Deloitte Consumer Insights

Capturing Indonesias
latent markets

Consumer Business
May 2015

Contents

Foreword 3

The driving forces in Indonesias retail landscape

Deloitte Consumer Insights: Indonesia

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 Indonesias latent markets

31

Appendix

32

Contact us

34

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 Indonesias 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 Indonesias 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 Indonesias 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 Indonesias 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

The driving forces in Indonesias retail

landscape
Indonesias 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 Indonesias 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 Indonesias 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 consumers 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%

77%

80%
70%

63%

60%
50%

83%

45%

49%

53%
Urbanisation rate

40%

Proportion with secondary

school education

30%
20%
10%
0%

2004

2009

2014

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

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

Million
300

250

221
3%

200

10%
24%

237
12%

250
25%
Higher Income
(More than IDR 120 million per annum)

31%

150

42%
100

Lower Middle Income

(IDR 36-60 million per annum)

32%
63%

50

Upper Middle Income

(IDR 60-120 million per annum)

26%

Lower Income
(Less than IDR 36 million per annum)

25%
0

7%
2004

2009

2014

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

High cost to serve

Indonesias 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

Figure 4: Logistics costs (as a percentage of GDP) in key Southeast Asian markets
30%

27%

25%

25%

20%

20%
15%

13%

10%

8%

5%
0%

Indonesia

Vietnam

Thailand

Malaysia

Singapore

Source: 2014 World Bank Logistics Performance Index

Nascent digital media platform takes off

Indonesias Internet usage has risen sharply over the last few years and consumers especially the middle income
segment are more connected than ever, with easy access to information. Social networking is by far the most
popular activity in Indonesia, with 72 million active users1. Although this is the highest number amongst Southeast
Asian markets, it represents only 28% of Indonesias total population, in contrast to Malaysia and Singapore with
a representation of 55% and 66% of their populations respectively. This implies a huge, untapped potential for
consumer business companies to engage their consumers through digital platforms as Internet penetration takes off.
Figure 5: Number of active social media accounts in key Southeast Asian markets
Percentage
of total
population
80

28%

40%

49%

31%

55%

66%

72

70
60
Million

50

40

40

32

30

28
17

20
10
0

4
Indonesia

Philippines

Thailand

Vietnam

Malaysia

Singapore

Source: World Bank, Wearesocial

Cities outside Jakarta as growth drivers

Traditionally, Jakarta, accounting for approximately 17% of Indonesias economy, has been the focus of retail
attention2. In recent years, however, other smaller cities outside Jakarta typically with populations of less than 10
million have emerged as attractive, alternative targets due to the strong competition within Jakarta as well as the
promising and accelerating growth and urbanisation rates of these cities.
Wearesocial: Digital, Social & Mobile 2015
Indonesia Central Bureau of Statistics

1
2

Deloitte Consumer
Insights: Indonesia

Deloitte Consumer Insights:

Indonesia
Following the inaugural Deloitte Consumer Insights survey conducted in Indonesia
in the fourth quarter of 2013, this second 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 that
have arisen since the previous survey. While some of the findings uncovered in this
edition remain consistent with that of the previous survey, a few trends appear to
have magnified. Their trajectories have been highlighted in the Spot the difference
sections of the respective pages.
Methodology
The survey was conducted in the first quarter of 2015 across 2,000 households via
face-to-face interviews in five major cities: Jakarta, Bandung, Makassar, Medan and
Surabaya.
Consumers were surveyed on their spending pattern, buying behaviours, brand
preferences, communication channels, buying channels and geographic preferences
across seven consumer product categories:
Beverages
Clothing and Footwear
Confectionery
Household Cleaning Products
Packaged Food
Personal Hygiene Products
Tobacco

Demographics of survey respondents

Figure 6: Geographical distribution of consumer
survey respondents
10.0%

Figure 7: Gender distribution of

consumer survey respondents

Jakarta
Bandung
Makassar
Medan
Surabaya

10.1%
10.0%
59.8%

10.1%

50.1%

49.9%

Figure 8: Age distribution of survey respondents

Age group, years
29%

15-24

32%

25-34
29%

35-49

11%

50-64

Percentage of survey respondents

Figure 9: Monthly household income distribution by city

Monthly household
income, IDR million

Income distribution
Jakarta 2%
14%
Bandung 2% 13%
Makassar
11%
Medan 2% 12%
Surabaya
15%

22%

18%

16%
19%
16%

43%

22%
23%

22%
22%
24%

21%

14%

25%

23%

16%
15%
15%

8%

16%

8%

8%
9%

Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10

Percentage of survey respondents

Figure 10: Monthly household income distribution of survey respondents vs.

actual household income distribution
Actual

7%

Survey

26%

14%
0%

42%

18%
20%

14%

40%
40%

60%

16%
80%

Monthly household
income, IDR million
11%
13%

100%

Less than 3
3-5
5-10
10-15
More than 15

From the monthly income distribution of survey respondents by city, it appears that Jakarta has a greater
proportion of middle and higher income households as compared to other cities. This finding is consistent
with Jakartas Gross Regional Domestic Production (GRDP) per capita, which is about four times higher than
the other cities3. Overall, the income distribution of the survey respondents is fairly representative of the
actual income distribution within Indonesia.

Statistic Indonesia 2012

9

Key consumer insights

The insights revealed by the first edition of the Deloitte Consumer Insights survey
remain largely consistent in this second edition: the burgeoning middle class is moving
away from spending merely on necessities to other discretionary expenditures; price
sensitivity has decreased as household income levels increase; Local brands are still
performing strongly over Foreign ones; TV remains the dominant communication
channel; and Warungs retain their crown as the most frequented retail outlets.
But a few shifts uncovered by this survey are worthy of attention. Consumers, for
instance, are beginning to exhibit greater levels of sophistication, prioritising attributes
such as Trust and Overall Quality over Price in their purchase decisions, even in the
lowest income segment. For the first time, this edition also features an entire section
focused on the geographical differences between Indonesias key cities, with a
particular emphasis on those outside the main metropolitan area of Jakarta.

