing steadily, and was boosted by the social distancing and lockdown measures put in place during the Covid-19 pandemic. E-commerce is expected to register a 23.8% growth in 2022 and reach around USD 30 billion (GlobalData). During the pandemic, consumers shifted their priorities towards necessities, and away from discretionary spending (Deloitte). However, before this disruption consumers had been focusing less on price and more on other factors like overall product quality and trustworthiness of brands. Consumers tend to be loyal to brands, even if that particular brand is not the cheapest option - especially when it comes to home and personal care products, as well as food and beverages. Therefore, even though price is still a relevant factor, the Indonesian consumer is willing to pay extra for a higher quality product. However, for low-income consumers, price is a decisive factor when making a purchase. While there is room for foreign brands in Indonesia, consumers prefer local ones, as they have more trust in their quality and believe that local companies understand Indonesian consumers better than foreign ones. Additionally, while not decisive when making a purchase, Indonesians tend to prefer brands and shops that provide quality after-sales services. Despite continued growth in digital and online media adoption, traditional media continue to dominate, with TV, In-Store Promotions and Friends & Colleagues remaining the preferred channels of communication. One reason for this may be the strong dependence of Indonesian consumers on sponsorship of their indoor environments, which in turn still tend to be strongly influenced by traditional media campaigns (Deloitte).
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Latest Update: November 2024