Deloitte Consumer Insights Embracing bricks and clicks in Indonesia June 2017 Foreword 03 Deloitte Consumer Insights 04 1. Overall consumer sentiment 06 2. Spending patterns 10 3. Brand preferences and buying behaviour 15 4. Buying channels 22 5. Communication channels 25 6. e-Commerce 28 Looking ahead 34 Contact us 35 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Foreword
Indonesia is often described as Southeast Asia’s most populous economy. With its consumers increasingly gravitating towards online consumption, it is not inconceivable that it might one day become the region’s leader in e-commerce and a priority destination for digital innovation.
In this fourth edition of the Deloitte Consumer Insights report, we explore some of the latest consumption patterns of the Indonesian consumer that emerged from the results of the recent survey conducted in the first quarter of 2017 across 2,000 households via face- to-face interviews in five major cities: Bandung, Jakarta, Makassar, Medan and Surabaya. In addition, we review some of the insights uncovered in previous editions of the survey, and reflect on the evolution of the Indonesian consumer over the last few years.
One unmistakeable shift has been the acceleration in the trend towards online shopping. In the short, one-year span between the previous and this edition of the survey, the percentage of respondents possessing prior online shopping experience has increased significantly. Given Indonesia’s vast potential, however, this is only the tip of the iceberg. Companies hoping to tap into the growth of this digital channel have much to look forward to – that is, if they can adequately satisfy the consumer’s demands along a trinity of dimensions: Practicality, Price and Product Range.
It must be said, however, that some barriers to digital adoption remain. These deterrents – which vary significantly between the different cities – include concerns over security, lack of knowledge and perceived difficulties in returning or exchanging products, and are best addressed with the use of customised strategies and campaigns tailored to the needs of the local market.
Finally, the take-off of digital channels does not imply that traditional channels will diminish in relevance. Consistent with our previous reports, we have also captured and discussed the latest trends and insights on consumer sentiments, behaviours and motivations on the non-digital aspects of the market, including spending patterns, buying behaviours, buying channels, and information sources.
We hope that this report will provide you with insights into the Indonesian consumer market and the considerations that you will need to make in order to harness the potential of this next digital destination.
Eugene Ho Southeast Asia Industry Leader Consumer & Industrial Products
03 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Deloitte Consumer Insights
As with prior editions, this fourth edition of the Deloitte Consumer Insights survey explores a number of macroeconomic and technological trends influencing the consumption preferences and buying behaviours of consumers in Indonesia. Later in this report, we will also delve deeper into the consumption patterns for specific product categories, and examine the impacts of digital technology on consumer behaviour, as its influence on consumers – as a source of information, purchasing channel and avenue for consumer engagement – continues to grow.
Methodology The survey was conducted in the first quarter of 2017 across 2,000 households via face-to-face interviews in five major Indonesian cities – Bandung, Jakarta, Makassar, Medan and Surabaya – with respondents selected from seven household income levels across the low, middle, and high income segments. The sample was carefully selected such that it would be a relatively fair representation of Indonesia’s overall population demographics in terms of geographical distribution, gender and age.
Consumers were surveyed on their spending patterns, consumer sentiment, brand preferences, buying behaviours and channels, e-commerce activities and geographical differences across eleven product categories:
•• Audio and Video Electronics Products (refers •• Household Appliances (Small) (refers to portable to audio visual products, as well as related or semi-portable appliances usually placed on accessories and gadgets) counters or other platforms, such as microwave •• Beverages ovens and rice cookers) •• Clothing and Footwear •• Household Cleaning Products •• Confectionery •• Packaged Food •• Household Appliances (Major) (refers to non- •• Personal Hygiene Products portable appliances, such as refrigerators and •• Tobacco washing machines) •• Transportation
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Demographics of survey respondents
Geographical distribution of survey respondents Gender distribution of survey respondents
Surabaya Medan
Makassar
Jakarta Bandung
50% 50%
Age distribution of survey respondents ge gro ears
15-24 25-34 35-4 50-64
Monthly household income distribution of survey respondents
on l o se old income le el I million Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
ore than 10
Monthly household income distribution by city
on l o se old Bandung 6% 28% 16% 15% 18% 12% 5% income le el I million Jakarta 3% 9% 11% 13% 10% 13% 41% Less than 1 1-2 akassar 5% 26% 13% 18% 16% 13% 9% 2-3 3-5 5-7.5 edan 4% 30% 14% 19% 21% 11% 1% 7.5-10 ore than 10 Surabaya 8% 19% 18% 21% 19% 12% 3%
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1. Overall consumer sentiment
Optimism on the rise Figure 1: Overall consumer sentiment on economy Overall consumer sentiment in Indonesia has been consistently positive over the last three years with only marginal movements: 17% 15% 19% consumers expressing positive sentiments shifted from 83% in 2015, to 85% in 2016, and then to 81% in 2017 (see Figure 1).
Taking a closer look at this year’s results, we see a significant increase in the proportion of respondents indicating clearly positive sentiments, relative to those expressing moderately optimistic sentiments (see Figure 2). 83% 85% 81%
There are a number of factors that could have contributed to this phenomenon, including Indonesia's robust economy currently growing at 5% per annum, driven primarily by the growth in population to reach projected 268 million by 20201. In addition, infrastructure spending under the administration of current 2015 2016 2017 President Joko Widodo has boosted confidence and employment ositive egative prospects. Source: Deloitte Consumer Insights survey (2015, 2016, and 2017)
Figure 2: Breakdown of positive consumer sentiment
2017 2016 oderate
Optimistic
Source: Deloitte Consumer Insights survey (2016 and 2017)
1 Population Estimates and Projections. The World Bank.
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Makassar makes its voice heard With the exception of Medan, respondents across all cities expressed optimism levels of 50% and above. Once again, this represents an improvement from the previous edition of the survey, where only respondents from Bandung indicated such optimism.