10

1. Spending patterns

Clear inflection point at monthly household income level of IDR 5 million

As was found in the previous survey, a clear inflection point in spending patterns exists at a monthly household
income level of IDR 5 million. Households with incomes below that threshold tend to spend almost 100% of their
household incomes every month, leading a hand-to-mouth lifestyle and focusing mainly on basic necessities.
Figure 11: Average monthly household expenditure
Monthly household
income, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10

1,075,000
1,653,000
3,160,000
3,613,000
4,296,000
4,818,000
5,853,000

On the other hand, the spending patterns of consumers with monthly household incomes of above IDR 5 million
revealed a shift from basic necessities, such as Beverages, Clothing and Footwear, Packaged Food, Household
Cleaning products, and Personal Hygiene products, towards supplementary products such as Credit Card Instalments,
Leisure and Holiday, as well as Welfare and Savings as more disposable income becomes available at this income
level.
Households with monthly incomes above IDR 5 million also have a greater propensity to allocate funds for financial
services, including Credit Card Instalments and Welfare and Savings, setting aside about 24% of their total monthly
expenditures for these purposes, in comparison to the Households with monthly income of IDR 3-5 million which
allocate only 10% of their total monthly expenditures. Thus, the IDR 5 million income level mark is also the inflection
point at which consumers have access to, and appear to be leveraging, debt to finance their lifestyles (see Figures 12
and 13).
With overall consumer sentiment on the rise, 80% of respondents have indicated optimism that the economy would
improve within the next five years. The lower income segments, for instance, have shown a clear indication of a
planned increase in spending in the categories of Confectionery, Household Cleaning, Packaged Food and Tobacco,
except for the lowest monthly income consumer group of less than IDR 1 million. These categories are most likely to
increase their spending with economic growth and increased income levels (see Figure 14).

Spot the difference

As compared to the previous survey, there have been increases in spending on the Beverages and Packaged
Food categories. This pattern was consistent across almost all income levels, although differing in magnitude
depending on income levels. For Beverages, expenditures increased from 4%-8% of total spending in the
previous survey to 5%-11% in this survey, while for Packaged Food, the figure showed significant increment
from 12%-27% to 18%-32%.
In contrast, spending on Leisure and Holidays decreased from the previous survey from 6%-13% to 3%-8%. This
could have been a result of the overall increase in product or service prices, positive economic outlook and the
increasing adoption of modern consumption patterns. Spending on Leisure and Holidays as well as Welfare and
Savings categories remains skewed towards the higher income segments and continue to be of lower priority
for the middle and lower income segments which are primarily focused on basic necessities.

11

Figure 12: Breakdown of monthly household expenditure (2015)

Monthly household
income, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
0%

31%

11%

32%

6%

27%

6%

28%
29%
5%

8%

5%

4%

5%

3%

4%

4%

5%

11%

11%

12%

3% 2%
4%

12%

9%

9%

3% 3%

11%
15%

9%

6%

9%

11%

11%

7%

10%

7%

6%

7%

5%

6%

7%

6%

5%

6%

8%

8%

11%
6%

6%

9%

3%

3%

13%
12%

11%

4%

6%
6%

18%

5%

6%

23%

5%
5%

5%

7%
8%

8%

2%

4%

4%
8%

12%
14%

8%

16%

5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
Weightage

*Includes Confectionery and Packaged Food

Food*
Beverages
Tobacco
Clothing and Footwear
Personal Hygiene
Household Cleaning
Communication and Media
Transportation
Housing and Utility
Leisure and Holiday
Credit Card Instalment
Welfare and Savings

Figure 13: Breakdown of monthly household expenditure (2013)

Monthly household
income, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
0%

23%

7%

22%

5% 2%

12%

4%

5%
5%

10%
9%

5%

4%

4%

3%

6%

5%

5%

5%

9%

6%

6%

6%

10%

10%

10%
7%

14%
13%

6%

5%
11%

9%

13%

12%

6% 2%

13%
13%

10%

11%
10%

13%
10%

9%
8%

6%

8%

4%

7%
6%

5%
4%

5%

9%

10%

5%

11%

8%

10%

10%

5%

6%

11%
5%

4%

5%

20%
13%

4%

8%

27%

12%

5%

17%
20%

8%
11%

17%

5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
Weightage

*Includes Confectionery and Packaged Food

Food*
Beverages
Tobacco
Clothing and Footwear
Personal Hygiene
Household Cleaning
Communication and Media
Transportation
Housing and Utility
Leisure and Holiday
Credit Card Instalment
Welfare and Savings

Figure 14: Correlation between monthly household income level and percentage of consumers with plans to increase spending

Percentage of respondents with

plans to increase spending

Packaged Food

Confectionery

Household Cleaning

80

80

80

60

60

60

60

40

40

40

Trend Line

40
Trend Line

20

20

Trend Line

20

20
Trend Line

0
2-3
5-7.5 More
Less
than
than
10
1
1-2
3-5 7.5-10

0
2-3
5-7.5 More
Less
than
than
10
1
1-2
3-5 7.5-10

0
2-3
5-7.5 More
Less
than
than
10
1
1-2
3-5 7.5-10

Monthly household income (IDR Million)

12

Tobacco

80

2-3
5-7.5 More
Less
than
than
10
1
1-2
3-5 7.5-10

2. Buying behaviour

More affluence, less price sensitivity

In the previous survey, it was observed that as Indonesians gain affluence, price and basic functionalities are no
longer the only key drivers for purchase choice. Consumers become more sophisticated in their buying behaviour and
in assessing and communicating what they like. This trend continues to be apparent in this years survey.
For Beverages and Packaged Food, this years survey indicated that these are the two categories where consumers
across almost all income levels have increased their share of expenditure over last year (see Figures 15 and 16).
A clear inflection point can be seen at a monthly household income level of IDR 3 million and above, where
price becomes a less important consideration and consumers begin to place greater emphasis on the products
characteristics and its brand image. Although Taste attributes remain the biggest driver in the purchase of Packaged
Food, for instance, the importance of Smell attributes has also increased. Similarly, in the Beverages category, while
Taste and Price attributes remain the key drivers, Safety, Health and Trust attributes are gaining importance. This could
be a result of the increasing awareness of drinking water safety and a move towards greater health-consciousness.
For both categories, the trustworthiness of the brand is also increasing in importance.
Figure 15: Drivers of Packaged Food purchases by monthly household income level
Monthly household
income, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10

3%

5% 2%

4%

8%

2%

11%
2%

9%

4%

9%

9%

5%

2%

12%

4%
6%

17%

10%

22%
2%

4%

17%

9%

6%

15%
14%

10%

28%

8%

2% 5%

14%

8%

29%
7%

6%

8%

29%

11%
7%

11%
30%

13%

15%

10%

10%

3%

2%

32%

13%

7%

16%
11%

10%

0%

5%

7%

10%

29%

5%

12%

27%

13%

5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
Weightage

Availability
Health
Innovation
Overall quality
Packaging
Price
Promo
Safety
Smell
Taste
Trust
Others

