Indonesian consumers confident and willing to spend

NIELSEN MARKET SNAPSHOT

Across 2018, positive macro-economic indicators buoyed consumer spending in Indonesia, with stable GDP growth at 5% and declining inflation at 2.9%. These promising conditions were also reflected in the strong confidence Indonesian consumers felt about the economy.

Indonesia remains one of the most optimistic markets globally with consumer confidence at 125 points in Q1 2019, and 63% of consumers purporting a willingness to spend despite concerns about the currency weakening, which could create economic volatility.

Consumer spending remains positive. Indonesians like treating themselves to motor vehicles, electronic and entertainment devices, dining out and travel or vacations. At the same time, young consumers are the most influential group, impacting FMCG market growth which has slightly decreased (-0.9%) because they prefer spending on categories that bring them joy and excitement in the moment like dining out or electronic devices. 

As a result, their shopping behaviour is changing — they are visiting fewer retail channels with a preference for convenience stores given the ease of access, complete product range and affordability. This trend is also supported by the growing penetration of FMCG online shopping, from 1.5% in 2017 to 3% in 2018. It is supported by evidence from major e-commerce companies that shows accelerating growth on a quarterly basis.

• For the list of Indonesia's top 100 brands in 2019, click here

A nascent opportunity lies in the young population. More than half of Indonesians are under 30 years old². Understanding behaviour is crucial to unlocking potential within this demographic. The  age structure will contribute to the future prosperity of both manufacturers and retailers if the right actions are implemented: younger consumers are prone to increase their spending as the economy grows.

Moreover, consumers under 30 remain the main driver of digitalization of key industries including retail and, as the internet expands throughout the country, Generation Z and the Millennials will become the early adopters of innovations such as e-commerce or new products. For the moment, the main restraining factor on e-commerce development in Indonesia is that 50% of all dependent employees and 70% of all workers are estimated to be employed unofficially² and therefore do not have access to credit cards.

At the same time, the popularity and possession of mobile phones is growing on a yearly basis, which reveals another possibility for manufacturers to draw consumers' attention by means of advertising and promotions. Attracting and receiving the benefits of this opportunity requires a deep dive into consumer behaviour, toward products and brands and their shopping experiences to identify what and why consumers are willing to purchase, where there is still some space for implementing new strategies aimed to attract new customers.

1 Nielsen Growth reporter, volume sales, MAT 2018
2 The Organization for Economic Co-operation and Development

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