Makassar, in particular, emerged as the most optimistic city, with 78% of respondents indicating optimism (see Figure 3). This is perhaps expected, given the increasing levels of domestic and foreign direct investments in large- scale infrastructure spending driving highly visible change within the city, such as its Middle Ring Road initiative and Makassar New Port development project2.
Similar drivers can also be observed for Jakarta and Surabaya. In Jakarta, for instance, five large-scale infrastructure spending projects – Airport Express Line, Mass Rapid Transit, Light Rapid Transit, National Capital Integrated Coastal Development and the development of intermediate treatment facilities for waste management – are currently underway3. These are further bolstered by the increase in minimum wage levels across the five cities, with the highest increases seen in Jakarta and Surabaya (see Figure 4).
Figure 3: Consumer sentiment by city
e el o cons mer Bandung 59% 21% 20% sen imen Optimistic Jakarta 57% 24% 19% oderate essimistic
akassar 78% 20% 2%
edan 45% 28% 27%
Surabaya 51% 27% 22%
Source: Deloitte Consumer Insights survey (2017)
Figure 4: Minimum wage increase by city
2015 Bandung 2016 2017 Jakarta
akassar
edan
Surabaya
on l minim m age
Source: Statistics Indonesia (Badan Pusat Statistik)
2 "Public Projects of the Indonesian Government". Indonesia Investments. https://www.indonesia-investments.com/projects/public-projects/item72 3 "Giant infrastructure projects in Jakarta". The Jakarta Post. 19 February 2016. http://www.thejakartapost.com/news/2016/02/19/weekly-5-giant- infrastructure-projects-jakarta.html 07 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Prudence persists Consumer sentiment varies across income segments, with middle and high income households expressing higher levels of optimism, and low income households expressing more moderate and pessimistic sentiments (see Figure 5).
Overall, however, prudence remains the order of the day across all income groups, with only 29% of respondents expressing plans to increase their spending, while the remaining 74% were not sure or had no plans to increase their spending this year (see Figure 6). Of the 26%, more than half indicated cautious prudence, expressing a desire to increase their spending by less than 10%.
In addition, amongst respondents expressing optimistic sentiments, 35% of them planned to increase spending. For moderate and pessimistic respondents, this figure was at 15% and 17% respectively (see Figure 7).
Figure 5: Consumer sentiment by monthly household income level
on l o se old income e el o cons mer le el I million sen imen
Less than 1 23% 47% 30% essimis ic odera e imis ic 1-2 24% 26% 50%
2-3 22% 24% 54%
3-5 20% 26% 54%
5-7.5 22% 24% 54%
7.5-10 13% 23% 64%
ore than 10 15% 18% 67%
Source: Deloitte Consumer Insights survey (2017)
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Figure 6: Overall trend among Indonesian consumers with positive sentiment in 2017 vs. 2016
4% In ended increase in s ending 9% 10% ore than 50% 26% 14% 26-50% 10-25% Less than 10% 33% 28%
74% o increase s ending
ercen age o res onden s 53% 49%
lans or increased ercen age o o la ion lanning s ending es o
Source: Deloitte Consumer Insights survey (2016 and 2017)
Figure 7: Correlation between Indonesia consumer sentiment and plans for increased spending in 2017
lans or increased s ending
essimistic 83% 17% o ns re es
oderate 85% 15%
Optimistic 65% 35%
Source: Deloitte Consumer Insights survey (2017)
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2. Spending patterns
Inflection point lingers Packaged Food categories. Between 2015 and 2016, there was a Food and beverage items accounted for 38% of overall monthly 6% increase in the share of expenditure for these categories, and expenditures, with the remaining 62% accounted for by non-food a 5% increase between 2016 and 2017. This in line with overall items (see Figure 8). Across all income segments, there was an macroeconomic trends such as a growing Indonesian middle overall increase in monthly household expenditure levels ranging class, with the growth of incomes amongst low and middle class from 15% to 34% – or an overall average 25% increase in monthly households enabling them to increase their expenditures in these household expenditures – from last year (see Figure 9). areas in order to obtain greater quantities and varieties of products (see Figure 10). Despite this trend, the inflection point observed in previous editions of this survey continues to linger. This inflection point, The overall distribution of expenditures between the three main identified as the monthly household income level of IDR 5 million, product clusters – Basic Necessities, Welfare and Leisure, as well as remains a reliable indicator of the point at which consumers make Housing and Transportation – remained relatively constant, with a the shift from prioritising basic needs to making a greater number slight increase in the Basic Necessities cluster (from 33% in 2016 to of discretionary purchases. 38% in 2017) and a marginal decrease in the Welfare and Leisure (from 15% to 13%) and Housing and Transportation (from 20% to Over the last three editions of the survey, we have observed a 17%) clusters (see Figure 11). steady increase in consumer spending for the Beverages and
Figure 8: Breakdown of monthly household expenditures ercen age oin ga be een erall mon l o se old income le el I million ig es and 1% 1% 2% 2% 2% lo es o se old 2% 2% 4% 2% 3% 3% 4% income le els 6% 1% 6% 3% 4% 3% 3% 3% 2% 2% 4% 4% 12% Electronics 4% 5% 10% 4% 8% roducts 4% 4% 4% 1% 13pp 4% 9% 8% 5% 5% 7% 3% 9% 8% 1% 7% 6% 6% on-food 11% 2% 10% 15% 7% 7% Welfare and items Leisure 9% 7% 9% 62% 5% 6% 8% 6% 1 pp 5% 5% 6% 6% 5% 6% 5% 8% 5% 5% 5% 4% 6% 4% 7% 4% 4% 5% 5% 6% 4% 8% 5% 4% Housing and 5% 5% 6% 8% Transportation 4% 5% 6% 6% 5% 3% 5pp 5% 5% 4% 5% 3% 3% 5% Food and 33% 30% 34% 35% 34% 2% beverage 30% 32% items 38% 18% Basic ecessities 16pp 6% 6% 4% 5% 5% 4% 4% 3% Less than 1 1-2 2-3 3-5 5-7.5 7.5-10 ore than 10 Beverages Household Cleaning roducts Transportation Audio and Video Electronics Increase in percentage ackaged Food ersonal Hygiene roducts Credit Card Instalments roducts contributions between highest and lowest household income levels Tobacco Communication and edia Lesiure and Holidays Household Appliances a or) Clothing and Footwear Housing and tilities Welfare and Savings Household Appliances Small) Decrease in percentage contributions between highest and lowest household income levels Source: Deloitte Consumer Insights survey (2017)
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Figure 9: Change in monthly household income and expenditure levels
on l o se old income le el I million Surplus/Deficit Index* 2015 Less than 1 2016 2017
1-2 asic necessi ies are 2-3 riori ised
3-5
5-7.5
iscre ionar 7.5-10 s ending increases
ore than 10
on l o se old e endi re le el I million