Figure 16: Drivers of Beverage purchases by monthly household income level

Monthly household
income, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10

10%
3%
6%

15%
11%

19%

7%

17%
19%

2%

5%

13%

3%

15%

3%
12%

4%

16%

3%
10%
11%

2%

28%
23%

2%

11%

17%

5%
5%

4%

15%

5%

0%

10%
15%

4%

13%

3%

13%

2%

9%

7%
9%

3%

2%

10%
10%

20%

4%

10%

4%
3%

3%

16%

9%
9%

18%

5%

10%

2%

2%

5%

11%

17%

12%

20%
18%

10%

18%

11%
15%

5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
Weightage

Availability
Health
Innovation
Overall quality
Packaging
Price
Promo
Safety
Smell
Taste
Trust
Others

Spot the difference

While Taste and Price attributes remain the top criteria in deciding brand choices for the Packaged Food
category, three brand drivers have increased in importance across all income levels: Trust, Overall Quality, and
Smell. This change represents the increasing sophistication of Indonesian consumers, as even consumers within
the lowest income segment are starting to prioritise Trust and Overall Quality attributes. In line with this, the
percentage of respondents in this income segment who considered Price attributes to be the top driver has
decreased from 26% in the previous survey to 17%, while the percentage of respondents who prioritised Overall
Quality increased from 5% to 11%. While there appears to be a decrease in the percentage of respondents who
opted for Safety attributes, this does not imply that it has decreased in importance. Rather, this indicates that
consumers are starting to have more holistic perceptions of brands and place greater emphasis on Trust, with
Safety as an implicit expectation.
13

3. Brand preferences

Local is still in favour

Generally, the majority of Indonesians continue to show preference for brands that they perceive to be Local, over
those that they think are Foreign. However, in reality, they often mistakenly perceive some Foreign brands to be Local.
As income levels increase, the propensity to purchase Foreign brands increases too most notably in the Clothing
and Footwear and Personal Hygiene categories with more than 50% of the higher income households preferring
Foreign brands. For Packaged Food, the ability to cater local tastes drives consumers purchase and preference for
Local brands.
Figure 17: Preference for Foreign brands by monthly household income level
Monthly household
income, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10

29%

56%

15%

42%

57%

33%

63%

26%

11%

65%

25%

8%

67%

11%

5%

4%

63%

20%

0%

2%

13%

63%

10% 15%

20% 25%

30% 35%

40%

23%

45%

50% 55%

60% 65% 70%

75% 80%

85%

2%

90%

Strongly Do
Not Prefer
Do Not
Prefer
Prefer
Strongly
Prefer

95% 100%

Weightage

Figure 18: First brand of choice by monthly household income level

Monthly household
income, IDR million

Clothing and
Footwear

Beverages

Less than 1

97%

Household
Cleaning

Confectionery

86%

100%

89%

100%

1-2

82%

92%

92%

93%

100%

2-3 20%

80%

20%

78%

86%

92%

99%

3-5 18%

82%

24%

76%

89%

87%

5-7.5 20%

80%

23%

76%

7.5-10 23%

76%

More than 10 29%

70%

0%

50%

37%
68%
100%

50%

17%

Personal
Hygiene
28%

Tobacco

72%
86%

26%

92%

74%

98%

33%

67%

90%
90%

86%

98%

32%

67%

89%

17%

82%

84%

99%

43%

56%

84%

31% 34%

66%

75%

95%

100%

50%

24%
100%

50%

100%

50%

56%
100%

Foreign
Local
Private
Label

100%

82%

61%

Weightage

14

Packaged
Food

43%
50%

38%

100%

62%
50%

100%

4. Communication channels

TV dominates, but Word of Mouth matters too

The survey revealed that traditional media continued to dominate, with TV as the primary channel through which
Indonesian consumers obtain information about products and brands across most income levels. Nevertheless, Word
of Mouth via relatives, friends and colleagues, as well as In Store Promotion, also plays important roles in influencing
purchase decisions.
Figure 19: First source of information by monthly household income level
Monthly household
income, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
0%

39%

25%

18%

20%

22%

20%

20%

19%
19%
19%

16%

40%

17%

16%

43%

16%

18%

43%

17%

18%

41%

25%

17%

5% 10% 15%

14%

41%

2% 2%

32%

16%

2%

19%

20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Relative
Friends and Colleagues
Expert
TV
Radio
Print Ads
Digital Media
Outdoor Ads
In Store Promotion

Weightage

Social media is only social for now

While the Internet and Social Media are widely and actively used in Jakarta - which has been dubbed the social media
capital of the world consumers tend not to use this channel for commercial purposes at this point in time. For
Private Labels and Foreign brands in Clothing and Footwear, Confectionery and Packaged Food categories, however,
Social Media is gaining traction and is more frequently used to influence the purchase decision.
Figure 20: Preferred sources of information by product category and brand type
Product
category
Beverages

Brand type
Local
Private Label
Foreign
Clothing and Local
Footwear
Private Label
Foreign
Confectionery Local
Private Label
Foreign
Household
Local
Cleaning
Private Label
Foreign
Packaged
Local
Food
Private Label
Foreign
Personal
Local
Hygiene
Private Label
Foreign
Tobacco
Local
Private Label
Foreign

21%

21%

14%

27%

27%
20%
15%

11%

19%

24%

22%

20%

8%

20%
22%
20%

25%

23%

21%
13%

21%

2%

20%

17%

23%

3%
3%

2%

22%
17%

5%
9%

4%

6%

6%

5%
8%

4%

18%
25%

3%

25%

2%

19%

4%
6%

15%

33%

33%
23%

25%

9%
19%

2% 2%

15%

26%

26%
33%

6%
3% 2%

27%
21%

2%

19%
27%

33%

20%

16%

17%

4%

5%

5%
28%

14%

23%

4%

5%

3%

24%

18%
21%

5%
5%

27%
20%

24%

21%

2%

20%

13%

22%

23%
4%

13%

28%

18%

27%
3% 2%

28%

20%

16%
22%

4%

2% 4%

27%

6%

4%

12%

27%

14%

3%
4%

5%

6%
12%

22%

19%

8%

Relative
Friends and Colleagues
Expert
TV
Radio
Print Ads
Digital Media
Outdoor Ads
In Store Promotion

18%
21%

5%

13%

24%

5%

13%

27%

20%

23%
11%

3% 2%

23%

2%

11%

14%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
Weightage

15

Indeed, Social Media is likely to gain greater importance going forward. As a TV-centric market with only about 30%
of its population connected online (main concentration in Jakarta and key cities)4, competition for the limited TV
advertisement slots in Indonesias ten national TV stations has become intense among mass marketing companies.
Coupled with the typically lower returns on investment (ROIs) from traditional media ROIs from TV advertisements
are estimated to be only about half that of Social Media advertisements companies have increasingly begun
to turn to the digital space to strengthen their marketing strategies. Despite Indonesias nascent digital market,
a number of global companies have managed to successfully deploy Social Media to achieve their marketing
objectives. Such efforts will certainly continue and help to expand the role of Social Media in influencing consumer
decisions as Internet penetration rates continue to increase.

