Deloitte Consumer Insights Capturing Indonesia’s latent markets

Deloitte Consumer Insights Capturing Indonesia's latent markets

Consumer Business May 2015

Contents

Foreword

3

The driving forces in Indonesia's retail landscape

4

Deloitte Consumer Insights: Indonesia

7

1. Spending patterns

11

2. Buying behaviour

13

3. Brand preferences

14

4. Communication channels

15

5. Buying channels

17

6. Geographical differences

19

Deloitte Retail Insights: Indonesia

21

1. Stocking behavior

25

2. e-Commerce

27

Looking ahead

29

Capturing Indonesia's latent markets

31

Appendix

32

Contact us

34

2

Foreword

With its sheer size as the largest consumer market in Southeast Asia, Indonesia is undoubtedly one of the key markets for consumer business companies in the region. In particular, its main metropolitan areas of Jakarta and Surabaya have emerged as hotbeds for companies seeking to dominate the playing field, with higher levels of urbanisation and income per capita. Additionally, a number of other cities have been exhibiting strong economic growth in recent years and present latent markets ripe for capture. In this publication, we examine some of the key driving forces in Indonesia's consumer business landscape. Then, we present the results from the second edition of the Deloitte Consumer Insights survey conducted in the first quarter of 2015 across 2,000 households in five major Indonesian cities: Jakarta, Bandung, Makassar, Medan and Surabaya. Following the inaugural survey conducted in Indonesia in the fourth quarter of 2013, this edition of the survey aims to provide perspectives on Indonesian consumer spending habits and behaviour by product category and channel preferences, as well as reveal some of the new shifts and opportunities that have arisen since the previous survey. This year, we also introduced a new section to highlight findings from our first Deloitte Retail Insights screening exercise conducted in 200 modern and traditional trade retail outlets in Indonesia across seven different product sub-categories. This was introduced with the objective of augmenting the consumer survey insights to provide a more holistic understanding of Indonesia's retail landscape. We then share our point of view on the key considerations for consumer business companies in this diverse and dynamic marketplace. These include the need for a segmented channel and product strategy to capitalise on the changing spending patterns of consumers as they transition into higher income segments; the necessity for a tailored approach for Indonesia's major geographic regions; as well as the imperative to leverage new media and technology for innovative consumer and business solutions. With increasing heterogeneity in its consumer demographics and market conditions, the current modus operandi will need to be reviewed and revised if companies wish to capture Indonesia's next waves of opportunities. We hope that this publication will provide them with a glimpse into the insights for success.

Eugene Ho Southeast Asia Leader Consumer Business

3

The driving forces in Indonesia's retail landscape

Indonesia's retail market is characterised by its immense size. While it brings countless opportunities to consumer business companies in the form of a massive ? and still growing ? middle class, digital consumers, as well as rapidly urbanising cities outside of Jakarta, a multitude of challenges such as the high cost to serve across the expansive archipelago exist. In this section, we explore four key driving forces in Indonesia's retail landscape that also later manifest themselves in the results of the Deloitte Consumer Insights survey and Deloitte Retail Insights screening exercise.

A burgeoning middle class As many of Indonesia's low income consumers continue to transition to the middle income segment ? defined broadly as those with annual household incomes of between IDR 36 million to IDR 120 million ? they are becoming increasingly sophisticated in their spending habits and product choices (see Figures and 1 and 2). While this means an expected increase in expenditures in many consumer business categories such as beverages and packaged food, companies will also require more differentiated and segmented product offerings to capture the consumer's share of wallet as considerations such as price becomes less salient when compared to factors like the overall product quality and trustworthiness of brands.

Figure 1: Education and urbanisation rates in Indonesia (2004-2014)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

63% 45%

2004

77% 49%

2009

83% 53%

2014

Urbanisation rate

Proportion with secondary school education

Source: World Bank, Indonesia Bureau of Statistic, The Economist Intelligence Unit

4

Figure 2: Population demographics in Indonesia (2004-2014)

Million 300

250

221

3%

200

10%

24% 150

100 63%

50

0 2004

237 12% 31%

32%

25% 2009

250 25%

42%

26% 7% 2014

Higher Income (More than IDR 120 million per annum)

Upper Middle Income (IDR 60-120 million per annum)

Lower Middle Income (IDR 36-60 million per annum)

Lower Income (Less than IDR 36 million per annum)

Source: World Bank, Indonesia Bureau of Statistic, The Economist Intelligence Unit

High cost to serve Indonesia's fragmented retail market is characterised by underdeveloped infrastructure: in the 2014 World Bank Logistics Performance Index, Indonesia ranked the lowest amongst other key Southeast Asian markets (see Figures 3 and 4). Traditional trade outlets such as Warungs and Minimarkets continue to be preferred by the majority of consumers and still account for the majority of the retail presence in Indonesia. Consumer business companies will require extensive distribution networks to tap into the market, resulting in one of the highest costs to serve in Southeast Asia with numerous route-to-market challenges. For many companies, there is a need for innovations (e.g. packaging) and segmented market approaches to overcome the restrictions of limited, and hence competitive, shelf space in these traditional trade outlets.

Figure 3: Ranking of key Southeast Asian markets in the 2014 World Bank Logistics Performance Index

Singapore Rank #5

Malaysia Rank #25

Thailand Rank #35

Vietnam Rank #48

Indonesia Rank #53

Source: 2014 World Bank Logistics Performance Index 5

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download