Nielsen provides insight into Indonesia's economic outlook and retail backdrop.
Indonesia represents Southeast Asia’s biggest consumer market and its population is predicted to grow by 10 percent to 282 million people by 2025. Urbanisation in Indonesia will continue to increase from 53.7 percent in 2015 to over 60 percent of the population in 2025, giving consumers unprecedented access to goods and services.
In 2016, Indonesia posted 4.9 percent economic growth for Q4 as controlled inflation and high government spending on infrastructure continued.
While Indonesia remains one of the most confident and optimistic nations globally, a number of factors occuring in 2016, such as the US presidential election, the tax amnesty program and regional elections, impacted consumers’ outlook and willingness to spend.
Looking ahead, consumers display a generally less optimistic outlook on their financial status. However, overall confidence remains high and three in five consumers believe it is a good time to buy the things they want and need.
In the past decade, average household income in Indonesia grew by 29 percent, and a further 25 percent growth is forecast over the coming decade. This growth will have a flow-on effect to the country’s consumer sector, which is projected to be worth US$2 trillion by 2030. As consumers become more educated and more women enter the workforce, lifestyles are evolving and the average household is becoming busier. Convenience-driven products and services designed to make life easier are therefore becoming more relevant.
The modern retail format has also adapted to meet these consumer needs with proximity shopping becoming more important - as evidenced by the rise of minimarkets. Not only do these stores meet consumers’ traditional grocery needs, they also offer in-store dining and take-away meal options to cater to consumers’ busy lifestyles.
Just as store formats are tailoring their offering to consumer needs, so too are brands. Indonesian consumers’ affinity for branded products has been steadily rising, and within the FMCG sector alone more than two thirds of consumers (68 percent) regularly purchase more than 75 brands. This trend is even higher among millennials, with 78 percent using more than 75 brands. For brands looking to build meaningful and lasting connections with consumers, it is important to focus on providing relevant and personalised options that address a fundamental consumer need. Understanding what motivates consumers to purchase and when, in order to deliver timely and relevant brand messages, is key to success.
Looking ahead, Indonesia’s economic forecast and consumer spending estimates are solid. For brands looking to capitalise on the vast opportunities that exist, it will be essential to understand the diverse consumer landscape and the evolving drivers of the various consumer segments.
Sources: All population and urbanisation figures come from United Nations Urbanisation Prospects 2015.