Mini Oreo not-so-mini impact

In order to raise awareness amongst young adults for its new product, the Mini Oreo, and to encourage them
to purchase it as a snack, Mondelz International launched a series of advertisements on Facebook5. Partnering
with Facebooks Creative Shop, and working with its agencies, it created a suite of engaging and creative photo
advertisements depicting how the Mini Oreo can be consumed in a range of different occasions, such as during
a meeting, bike ride or shopping trip.
The campaign was a resounding success: within six weeks, the campaign reached 18.6 million target
consumers, exceeding the campaigns target by 35%. In addition, the campaign also delivered a six-point
lift in advertisement recall for the Mini Oreo, five-point increase in purchase intent for the Oreo brand, 8.4%
engagement rate with the advertisements, as well as 146,794,864 impressions.

4
5

16

Economist Intelligence Unit

Facebook for Business

5. Buying channels

Modern trade takes off, but Warungs still win

As with the previous survey, this year's survey uncovered a correlation between income levels and preference for
modern trade outlets. The middle and higher income consumers are more likely to purchase from Minimarkets and
Supermarkets due to their better product assortment and availability, while the lower income groups are more likely
to purchase from Warungs for the convenience and affordable prices (see Figures 21 and 22).
Figure 21: Channel preferences by monthly household income level and product category (2015)
Monthly household
income, IDR million

Clothing and
Footwear

Beverages

Less than 1

75%

25%

57%

43%

1-2

81%

19%

64%

36%

2-3

60%

40%

42%

3-5

50%

50%

31%

5-7.5

45%

55%

17%

64%
80%

97%

50%

100%

74%

26%
44%

44%

83%

More than 10 20%

42%

56%

69%

87%

0%

58%

58%

7.5-10 36%

Household
Cleaning

Packaged
Food

63%

37%

72%

61%

39%

73%

Confectionery

56%

27%

37%

63%

22%

32%

68%

100%

73%

51%

49%

78%

40%

100%

58%

60%

45%
29%

100%

39%

27%

94%

74%

73%
84%
94%

50%

100%

23%

86%

71%

86%

50%

77%

55%

69%

31%

Tobacco

42%

61%

27%
43%

93%

50%

28%

57%

86%

86%

50%

59%

41%

Personal
Hygiene

26%

78%

22%

73%

27%

54%

50%

100%

Traditional
trade
Modern
trade

46%
50%

100%

Weightage

Figure 22: Channel preferences by monthly household income level and product category (2013)
Monthly household
income, IDR million

Clothing and
Footwear

Beverages

Less than 1

90%

59%

1-2

65%

35%

2-3

65%

35%

41%

46%
42%

58%

38%

62%

72%

5-7.5 19%

81%

7.5-10 23%

77%

97%

83%

100%

More than 10
0%

50%

91%

100%

92%

54%

3-5 28%

50%

Household
Cleaning

Confectionery

68%

64%
58%
32%
19%

42%
68%
81%

60%

46%

54%

19%

92%

86%
50%

81%

50%

54%

69%

31%

68%
44%

32%
56%

42%
40%
41%

Tobacco

46%

Traditional
trade
Modern
trade

96%

58%

94%

60%

93%
88%

59%

26%

74%

92%

55%

22%

78%

96%

45%

55%

98%

42%

58%

95%
100%

Personal
Hygiene

93%

46%

40%

83%

100%

32%

54%

36%

Packaged
Food

89%
100%

50%

100%

50%

100%

45%

50%

100%

Weightage

Due to a combination of factors such as close proximities to consumers homes, convenience and opening hours,
the two most frequented retail outlets across all product categories are (see Figures 23-25):
Warungs (Traditional trade): Small, independent, kiosks (4-15 square metres) that are usually within walking
distance or located close to residential areas, and sell Beverages, Household Cleaning products, Packaged Food,
Personal Hygiene products, and Tobacco.
Minimarkets (Modern trade): Expanded versions of Convenience Stores (100-1,000 square metres) which sell a
wider range of products, and compete partially with Supermarkets but with fewer product varieties due to smaller
floor spaces.

17

Figure 23: Channel preferences by monthly household income level and product category
Monthly household
income, IDR million

Clothing and
Footwear

Beverages

Less than 1

71%

1-2

76%

2-3

18%

44%

5-7.5

40%

7.5-10

24%

64%

35%

31%

27%

24%

37%

50%

100%

40%

32%

26% 38% 18%

39%

66%

38% 23%

77%

35% 34% 18%

46%
40%

38% 33%

26%

50%

76%

24% 37% 24%

31%

68%

63%

27% 27% 31% 22% 28% 35%

100%

50%

100%

50%

21%

Street Hawkers
Wet Markets
Warungs
Minimarkets
Supermarkets
Hypermarkets
Brand Stores

70%

34% 27% 20%

35% 29% 22% 25% 33% 21%

100%

85%

48% 22%

33% 30% 20% 21% 31% 26%

19% 35% 28%

37% 22% 26% 23% 30% 40%

50%

Tobacco

17% 53%

21% 37% 25%

52%

100%

Personal
Hygiene

49% 22%

17%

58%

50%

Packaged
Food

43% 19%

29%

38%

82%

38% 19%19%
0%

52%

43%

34%

31% 38%

More than 10

50% 23%

56%

57%

3-5

43%

Household
Cleaning

Confectionery

47%

100%

25%
34%

50%

100%

Weightage

Figure 24: Reasons for channel preferences by channel type

Channel type
Street Hawkers
Wet Markets
Warungs
Minimarkets
Supermarkets
Hypermarkets
Brand Stores