*Surplus/Deficit Index represents the positive/negative gap between the median monthly household income and expenditure levels
Source: Deloitte Consumer Insights survey (2015, 2016 and 2017)
Figure 10: Overall spending trend on Beverages and Packaged Food as part of total expenditure over 2015-2017
33% 27%
22%
6% 5% 5%
2015 2016 2017
Beverages ackaged Food
Source: Deloitte Consumer Insights survey (2015, 2016, and 2017)
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Figure 11: Allocation of monthly household expenditure across the three main consumer product clusters
33%
4% 7%
4%
9% 5% 3%
Basic ecessities Welfare and Leisure Housing and Transportation
Beverages Welfare and Savings Transportation Leisure and Holidays ackaged Food Housing and tilities Credit Card Instalments
Source: Deloitte Consumer Insights survey (2017)
Packaged Food are the popular good By comparing last year’s planned increases in expenditures with this year’s actual increases, we can gain some understanding of the changing consumer priorities as they make trade-offs in their consumption across different product categories.
Packaged Food is the only product category where actual spending exceeded the planned increase. Clothing and Footwear emerged as the product category with the second highest ratio of actual to planned increase in expenditure, while Household Appliances (Small) came in at the lowest (see Figure 12). This indicates, to some extent, how the Indonesian consumer continues to trade off some discretionary purchases in favour of basic necessities, and is in line with the expectation that any increases in consumer spending, particularly that driven by the expansion of the middle class, is typically first allocated to basic needs.
Figure 12: Planned and actual increases in expenditures across product categories lanned increase 2016)
Actual increase 2017)
ackaged Clothing and ersonal Household Tobacco Beverages Household Audio Video Household Food Footwear Hygiene Cleaning Appliances Electronics Appliances roducts roducts a or) roducts Small) atio of actual 2017) to planned 2016) increase in expenditure 300 43 42 38 36 36 x 100 28 22 13
Source: Deloitte Consumer Insights survey (2016 and 2017)
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As with previous editions of the survey, three major expenditure patterns which vary with monthly household income level were observed (see Figure 13):
Expenditure Pattern 1: Proportion of expenditure relatively constant across all household income levels This year, products in this category include Packaged Food, Clothing and Footwear, and Transportation. Assuming that, on a per capita basis, the quantities consumed do not vary significantly, this suggests that consumers with higher incomes tend to consume more expensive or premium options in these categories.
For instance, when a consumer’s income doubles, he or she may not necessarily double his or her food intake, but instead may choose to purchase higher quality products, consume a wider variety of products, or pay a premium for perks such as convenience. For these product categories, this finding suggests opportunities for price and product differentiation to cater to the different income segments.
Expenditure Pattern 2: Proportion of expenditure decreases as household income level increases As monthly household income levels rise, expenditure as a proportion of income decreases for products in this category. Examples include Beverages, Household Cleaning Products, Personal Hygiene Products, as well as Tobacco.
This could be a result of either a decrease in overall consumption as income rises, or a stagnation in expenditure level such that it shrinks in proportion relative to income. For instance, while the amount of Household Cleaning Products that a high income household consumes is likely to slightly exceed that of a low income household, this difference may not be significant when calculated as a proportion of overall income.
Expenditure Pattern 3: Proportion of expenditure increases as household income level increases As monthly household income levels rise, expenditure as a proportion of income increases for products in this category. Examples include Credit Card Instalments, Electronic Products, Leisure and Holidays, as well as Welfare and Savings.
Typically known as luxury or big-ticket items, products in these categories tend to face an increase in demand as consumer affluence increases. As their income increases, consumers become increasingly willing to pay a premium for quality and luxury, and are more interested in financial products such as investments and credit.
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Figure 13: Expenditure patterns of product classes across household income levels
Clothing and Footwear Packaged Food Transportation ercen age s are ercen age s are ercen age s are ttern o e endi re o e endi re o e endi re ons an across mon l o se old income le els
Less 1- 2- 3- 5- 7.5- ore Less 1- 2- 3- 5- 7.5- ore Less 1- 2- 3- 5- 7.5- ore than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 on l o se old income le el I million on l o se old income le el I million on l o se old income le el I million
Beverages Household Cleaning Products Personal Hygiene Products Tobacco
ercen age s are ercen age s are ercen age s are ercen age s are ttern o e endi re o e endi re o e endi re o e endi re ecreases as mon l o se old income le els increase
Less 1- 2- 3- 5- 7.5- ore Less 1- 2- 3- 5- 7.5- ore Less 1- 2- 3- 5- 7.5- ore Less 1- 2- 3- 5- 7.5- ore than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 on l o se old income le el I million on l o se old income le el I million on l o se old income le el I million on l o se old income le el I million
Credit Card Instalments Electronic Products and Appliances Leisure and Holidays Welfare and Savings
ercen age s are ercen age s are ercen age s are ercen age s are ttern o e endi re o e endi re o e endi re o e endi re Increases as mon l o se old income le els increase
Less 1- 2- 3- 5- 7.5- ore Less 1- 2- 3- 5- 7.5- ore Less 1- 2- 3- 5- 7.5- ore Less 1- 2- 3- 5- 7.5- ore than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 on l o se old income le el I million on l o se old income le el I million on l o se old income le el I million on l o se old income le el I million
Source: Deloitte Consumer Insights survey (2017)
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3. Brand preferences and buying behaviour
Local flavour, global fervour Indonesian consumers increasingly consume a mixed basket of products from both local and global brands. A strong preference for Local brands is evident across all household income levels in the product categories of Confectionery, Packaged Food, Household Cleaning Products and Tobacco. These brands are often perceived by consumers to be offering affordable prices and quality products. Of note is also the fact that some of the more successful Foreign brands are perceived by consumers to be Local brands.
