Population, purchasing power and potential

Social media holds the key to reaching Indonesia's millions of networked consumers.

For more than a decade, with the emergence of a wealthy middle class, Indonesia has posted impressive purchasing-power growth year on year. It is Southeast Asia’s largest economy, and the world’s fourth largest population with 250 million people.

But recently, falling commodity prices, government failure to kick-start a major infrastructure programme, ongoing investment difficulties and corruption at several levels have combined to slow the economy. Still, Indonesia is attractive for companies expanding into Southeast Asia; and the newly elected president, Joko Widodo, has brought a glimpse of confidence and hope to the economy. The potential is immense.

Increasing wealth, paired with the size of the local market, drives a growing appetite for branded consumer goods and services.

A consumer desire to differentiate themselves through status symbols is nearly universal and has helped increase awareness for global luxury brands in Indonesia. The uptake is much faster now than in previous years. With well-established groups such as Kering SA and LVMH already in the market, there were relatively few newcomers in 2014. Overall, expectations of the market’s consumer spending are for an increase of more than 7 per cent annually in coming years. So what matters to consumers living in such a dynamic should matter greatly to brands as well.

Indonesia has the world’s third-largest Facebook community

Amidst all this data, one major trend stands out: the local embrace of social media in this populous nation is phenomenal. Indonesia is one of the largest internet, mobile and social media markets in the world. With over 150 million mobile subscribers and 80 million internet users (both growing exponentially), social media and mobile technology are booming. This is a driving economic force as Indonesia has one of world’s largest, youngest and most digitally savvy net generations.

With more affordable smartphones available, most Indonesians can now easily possess one and many of more than one. Besides text messages and phone calls, the smartphone has also opened up the world of social media to the masses. Jakarta, the capital, boasts the most number of tweets sent per day compared to any other city worldwide. Indonesia is also the world’s third largest Facebook community after the US and India, with around 33 million daily users, most using mobile access.  Local and international brands are now competing to offer hi tech products and apps to capture this growing market segment.

KakaoTalk , the Korea-based free mobile messenger service, had only 500,000 users in Indonesia in 2013 but within a year it attracted 16 million users, becoming KakaoTalk's largest market worldwide outside Korea. The hip young company collaborated with local designers and companies to capture and generate Indonesian-specific content as well as introduce popular K-pop theme emoticons.

More recently, Singapore’s Mediacorp acquired a 52 per cent stake in Indonesia’s KLN Group (KLN), the parent company of KapanLagi Network, one of the largest and most successful online media companies in Indonesia. The strategic partnership aims to increase KLN’s market position and create new ways for advertisers to reach customers. KLN is best known for its popular portals kapanlagi.com and merdeka.com, attracting more than six million visitors monthly, and the group has specific sites targeting men, women, car enthusiasts and football fans. KLN’s video content has been viewed more than 450 million times.

With a growing number of online retailers, consumers have also begun making online purchases in fashion, footwear, beauty and personal care but a lingering lack of confidence in online purchases for luxury goods leaves one door open for more brands to innovate.

Yu Pohleng is senior VP Ruder Finn Asia