9%

10%

12%

5%

26%

12%

10%

12%

12%

10%

14%

15%

10%

16%

24%

10%

15%

20% 25% 30%

12%

8%

35%

40% 45%

2%

50% 55% 60%

11%
11%

7%

3%

8%

13%

8%

2%

65%

10%

12%
6%

5%
6%

20%

7%

11%

12%

18%

4%

18%

20%

23%

19%

5%

18%

22%

21%

25%

10%

16%

18%

0%

14%
16%

10%

12%

9%

14%

17%

70% 75% 80%

85%

90% 95%

100%

Assortment
Availability
Convenience
Location
Opening Hours
Price
Promotion
Service

Weightage

Figure 25: Reasons for channel preferences by monthly household income level
Monthly household
income, IDR million

Street Hawkers

Less than 1

21% 26% 20%

Wet Markets
18%

Warungs

Minimarkets

23% 17% 20% 30% 30%

Supermarkets

30% 33%

Hypermarkets*

33% 33%

1-2

21%

27%

2-3

23%

23%

18% 20%

25% 21% 17% 21%21%

18%18%

21% 17%

24% 18%

3-5

26%

27%

17% 17%

5-7.5

27%

22%

18%

7.5-10

29%

23%

18%

More than 10

31%

29%

25%

0%

50%

100%

50%

20% 24% 17%

19% 17%

20%

34%
100%

50%

100%

25% 32% 18%

27%

42%
19%

22% 23% 23%

33%

22%

20%21% 20%

19% 25% 25%

18%

19%23%

21%24% 18%

19% 25%19%

20%

19%20% 19%

20%4%

19% 23% 20% 17%

26%

18%23% 18%

22%24%

18% 24% 20% 18%

50%

100%

50%

100%

50%

Weightage
* Low income families (monthly household income less than IDR 1 million) typically do not shop in Hypermarkets and Brand Stores

18

Brand Stores*

100%

50%

100%

Assortment
Availability
Convenience
Location
Opening Hours
Price
Promotion
Service

6. Geographical differences

Indonesia is not just Jakarta

To date, the majority of investments have been focused in larger cities such as Jakarta and Surabaya. However, with
greater urbanisation across the country, cities outside these main metropolitan areas are becoming increasingly
attractive with their high growth potentials and opportunities for consumer business companies. Due to Indonesias
diversity across its huge expanse of islands, targeting these cities will first require a review of their potential
differences.
As a case in point, Makassar the provincial capital of South Sulawesi and the eleventh most populous city in
Indonesia that is well-known for its shipping and port industry has shown an attractive economic growth potential,
with an annual GDRP growth of 17.1% since 2009, higher than the growth of 12.6% in the nations annual Gross
Domestic Product (GDP).
Figure 26: Makassars GRDP growth (2009-2013)
IDR billion
60

58.8
50

+17.1%
43.4

40
30

50.7

37.0
31.3

20
10
0

2009

2010

2011

2012

2013

Source: Badan Pusat Statistik Indonesia

Consumer optimism in these cities beyond Jakarta is palpable. For example, buoyed by the positive economic
outlook, over 40% and 25% of consumers in Bandung and Makassar, respectively, have expressed plans to increase
their expenditures on the Beverage category by more than 10% (see Figure 27).
Given the varying degrees of urbanisation across Indonesia, consumer behaviours also differ by cities. Consumers in
Makassar, for example, are more receptive to Foreign brands as compared to the other three cities outside Jakarta
(see Figure 28).
In addition, consumers in Makassar are more experienced with e-commerce. Second only to Jakarta, 20% of its
consumers have made online purchases at least once. Amongst those who have not made online purchases, their
main concern was payment security. This sentiment is common across all the cities in the survey, implying a need to
tackle the issue with the technology, operations and communications that have been deployed in more developed
markets (see Figure 30).

19

Figure 27: Planned increase in monthly household expenditure by city

Clothing and
Footwear

Beverages
Jakarta

39%

Bandung

56%

Makassar

37% 25% 26% 42%

67%

47%

43%

27%

47%

47%

75%

47%

43%

60%

53%

37%

Surabaya

41%

53%

0%

32% 43%

43%

Medan

50%

22%

50%

33% 23% 37%

69%

29% 50%

43%

67%

66%
50%

35%

30%
100%

50%

44%
31%

51%
20%

66%

100%

Personal
Hygiene

Tobacco

44% 19% 33% 41% 26% 43%

61%

29%

59%

34%

31%
100%

Packaged
Food

37% 19% 44%

54%

70%

100%

Household
Cleaning

Confectionery

40%

67%

31%

66%

66%

29%

48%

34%

38% 35% 27%

61%

59% 21% 28%

50%

32% 25%

100%

45%

66%
50%

100%

34%

Less than 10%

10-25%
More than 25%

52%

55%
50%

100%

Weightage

Figure 28: Preference for Foreign brands by city

Jakarta
Bandung
Makassar
Medan
Surabaya
0%

12%

66%

19%

39%
10%

3%

77%

13%

60%

38%

31%

5% 10%

15%

2%

57%

2%

64%

20%

25%

30%

35%

40% 45%

50% 55%

4%

60% 65%

70% 75% 80%

85%

Strongly Do
Not Prefer
Do Not Prefer
Prefer
Strongly Prefer

90% 95% 100%

Weightage

Figure 29: Prior experience with online purchasing by age

Age group, years
15-24
25-34
35-49
50-64
0%

46%

59%

25%

75%

17%

5% 10%

83%

15%

20%

25%

30%

35%

40% 45%

50% 55%

60% 65%

70% 75% 80%

Weightage

Figure 30: Top 3 reasons cited for not making online purchases by city
70%

61%

60%
50%

40%

40%

35%
29%

30%
20%
10%
0%

13%

No credit card

20

27%

28%

33%

33%
24%

24%

16%

14%
5%

4%
Jakarta

Yes
No

54%

41%

Bandung
Dont know how

Makassar
Not secure

Medan

Surabaya
More expensive

85%

90% 95% 100%

Deloitte Retail
Insights: Indonesia

21

Deloitte Retail Insights: Indonesia

For this edition of the report, the Deloitte Retail Insights screening exercise was
conducted to shed light into some of the key aspects of Indonesias retail outlets.
Methodology
200 retail outlets across different categories including Supermarkets/Hypermarkets,
Minimarkets, Warungs and Wet Markets were screened on product availability, shelf
visibility and promotion types carried across nine product sub-categories:

22

Product category

Sub-category

Beverages

Beverages

Confectionery

Chocolates

Household Cleaning

Dish Washing
Laundry Care

Packaged Food

Breakfast Cereal
Instant Noodle

Personal Hygiene

Bath and Shower

Hair Care
Woman Sanitary

Tobacco

Tobacco

Overview of retail screening

Figure 31: Geographical distribution of retail outlets

21.0%

20.0%

17.5%

20.5%

Jakarta
Bandung
Makassar
Medan
Surabaya

21%

Figure 32: Types of retail outlets screened

25%

Traditional Pasar*

38%

Warungs

13%

Minimarkets

13%
13%

Hypermarkets / Supermarkets
Others**

* Includes Wet Markets and Street Hawkers

** Includes Convenience Store, which is a relatively minor retail outlet in Indonesia and does not exist in all cities.
Minimarket is a localised/enlarged variation of Convenience Store.