However, in other product categories such as Clothing and Footwear, Audio and Video Electronics Products, Household Appliances (Major) and Household Appliances (Small), there is a relatively higher preference for Foreign brands (see Figure 14). This preference tends to become more pronounced as monthly household income levels increase (see Figure 15).
In the electronic products categories, low income consumers typically have a strong preference for Local brands. Preference for Chinese brands are low overall, but low income consumers showed a slightly higher preference for Chinese Audio and Video Electronics products. On the other hand, Western brands tend to be more popular with high income consumers, while Japanese and Korean brands are strongly positioned overall and especially among households with mid to high income (see Figure 16).
There are, however, some geographic differences. Bandung and Medan emerged as the two cities with the highest preference for Local brands in the electronic products categories (see Figure 17). In these cities where consumers display relatively higher levels of price sensitivity, the preference for Local brands has continued to grow.
Figure 14: Brand preferences by product category
Beverages Confectionery ackaged ersonal Clothing and Household Tobacco Audio and Household Household Brand Food Hygiene Footwear Cleaning Video Appliances Appliances preference roducts roducts Electronics a or) Small) roducts 6% 5% 1% 12% 4% Foreign
94% 95% 99% 88% 35% 65% 100% 96% 74% 26% 73% 27% 48% 52% Local
Source: Deloitte Consumer Insights survey (2017)
A passion for fashion With the growth of a young and trendy middle class, Indonesia’s apparel market is heating up with competition as global retailers intensify their focus on the market with aggressive expansion to capture market share. Notable players include:
H&M: H&M entered the Indonesian market in 1996 with the objective of leveraging Indonesia as a sourcing base. In recent years, however, the focus has been on retail expansion. Its first standalone stores opened in October 2013 and as of 2016, a total of 20 standalone stores have been opened in Indonesia.
Uniqlo: Since opening its first store in June 2013 in Jakarta, Uniqlo has since undertaken rapid expansion plans. In September 2016, it opened its tenth store in Jakarta.
Zara: Zara entered the Indonesian market in 1996, and opened its biggest Southeast Asian store in Jakarta in December 2014. As of 2017, it has 16 stores across Indonesia.
Source: Detik Finance, FastRetailing Indonesia, H&M Indonesia, Tirbunnews, Uniqlo Indonesia, Warta Ekonomi, Zara Indonesia, and Deloitte analysis
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Figure 15: Brand preferences by product category and monthly household income level on l o se old income le el I million
Beverages Confectionery ackaged ersonal Clothing and Household Tobacco Audio and Household Household Food Hygiene Footwear Cleaning Video Appliances Appliances roducts roducts Electronics a or) Small) Brand roducts preference
Less than 1 100% 100% 100% 5% 95% 10% 90% 100% 100% 62% 38% 44% 56% 21% 79% Foreign Local 1-2 100% 100% 100% 4% 96% 8% 92% 100% 1% 99% 55% 45% 52% 48% 22% 78%
2-3 100% 4% 96% 100% 7% 93% 17% 83% 100% 1% 99% 64% 36% 69% 31% 38% 62%
3-5 14% 86% 3% 97% 100% 8% 92% 22% 78% 100% 3% 97% 73% 27% 75% 25% 44% 56%
5-7.5 25% 75% 4% 96% 100% 12% 88% 24% 76% 100% 4% 96% 66% 34% 71% 29% 48% 52%
7.5-10 11% 89% 4% 96% 100% 14% 86% 42% 58% 100% 8% 92% 74% 26% 76% 24% 51% 49%
ore than 10 21% 79% 8% 92% 3% 97% 21% 79% 62% 38% 100% 8% 92% 88% 12% 81% 19% 62% 38%
Source: Deloitte Consumer Insights survey (2017)
Figure 16: Brand preferences for electronic products and appliances categories by monthly household income level
on l o se old income le el I million rand Audio and Video Electronics roducts Household Appliances a or) Household Appliances Small) re erence Less than 1 21% 13% 28% 38% 3% 22% 17% 3% 55% 5%5%11% 79% Chinese Japanese 1-2 10% 21% 21% 3% 45% 5% 27% 18% 2% 48% 5% 9% 78% Korean 5% 3% Western 2-3 8% 26% 24% 6% 36% 3% 37% 23% 6% 31% 5%5%10% 17% 63% Local
3-5 6% 36% 27% 4% 27% 2% 34% 35% 3% 26 % 2% 19% 12% 11% 56%
5-7.5 5% 28% 30% 3% 34% 2% 28% 36% 5% 29% 3% 20% 15% 10% 52%
7.5-10 4% 31% 37% 2% 26% 3% 32% 38% 3% 24% 2% 27% 9% 13% 49%
ore than 10 4% 35% 45% 4% 12% 5% 34% 36% 6% 19% 3% 24% 16% 21% 36%
Source: Deloitte Consumer Insights survey (2017)
Figure 17: Brand preferences by city
Beverages Confectionery ackaged ersonal Clothing and Household Tobacco Audio and Household Household Food Hygiene Footwear Cleaning Video Appliances Appliances roducts roducts Electronics a or) Small) Brand roducts preference
Bandung 100%100% 100% 100% 100% 1% 99% 100% 100% 13% 87% 15% 85% 11% 89% Foreign Local Jakarta 9% 91% 6% 94% 1% 99% 17% 83% 50% 50% 100% 10% 90% 87% 13% 84% 16% 56% 44%
akassar 2% 98% 100% 100% 12% 88% 7% 93% 100% 1% 99% 64% 36% 67% 33% 50% 50%
edan 4% 96% 3% 97% 100% 5% 95% 14% 86% 100% 100% 39% 61% 37% 63% 81% 19%
Surabaya 100% 100% 100% 100% 3% 97% 100% 2% 98% 64% 36% 70% 30% 62% 38%
Source: Deloitte Consumer Insights survey (2017)
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Sensitive but sensible Consistent with previous editions of the survey, we continue to observe that Indonesian consumers are generally price-sensitive. They are, however, becoming increasingly conscious about specific product attributes such as Health, Size Fit, across a range of different product categories from Beverages and Packaged Food, to Clothing and Footwear. This suggests an increasing health awareness, as well as a desire to be fashionable and trendy (see Figure 18).
