Over the past decade Indonesia has enjoyed stable economic growth. It ranks as the world’s 16th largest economy, and is on track to become the seventh-largest economy in the world by 2030.
Despite experiencing slowing GDP growth in 2013 (from 6.1 per cent in Q1 2013 to 5.6 per cent in Q4 2013), Indonesia started 2014 with a promising economic outlook. Economic pressure was well-managed in Q1 2014, with 5.7 percent GDP growth and a decreasing inflation rate (7.3 per cent in Q1 2014 vs 8.4 per cent in Q3 and Q4 2013). Further adding to Indonesia’s positive outlook, the country has also been rated by the IMF as the most successful of the ASEAN nations in managing its ratio of public debt to GDP.
In 2014 Indonesians go to the polls to elect a new president, with the current President having served the maximum two terms. The pending leadership change has had little to no impact on consumer confidence levels, however, with Indonesian consumers remaining confident in the country’s economic position.
In fact, Indonesians are undoubtedly among the world’s most-optimistic when it comes to their perceptions of their country’s economic conditions, having posted the highest global Consumer Confidence Index score for five consecutive quarters in Nielsen’s Global Survey. Indonesia is also home to one of the world’s fastest-growing middle class populations, which is forecast to almost triple by 2020.
Rising income levels and expanding wealth coupled with increasing urbanization across the country is bringing about significant changes to Indonesians’ lifestyles and spending. The first quarter of 2014 saw Indonesia post its highest-ever volume of automotive sales (328,000 vehicles were sold in the quarter), while Indonesians are increasing their spending in areas such as travel and fashion, as well as investing in shares and mutual funds.
Connectivity is also playing an increasingly important role in consumer behaviour, with connected device ownership continuing to increase; mobile penetration rose 14 percentage points to 95 percent in the past year , an estimated 139 million Indonesians will be connected to the internet by 2015 via mobile devices and Indonesia has the world’s fourth-largest Facebook user base. Rising connectivity levels and social media usage is changing the way brands engage with consumers.
Another major catalyst for the changing lifestyles is the aggressive expansion of modern retailers, particularly the mini market retailers. Accessibility, convenience, and shopping experience are seeing Indonesians shift away from traditional trade retail stores to mini markets, and Indonesian consumer spending in mini market and convenience stores now outweighs spending in traditional format stores. As are result, it is becoming increasingly important for brands to re-think their packaging design and brand positioning.
With a buoyant economy and increasingly affluent consumers, opportunities abound in the years ahead for both local and multinational brands. However, with the socio-economic changes the country is experiencing, it is critical these brands invest in developing consumer engagement strategies that appeal to Indonesians’ evolving lifestyles, aspirations and values.