Figure 33: Type of retail outlets screened by city

Jarkata

29%

43%

14%

14%

14% 40

Surabaya

29%

43%

14%

14%

20%

Bandung

29%

43%

14%

14%

17%

Medan

29%

43%

14%

14%

Makassar

29%

43%

14%

14%

42
41

Traditional Pasar*
Warungs
Minimarkets
Hypermarkets / Supermarkets
Others**

35
20%

42

* Includes Wet Markets and Street Hawkers

** Includes Convenience Store, which is a relatively minor retail outlet in Indonesia and does not exist in all cities.
Minimarket is a localised/enlarged variation of Convenience Store.

23

Key retail insights

A number of significant insights have been uncovered by the Deloitte Retail Insights
screening exercise. Although Warungs have most widespread coverage across
Indonesia, for example, the difficulty in obtaining a spot on an outlets limited shelf
space may differ depending on the product in question.
But retail is not all just about brick and mortar stores anymore: the e-commerce
channel, although still nascent in Indonesia, is increasingly becoming a channel to
watch. As this screening exercise highlights, the role of the digital space may differ by
location. While it could be a solution for traffic congestion in the metropolitan area of
Jakarta, it can also solve the issues of access in other outlying cities.

24

1. Stocking behaviour

Size matters
While the Warung has the most extensive area penetration and coverage in Indonesia, it is usually an independent,
individual outlet that requires individually targeted order-taking and delivery of goods. These outlets are often
located within the rural residential areas, making efficient distribution an issue. In addition, given its small store size
and space, a Warung is unable to carry a large variety of products or brands and the limited shelf space available is
already dominated by leading brands. In order to accommodate the limitations in space, Warung operators prefer to
restrict the number of brands within categories that provide low margins, such as certain products in Beverages and
Packaged Food, either because of their low absolute prices or because such products tend to require refrigeration.
Figure 34: Average number of brands on shelf for selected products by product category
Product category

Wet Market

Warung

Minimarket

Supermarket / Hypermarket

Beverage
Fruit or Vegetable Juice

12

18

Confectionery
Chocolate

13

19

Household Cleaning
Dishwashing
Laundry Care

2
10

2
7

3
9

6
14

Package Food
Breakfast Cereal
Instant Noodle

4
7

3
5

6
10

9
15

Personal Hygiene
Baby Diaper
Bath and Shower
Hair Care
Woman Sanitary

3
16
9
3

3
11
8
3

4
23
14
4

9
33
25
6

Tobacco
Cigarette

12

12

13

17

25

Figure 35: Availability of different brands of beverages (Fruit or Vegetable Juice) by channel type
Fruit or Vegetable
Juice brand
YOU C1000

Warungs

Minimarkets

56%

92%

Ale Ale

72%

NutriSari

92%

68%

55%

Buavita
ABC

72%

64%

Minute Maid

68%
80%

25%
21%
23%

52%

84%

21%

Fruitamin

92%
96%

45%

Vita Zone

88%
84%

60%

59%

Frutang

Floridina

Hypermarkets

96%
88%

60%
48%
44%

80%
80%

The difference in stocking behaviour exhibited by Warung, Minimarket and Supermarket/Hypermarket operators can
be illustrated by comparing the average number of brands on their respective shelves for Fruit or Vegetable Juice
(Beverage), Woman Sanitary (Personal Care) and Cigarette (Tobacco). For example, an average of only five major
Fruit or Vegetable Juice (Beverage) brands are available at Warungs, in contrast to the 12 brands at Minimarkets and
18 brands at Supermarkets/Hypermarkets. In the case of Woman Sanitary (Personal Care) and Cigarette (Tobacco),
however, the gap between the different channels is closer. This is because these items tend to have higher prices and/
or smaller packages that is, a higher price per volume and hence are more attractive to stock from the perspective
of a Warung operator.
Given their popularity amongst low and middle income consumers, Warungs and Minimarkets are key channels
that companies should consider leveraging in their distribution structures to tap into the mass market. Each of these
channels offers its own set of advantages, but these are often accompanied by unique challenges too. For instance,
new entrants may find Minimarkets difficult to penetrate as it requires significant investments to not only ensure
that a product is able to secure a spot amongst the limited shelf space, but also to garner visibility from that display
position.

26

2. e-Commerce

More than just retails new storefront

In addition to brick and mortar channels, e-commerce has also emerged as an alternative buying channel. According
to the survey, about 35% of respondents have made an online purchase at least once, with consumers from the
middle and higher income segments having higher likelihoods of making online purchases due to better Internet
access and greater demands for convenience (see Figures 36 and 37). The younger demographic, consisting of 15-34
year-olds, are also more likely to make online purchases (see Figure 29).
Figure 36: Prior experience with online purchases by monthly household income level
Monthly household
income, IDR million
1-2
2-3
3-5
5-7.5
7.5-10
More than 10

2%
7%

0%

Yes
No

98%
93%
83%

17%

71%

29%

57%

43%
61%

39%

5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
Weightage

Figure 37: Reasons for online purchases by monthly household income level
Monthly household
income, IDR million
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
0%

39%

14%

47%

49%

15%
21%

44%
40%
44%
42%

16%

15%
18%

21%
20%
19%

5%
7%

16%

9%

23%

16%
9%

4%
5% 2%
3%

18%
12%

7%

Practical
Price
Product Range
Promotion
Reliable Review
Others

5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%
Weightage

Price remains as a significant consideration for online shopping, but it is not the top reason. Instead, the Practical
attributes of e-commerce has been cited by respondents as its key driver. This could be attributed to traffic congestion
issues in major metropolitan areas, especially in Jakarta, which makes moving between different shopping locations
time-consuming and inconvenient. In contrast, online shopping enables easy comparisons between different
merchant offers from the comfort of consumers own homes.
But interestingly, it is the cities outside Jakarta which have seen stronger e-commerce growth as online retail allows
consumers in these areas to purchase products from their favourite brands, usually in the Clothing and Footwear
category, without having to wait for the brands to be available in their neighbourhood stores, and at more
competitive prices.