•• Beverages and Packaged Food: Although Taste remains the most important driver for purchase, Health has emerged as the third most important factor in this year’s survey, right after Price. This has changed since 2014, when Taste and Overall Quality were top drivers. As Indonesian consumers become more affluent, non-price attributes increase in importance. Increasingly, we see that Indonesian consumers are more willing to pay more for greater perceived Health benefits in these categories. An example of this is the increasing popularity of cold pressed juices and energy bars from Indonesian brands such as Fitbar Kalbe and Rejuve.
•• Clothing and Footwear: Comfort and Size Fit are the most important considerations for this product category, which have risen in importance relative to Price. This finding, too, shows a degree of evolution since 2014 when Comfort and Appearance emerged as the top drivers. With the trend towards slim fit fashion, Size Fit has become more important as consumers demand trendy tight styles with comfortable fit. Across all monthly household income levels, consumers increasingly care more about how the apparel makes them look and the comfort level that it provides, rather than its price tag (see Figure 19). This suggests that, when targeting Indonesian consumers in this product category, factors such as aesthetics and trendiness, as well as fabric and size fit, are increasing in importance relative to price. One such example is the rise of contemporary streetwear – including “jogger pants” – amongst the middle and high income households, which were popularised by global brands such as Zanerobe and Elwood.
•• Household Cleaning Products: Price, Safety and Overall Quality have emerged as the top three drivers for this product category. In addition, Promotion has risen in importance as the fourth most important driver. This poses an important consideration for consumer product and retail companies: as Indonesian consumers become increasingly adept at comparing the functional attributes of competing products, executing the right Promotion strategy can help brands win market and mind share.
•• Personal Hygiene Products: Price continues to be the single most important driving factor in this product category. Considerations such as Overall Quality, Safety, Trust, and Promotion are among the next set of important drivers. This suggests a need for companies to invest in branding and building credibility with customers, as these attributes are difficult to assess and consumers would thus need to rely on brand reputation as a proxy.
Quite expectedly, low and middle income consumers are more price-sensitive and show a greater preference for Local brands, while high income consumers tend to be more concerned about Overall Quality (see Figure 20). For companies, this indicates a potential opportunity to adopt a segmented approach in price and positioning, such as the introduction of basic and premium product lines to cater to the different groups.
•• Household Appliances (Major), Household Appliances (Small), and Audio and Video Electronics Products: For these electronics product categories, consumers are driven primarily by the attributes of Technology, Price, Trusted Brand and Overall Quality. Other attributes, such as Promotions, are relatively less important. This suggests that consumers are weighing their decisions based on the trade-off between Technology and/or Quality and Price. On the other hand, factors such as Promotion are nice to have, but are less essential.
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Figure 18: Drivers of purchase for different product categories
e er ges ge oo
Taste Taste rice rice Health Health Overall Quality Overall Quality Smell Safety Trust Trust Safety Smell Availability Availability ackaging romotion romotion Innovation Innovation ackaging
Clothing n oot e r ousehol Cle ning ro u ts
Comfort rice Size Fit Safety rice Overall Quality Appearance romotion Durability Availability Overall Quality Trust romotion Smell opularity Health Safety Innovation Availability ackaging ackaging
erson l giene ro u ts ousehol li n es or
rice Technology Overall Quality rice romotion Trusted Brand Safety Overall Quality Trust Design Smell romotion Health Availability Innovation Innovation After Sales Service ackaging Availability
ousehol li n es m ll u io n i eo le troni s ro u ts
Technology Technology rice rice Overall Quality Trusted Brand Trusted Brand Overall Quality romotion Design Design Innovation Innovation romotion Availability After Sales Service After Sales Service Availability
Source: Deloitte Consumer Insights survey (2017)
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Figure 19: Drivers of purchase for Clothing and Footwear by monthly household income level
on l o se old income le el I million ri ers o rc ase Less than 1 20% 22% 16% 12% 11% 3% 5% 2% 4% 4% Comfort Size Fit 1-2 20% 20% 18% 10% 8% 8% 7% 2% 2% 4% rice Appearance 2-3 23% 19% 16% 13% 10% 6% 5% 3% 3% Durability Overall Quality 3-5 22% 15% 15% 13% 10% 7% 7% 4% 3% 3% romotion opularity 5-7.5 22% 16% 12% 13% 11% 12% 5% 5% 2% Safety Availability 7.5-10 24% 19% 11% 14% 9% 7% 6% 5% 2% 1% ackaging
ore than 10 21% 14% 12% 14% 9% 12% 6% 5% 4% 2%1%
Source: Deloitte Consumer Insights survey (2017)
Figure 20: Drivers of purchase for Personal Hygiene Products by monthly household income level
on l o se old ri ers o income le el I million rc ase
Less than 1 23% 6% 11% 11% 10% 12% 9% 9% 4% 5% rice Overall Quality 1-2 23% 11% 8% 11% 9% 11% 10% 9% 5% 3% Safety Trust 2-3 22% 11% 8% 11% 8% 11% 8% 11% 7% 3% Health
3-5 21% 14% 10% 10% 10% 9% 7% 8% 8% 3% Smell romotion
5-7.5 17% 15% 6% 13% 10% 10% 11% 7% 6% 5% Availability Innovation 7.5-10 16% 15% 8% 13% 11% 8% 8% 8% 9% 4% ackaging
ore than 10 17% 14% 9% 13% 11% 9% 12% 7% 5% 3%
Source: Deloitte Consumer Insights survey (2017)
19 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Is price still king? When presented with options to purchase lower, higher, or similarly priced product alternatives, 14% of Indonesian consumers chose to purchase the higher priced option, while 60% and 26% selected the similarly and lower priced options respectively (see Figure 21). This pattern also varies with income, with 71% of respondents in the highest monthly household income segment open to purchasing higher or similarly priced options (see Figure 22).