27

Figure 38: Growth of online transactions in Indonesia (2013)

Kalimantan
and Sumatera

Others
300%

370%
Jan

Jul

Jan

Jul

Kalimantan

Sumatera

Java excluding
Jakarta

Jakarta
Jakarta
Java
70%

Jan

Jul

370%

Jan

Jul

Source: Sales Data of Top Online Retailer Fashion Category in Indonesia 2013

This trend has prompted many well-established companies and start-ups, including Lazada Indonesia and Lippo
Group, to launch online platforms for their e-commerce operations. Other innovative applications are also being
introduced to leverage technology to serve the needs of local consumers. For example, Go-Jek utilises a mobile
application platform, Global Positioning Systems, and motorcycle taxis to provide quick delivery services to consumers
who purchase items from e-commerce sites as well as transportation services for commuters trying to circumvent
Jakartas heavy traffic congestion.

Going places with Go-Jek

Go-Jek is a start-up based in Jakarta that utilises ojek, or motorcycle taxis, to transport people and goods. Ojek
is a unique method of transportation often seen in Indonesia as a solution to traffic congestion and as a means
to access areas which are inaccessible on four-wheeled vehicles. Go-Jek differentiates itself with its transparent
pricing and driver tracking systems, which assure customers of its security and reliability.
Go-Jek offers the following services through its mobile app:
Instant courier: Delivery of goods within 90 minutes to anywhere in the city
Transport: Move customers from one place to another on a motorcycle taxi
Shopping: Shop for and deliver food, tickets, medicines or anything under IDR 1 million and consumers pay
with cash on delivery
Over 50 companies in Jakarta currently use Go-Jeks services to deliver their products, documents and even
their employees. For consumer business companies, this service can help bypass indirect distributors and reach
customers in remote areas, including Warungs, as well as better understand customer buying patterns, exercise
better control on the delivery cycle and cut costs.

28

Looking ahead

Many of the key trends revealed in the previous edition of the report remain valid if
not magnified in this edition. The middle income consumer segment continues to
grow in sophistication as their purchase considerations increasingly extend beyond
merely price and basic functionality, and consumer business companies will need
to find ways to provide segmented offerings and a variety of value propositions to
cater to these needs. At the same time, they will need to develop a balanced channel
and distribution strategy that effectively utilises both modern and traditional trade
outlets, especially Minimarkets and Warungs, which remain key inroads to the masses.
Engaging different consumer segments will also require different sets of tactics; for
example, targeting the low income segments via traditional trade channels will require
small packaging formats to ensure affordability and to accommodate the limited shelf
space.
This edition of the report reveals three key insights. Firstly, there is a strong potential
for growth in the four product categories of Confectionery, Household Cleaning,
Packaged Food, and Tobacco. As their income levels increase and they gradually move
into the middle income segment, many of the low income consumers have expressed
their intention to increase spending in these product categories. Investments in
building trust and the overall quality of the products will become critical to securing
these consumers confidence as they become more affluent and price decreases in
importance as a consideration when making the purchase decision.
Secondly, consumer business companies should capitalise on digital media and
e-commerce to build balanced consumer engagement portfolios and to tap into a
market that is ripe for expansion. Indonesia has some of the worlds most frequent
and committed users of social media: it is the fourth largest market for Facebook
with its 65 million registered users6 and the fifth most active market for Twitter. While
TV and Word of Mouth remain the key channels for consumers seeking information
on products, the real potential of digital media lies in the use of the platform for
consumers to share their reviews and experiences with products or brands with one
another. With the increasing Internet penetration rates, alternative means of consumer
engagement and route-to-market channels have already been introduced and
embraced in the major cities.

Jakarta Post: Facebook opens office in Jakarta

29

Figure 39: Number of broadband, Internet and mobile phone users in Indonesia (2013-2018f)
Million
434

440
416

420

357

360

Broadband
subscription

324

80
60

Mobile phone
subscription

378

380

340

Internet users

397

400

60

53

46

81

73

66

40
20
0

2013

2014

2015f

2016f

2017f

2018f

Source: Economist Intelligence Unit

Finally, consumer business companies need to look beyond the major metropolitan area of Jakarta and towards other
fast-growing cities with higher historical growth rates, such as Pekanbaru, Samarinda and Makassar. Optimistic about
the future economic outlook, consumers in cities like Bandung and Makassar have also expressed high interest in
increasing their expenditures. Nevertheless, given the differing levels of urbanisation across Indonesia, the propensity
to spend will vary between consumers from the different regions. Companies looking at extending their presences
into these areas must first understand the geographical nuances and tailor their strategies accordingly, at least in a
tactical sense, in order to reap the rewards.
Figure 40: Top 10 fastest-growing cities in Indonesia
18.5%

21.8%
14.3%

GRDP
CAGR
(2009-2013)

14.2%

GRDP
CAGR
(2009-2013)
Samarinda

Pekanbaru Bandar Palembang

Lampung
Percentage of
0.9%
Indonesias GDP

0.4%

Percentage of
0.5%
Indonesias GDP

1.0%

Sulawesi
(5%)

17.1%
GRDP
CAGR
(2009-2013)
Makassar
Percentage of
0.8%
Indonesias GDP

Kalimantan
(9%)

Sumatra
(24%)