Figure 21: Indonesian consumers selecting products among different price options
14% Selected product option Lower price Similar price Higher price
60%
26%
Source: Deloitte Consumer Insights survey (2017)
Figure 22: Indonesian consumers selecting different price options, by household income level
on l o se old elec ed rod c income le el I million o ion
Less than 1 36% 55% 9% Lower price
1-2 31% 60% 9% Similar price
2-3 37% 53% 10% Higher price 3-5 30% 60% 10%
5-7.5 22% 65% 13%
7.5-10 27% 60% 13%
ore than 10 29% 55% 16%
Source: Deloitte Consumer Insights survey (2017)
20 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
While the key drivers of purchasing decisions remain unchanged from last year across all product categories, there is a marked shift in drivers for consumers looking to purchase higher priced options (see Figure 23). For consumer product companies, this implies that a compelling value proposition is likely to be the one that is able to find the right match between a product’s price range and its specific drivers of purchase.
Figure 23: Key drivers when purchasing products at different price points
Beverages Confectionery Packaged Food
#1 Taste (26%) Taste (21%) #1 Taste (25%) Taste (27%) #1 Health Trust (16%) #2 Price (16%) Health (15%) #2 Health Price (15%) (19%) (16%) #3 Health Price (13%) #2 Taste (16%) Price (15%) (14%) #3 Price (15%) Overall #3 Price (15%) Safety (15%) Quality (13%)
Personal Hygiene Products Clothing and Footwear Household Cleaning Products
#1 Price (20%) Price (17%) #1 Comfort Comfort #1 Price (22%) Safety (29%) #2 Safety Health (13%) (19%) (23%) (12%) #2 Promotion Trust (16%) #2 Price (17%) Size Fit (16%) #3 Promotion Overall (17%) (11%) Quality #3 Overall Smell (8%) (13%) #3 Size Fit Appearance Quality (11%) (17%) (12%)
Tobacco Audio and Video Electronic Household Appliances Products (Small)
#1 Price (25%) Trust (18%) #1 Price (25%) Technology #1 Price (25%) Technology #2 Smell (13%) Price (16%) (23%) (32%) #3 Taste (11%) Safety (15%) #2 Technology Trusted #2 Overall Trusted (16%) Brand (20%) quality Brand (20%) (18%) #3 Overall Price (15%) Quality #3 Technology Overall (15%) (15%) Quality (14%)
Lower priced option Higher priced option
Note: % denotes percentage of survey respondents
21 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
4. Buying channels
A big market for Minimarkets Although Traditional Trade channels – especially Warungs – continue to be the preferred buying channels, Modern Trade channels have been gaining considerable traction (see Figure 24).
While overall total grocery sales in Indonesia grew at a year-on-year rate of 11%, Minimarkets posted a substantial growth rate of 19%4. This suggests that Modern Trade channels have the potential for greater expansion, and that its current seemingly slow pace of expansion is likely caused by the slow rate of investment rather than consumer resistance. Local player, Indomaret, for instance, has expanded its network of Minimarkets across the country by 72% from 2012 to 2017. In order to appeal to the Indonesian consumer, companies need to focus on providing Convenience, Location, Price, as well as Assortment and Availability (see Figure 25).
Consumers in Jakarta continue to have the strongest preference for Modern Trade channels due to their ease of access and location proximities (see Figure 26). Although Modern Trade outlets are mostly visited for the purchase of day-to-day necessities such as Household Cleaning Products and Personal Hygiene Products, consumers in Jakarta also prefer these channels for the purchase of Clothing and Footwear, due to greater affluence and easier access to Brand Stores and other modern retail outlets (see Figure 27).
Figure 24: Preference for buying channels
Source: Deloitte Consumer Insights survey (2017)
4 “Rise of Minimarkets: Indonesia’s Purchase Shift from Super and Hypermarkets to Minimarkets”. Snapcart, 10 March 2016. https:// snapcart.asia/rise-minimarkets-indonesia
22 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 25: Drivers of purchase for Traditional Trade and Modern Trade channels
ri ers o Warungs 10% 14% 6% 6% 34% 4% 3% 23% rc ase Assortment Wet arkets 16% 19% 18% 3% 9% 18% 12% 5% Availability Convenience Street Hawkers 15% 15% 11% 3% 24% 12% 12% 8% Opening on-chain Individual Hours 23% 23% 15% 4% 3% 18% 1% Electronic Stores 13% rice romotion inimarkets 5% 7% 8% 14% 25% 3% 5% 33% Service Location Supermarkets 14% 14% 5% 7% 33% 6% 3% 18%
Hypermarkets 19% 19% 16% 6% 8% 18% 10% 4%
Brand Stores 11% 13% 16% 10% 9% 20% 8% 13%
Electronic Chain 29% 20% 15% 3% 7% 17% 8% 1% Stores
Source: Deloitte Consumer Insights survey (2017)
Figure 26: Preference for Traditional Trade and Modern Trade channels by city
annel re erence Bandung 43% 57% radi ional rade
odern rade Jakarta 23% 77%
akassar 45% 55%
edan 45% 55%
Surabaya 42% 58%
Source: Deloitte Consumer Insights survey (2017)
Figure 27: Preference for Traditional Trade and Modern Trade channels by product category and city
Beverages Clothing and Confectionery Household ackaged ersonal Hygiene Tobacco Footwear Cleaning roducts Food roducts Channel preference
Bandung 53% 47% 56% 44% 52% 48% 43% 57% 50% 50% 41% 59% 70% 30% Traditional Trade
Jakarta 35% 65% 15% 85% 36% 64% 15% 85% 41% 59% 13% 87% 57% 43% odern Trade
akassar 54% 46% 36% 64% 58% 42% 24% 76% 55% 45% 27% 73% 86% 14%
edan 51% 49% 41% 59% 49% 51% 38% 62% 56% 44% 40% 60% 80% 20%
Surabaya 62% 38% 31% 69% 41% 59% 44% 56% 57% 43% 41% 59% 89% 11%
Source: Deloitte Consumer Insights survey (2017)
23 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Filling the (virtual) shopping carts On average, the size of shopping carts for Beverages, Packaged Food and Household Cleaning Products at Modern Trade outlets has increased since 2016 (see Figure 28).
One trend to note, however, is the decreasing shopping cart size for Personal Hygiene Products. This could be due to fact that consumers are turning to e-commerce channels for their personal hygiene products, such as skincare products and cosmetics from popular brands such as Innisfree. For consumer products and retail companies, this is a crucial point: Indonesian consumers mix and match their choice of purchasing channels, and companies will need to develop integrated and complementary multi-channel strategies in tandem.
Figure 28: Changes in average shopping cart size
Average shopping cart size per visit, ID
–10.4% +24.6% +4.2%
+9.7%
2016 2017 2016 2017 2016 2017 2016 2017 Beverages ackaged Food ersonal Hygiene roducts Household Cleaning roducts
Source: Deloitte Consumer Insights survey (2016 and 2017)
24 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
5. Communication channels
In Store Promotions are important While TV remains the most preferred source of information for products and brands amongst Indonesian consumers, In Store Promotions have also risen in influence (see Figure 29). For many consumer products and retail companies, providing the right in-store experience can be a meaningful way to encourage trial purchases and to cross-sell across product lines.
This is especially the case for Audio and Visual Electronics Products, Clothing and Footwear, Personal Hygiene Products as well as Household Appliances (Major) and Household Appliances (Small), where consumers prefer to experience the look and feel of the products before making a purchase. As Indonesian consumers are gener all bargain hunters and enjoy searching for discounts and promotions, In Store Promotion activities should also tap into this psyche.
Digital is about trust Although word of mouth channels, including Friends and Colleagues, as well as Relatives, rank lower in terms of preference, their collective effect is significant, particularly when compounded with other sources such as Digital Media and its accompanying viral effects. For product categories where frequent information updates on the latest fashion trends are paramount, such as Clothing and Footwear, and Audio and Visual Electronic Products, digital information sources also become relatively more important (see Figure 30).
Digital Media is also especially important in reaching Indonesia’s high income consumers. These consumers not only possess a higher tendency to search for product information through these channels, but also purchase more high value, high tech and specialty products online. High income consumers are also increasingly cautious and sceptical of traditional information sources that tend to be provided directly by product companies, preferring to seek out third party opinions instead (see Figure 31).
Figure 29: Preferred sources of information
TV
In Store romotion Friends and Colleagues
elatives
Outdoor Ads
Digital edia
Experts
rint Ads
adio
Source: Deloitte Consumer Insights survey (2017)
25 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 30: Preferred sources of information by product category
o rces o in orma ion TV Beverages 26% 20% 23% 18% 5% 2% 4% In Store romotion Confectionery 27% 22% 24% 16% 5% 1% Friends and Colleagues ackaged Food 28% 20% 23% 20% 5% 1% elatives ersonal Hygiene Outdoor Ads 27% 24% 20% 16% 5% 2%2% roducts Digital edia Experts Clothing and Footwear 15% 28% 26% 18% 3% 6% 2% rint Ads Household Cleaning adio roducts 28% 24% 18% 19% 5% 2%2% Tobacco 25% 16% 25% 19% 8% 2%
Audio and Video 7% Electronics roducts 24% 25% 17% 16% 4% 3%3%1% Household Appliances a or) 25% 26% 15% 15% 8% 3%3% 4%1% Household Appliances Small) 25% 26% 16% 17% 6% 1%3% 4% 2%
Source: Deloitte Consumer Insights survey (2017)
Figure 31: Preferred sources of information by monthly household income level
on l o se old income le el I million o rces o in orma ion Less than 1 25% 22% 25% 19% 4% 2% TV In Store romotion 1-2 26% 22% 23% 19% 6% 1% Friends and Colleagues 2-3 26% 24% 21% 17% 6% 2% 2% elatives Outdoor Ads 3-5 26% 23% 21% 17% 6% 2% Digital edia 5-7.5 25% 22% 20% 19% 6% 2% 2% Experts rint Ads 7.5-10 25% 25% 20% 16% 6% 3% 2% adio ore than 10 25% 25% 20% 16% 4% 4% 2% 3%
Source: Deloitte Consumer Insights survey (2017)
26 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
TV vs. Digital: The battle begins Although the overall influence of Digital Media channels – as compared to TV – on the Indonesian consumer remains relatively limited at this point in time, it is growing in importance, especially for consumers considering the purchase of higher priced alternatives. This trend is particularly pronounced for certain product categories, such as Beverages, Confectionery, Personal Hygiene Products, as well as Household Appliances (Major) and Household Appliances (Small) (see Figure 32).