Other island
(4%)
Java (58%)
16.7%

16.4%

13.8%

13.4%

13.3%

Surabaya

South
Tanggerang

Depok

Jakarta

4.0%

0.2%

0.3%

16.5%

GRDP
CAGR
(2009-2013)
Bandung
Percentage of
1.7%
Indonesias GDP

Source: Indonesia Bureau of Statistics

30

Capturing Indonesias latent markets

Indonesia remains one of the most attractive emerging markets for consumer business
companies in the region with its large population, rapidly growing middle class, and
increasing urbanisation. But winning in this market will be not be easy, mainly because
of the vast diversity of the markets, heterogeneous mix of modern and traditional
trade outlets and challenging distribution channels.
For consumer business companies, Indonesia possesses three promising, latent
markets: the increasingly sophisticated middle class that is growing in size, digital
consumers, as well as consumers in cities outside the metropolitan area of Jakarta.
Capturing each of these different markets will require a unique set of tailored
strategies.
It will be crucial for consumer business companies who wish to capitalise on the
changing spending patterns to capture the burgeoning and newly minted middle
income segment while, at the same time, maintaining a stronghold amongst the low
income consumers who still account for the majority of Indonesias population. This
will require a carefully calibrated set of modern and traditional trade channels, with
the former targeted at the middle to high income consumers, and the latter at the
mass market. Companies would also do well to focus on improving the overall quality
of their products and other intangibles such as brand and trust, in order to capture the
mindshare of consumers as they become less price-sensitive and more sophisticated in
their purchasing decisions.
With the rise of the digital consumer, consumer business companies need to explore
the possibilities that digital media and other new technologies offer. For some, this
could mean setting up online storefronts to offer consumers a set of value propositions
that were previously unavailable to them, such as early access to the latest seasons
fashion in remote areas. Others may prefer to leverage technology in their operations
as a solution to logistical challenges, such as congestion.
While Jakarta continues to be Indonesias largest metropolitan area, many of its
other cities are now ripe for growth. Exhibiting higher growth rates and consumer
optimism, these regions present consumer business companies with the opportunity
for accelerated growth, and, perhaps more importantly, the potential to obtain a firstmover advantage that is, if they act fast, and act now.

31

Appendix

Figure 1: GDP of Southeast Asia Countries

Indonesia has the largest economy in SEA, contributing to 37% of SEA GDP.
USD billion
2,500
2,136
2,000

1,846
40%
1,395

1,500

37%
1,000
17%
14%

500

20%
0

1,489

13%
13%
18%

Indonesia

39%

37%

13%

13%

Malaysia

13%

13%

Singapore

16%

17%

19%

20%

38%

38%
14%

2,337

2,264

13%

14%
13%

17%

16%
18%
2011

14%

20%

18%

2008

2009

2010

2012

Thailand
Cambodia, Lao PDR,
Philippines and
Vietnam

2013

Source: The Economist, World Bank, Badan Pusat Statistik Indonesia

Figure 2: Forecasted GDP of Indonesia

Indonesia is forecasted to experience significant growth with its GDP doubling to USD 1.7 trillion in 6 years time
in 2020.
USD billion
1,700

1,800
1,600
1,400

+100.9%
1,172

1,200
1,000

846

800
600

+229.2%

539

400
257
200
0

2004

2009

2014

Source: The Economist, World Bank, Badan Pusat Statistik Indonesia

32

2017f

2020f

Figure 3: Percentage of Indonesian urban population by province

Urbanisation is taking place across Indonesia.
Percentage point
change (2010-2015)

100%

DKI Jakarta

51%

Java

East Java

73%

West Java

DI Yogyakarta

Sumatra

Aceh

60%
53%

47%

37%
28%
44%
31%

64%
72%
56%
70%
83%

Riau Islands
Jambi

32%

Bengkulu

53%

West Kalimantan
Central Kalimantan

Sulawesi

South Sulawesi
Central Sulawesi
North Sulawesi
Southeast Sulawesi
West Sulawesi
Gorontalo

68%
66%

33%

Others

West Papua
Maluku
North Maluku

55%
63%
59%
73%
50%
69%
77%
61%
66%

28%

35%
72%

45%

West Nusa Tenggara

East Nusa Tenggara

34%
67%

45%
37%
41%
27%
50%
31%
23%
39%

Bali
Papua

48%

32%

East Kalimantan
South Kalimantan

17%
68%

Bangka Belitung Islands

Kalimantan

Descending island GDRP

West Sumatra

32%
30%

40%

North Sumatra
Lampung

52%
68%
71%

Banten

South Sumatra

27%

48%

Central Java

Riau

49%

32%
22%
38%
28%

Urban

55%
68%
78%
62%
72%

Population
(Million)

10.2

+3.5

38.8

+7.2

46.7

+2.7

33.8

+0.7

12.0

+4.1

3.7

+0.4

6.3

+3.4

13.9

+0.7

8.1

+2.6

8.1

+5.5

5.2

+2.4

5.0

+0.2

2.0

+1.3

3.4

+3.3

1.4

+0.7

1.9

+2.8

4.1

+2.9

4.8

+3.0

4.0

+3.1

2.5

+3.9

8.5

+2.9

2.9

+4.6

2.4

+3.8

2.5

1.3

+5.0

1.1

+5.3

4.2

+2.4

3.1

+3.7

4.8

+2.4

0.9

+2.3

5.1

+0.9

1.7

+0.7

1.2

Rural

Note: Provinces in bold have higher than average urbanisation growth

Source: Badan Pusat Statistik Indonesia

33

Contact us

For more information on these insights, please contact:

Eugene Ho
Executive Director
Consulting
+65 9670 2040
eugeneho@deloitte.com
Stanley Song
Director
Consulting
+62 21 2992 3100 (ext 30307)
stansong@deloitte.com
Kavita Rekhraj
Director
Consulting
+60 376 109 006
krekhraj@deloitte.com

34

Southeast Asia Consumer Business Practice

Southeast Asia and
Singapore Industry Leader
Eugene Ho
Executive Director
+65 9670 2040
eugeneho@deloitte.com
Guam
Mike Johnson
Partner
+1 671 646 3884
mikjohnson@deloitte.com

Audit
Tenly Widjaja
Partner
+62 21 2992 3100 ext.31893
twidjaja@deloitte.com

Indonesia
Jose Sabater
Partner
+62 21 2992 3100 ext.33591
josabater@deloitte.com

Consulting
Eugene Ho
Executive Director
+65 9670 2040
eugeneho@deloitte.com

Malaysia
Jeffrey Soo
Partner
+60 376 108 856
jefsoo@deloitte.com

Enterprise Risk Services

Jose Sabater
Partner
+62 21 2992 3100 ext.33591
josabater@deloitte.com

Philippines
Bonifacio Lumacang
Partner
+63 2581 9067
blumacang@deloitte.com

Financial Advisory
Ng Jiak See
Executive Director
+65 6531 5088
jsng@deloitte.com

Thailand
Manoon Manusook
Partner
+66 2 676 5700 ext. 5101
mmanusook@deloitte.com

Tax
Robert Tsang
Partner
+65 6530 5523
robtsang@deloitte.com

Vietnam
Nguyen Vu Duc
Partner
+84 462 883 568
nguyenvu@deloitte.com

35

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