Figure 32: TV vs Digital as preferred source of information among consumers choosing different price options
Beverages Confectionery
Lower priced Lower priced
Higher priced Higher priced
Packaged Food Household Cleaning Products
Lower priced Lower priced
Higher priced Higher priced
Clothing and Footwear Personal Hygiene Products
Lower priced Lower priced
Higher priced Higher priced
Tobacco Audio and Video Electronic Products
Lower priced Lower priced
Higher priced Higher priced
Household Appliances (Major) Household Appliances (Small)
Lower priced Lower priced
Higher priced Higher priced
o rces o in orma ion TV Digital edia
Source: Deloitte Consumer Insights survey (2017)
27 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
6. e-Commerce
High growth, even higher potential Figure 33: The rise of online shopping Driven by increasing mobile data usage, smartphone penetration and Internet penetration levels, this ercen age o res onden s i rior online s o ing e erience edition of the survey revealed a significant increase in the percentage of respondents with prior online shopping experience. Last year, only 17% reported 2016 having shopped online, but this figure has since more 2017 than doubled to 42% this year, indicating rapid growth (see Figure 33).
This is likely to be only the beginning. Indonesia’s e-commerce market, expected to reach a value of USD 130 billion by 20205, is the largest in Southeast Asia. With signs of accelerating growth, Indonesia may just be on the cusp of realising the full potential of its e-commerce industry.
es o To capitalise on this opportunity, companies must first understand what their consumers want from Source: Deloitte Consumer Insights survey (2016 and 2017) their online shopping experience. For Indonesian consumers, the drivers of online purchase appear to involve considerations on the dimensions of Topping it off Practicality, Price and Product Range (Availability) Launched in February 2009, Tokopedia is now (see Figure 34). one of Indonesia’s most successful and popular e-commerce websites. It provides an online Many Indonesian consumers, given their fixation platform for sellers to market and distribute on bargain hunting, relish the opportunity to nab their products, connecting them to logistics deals online that are not available elsewhere. agents and payment networks, such as BCA Numerous companies have begun to capitalise on this KlikPay, ClickPay Mandiri, KlikBCA and Mandiri observation to drive growth, for instance, by offering e-Cash, to facilitate transactions. coupons and price comparison features to boost the shopping experience and increase site traffic. Recently, Tokopedia announced the launch of its Mitra Toppers programme, a partnership with Overall, Clothing and Footwear, Tickets (including lenders to support e-commerce businesses in airline and movie tickets), and Personal Hygiene raising capital to develop their ventures. Products were the top three product categories purchased through online channels. There are, Tokopedia is also the first Internet company in however, some variances across the different income Southeast Asia to receive trust funds amounting levels for categories such as Electronic Products (see to USD 100 million from Softbank and Sequoia Figure 35). Capital in 2014, the largest investment in a Southeast Asian start-up to date.
Source: Tech in Asia, Tokopedia.com
5 “Indonesia will be Asia’s next biggest e-commerce market”. TechCrunch. 29 July 2016. https://techcrunch.com/2016/07/29/indonesia-will- be-asias-next-biggest-e-commerce-market
28 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 34: Drivers for online shopping
ractical
rice roduct ange Availability)
eliable eview
romotion
Source: Deloitte Consumer Insights survey (2017)
Figure 35: Breakdown of online purchases by monthly household income level
on l o se old income le el I million rod c ca egories
Less than 1 90% 10% Clothing and Footwear Electronics 1-2 44% 29% 13% 5% 7% 2% roducts Tickets 2-3 54% 12% 10% 3% 15% 2% 2% Books ersonal Hygiene 3-5 48% 18% 13% 6% 7% 4% 3% roducts ackaged Food 5-7.5 42% 18% 19% 6% 6% 3%1%4% Household Cleaning roducts 7.5-10 32% 19% 16% 9% 14% 2% 3% 3% Confectionery Beverages ore than 10 31% 12% 17% 8% 11% 5% 5% 8% 2% Others
Source: Deloitte Consumer Insights survey (2017)
29 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Emerging market players Although Indonesia’s e-commerce market remains nascent at this point in time, a number of emerging market players can already be identified. The top players cited by respondents included Lazada (30%), Traveloka (17%), and Tokopedia (16%). These players exhibit strengths in different product categories: Traveloka commands a significant share in the purchase of travel tickets, while Tokopedia is favoured for Confectionery, Packaged Food, Personal Hygiene Products and Household Cleaning Products. Lazada is preferred for Clothing and Footwear, as well as electronic products, while Bukalapac and Tokopedia seem to be winning in the category of Books. On the other hand, Elevenia’s relative position is more focused on grocery items such as Beverages, Confectionery and Packaged Food (see Figure 36).
Figure 36: Most popular e-commerce platforms by product category e ommerce la orms
Beverages 50% 25% 25% Bli Bli Bukalapak Confectionery 14% 9% 18% 9% 50% Elevania
Lazada ackaged Food 9% 9% 9% 4% 5% 64% OL ersonal Hygiene roducts 3% 2% 4% 43% 2% 45% 1% Toko Bagus
Tokopedia Clothing and 3% 10% 5% 38% 2% 1% 17% 24% Footwear Traveloka Household 5% 18% 4% 22% 4% 11% 36% Zalora Cleaning roducts 1% 1% Tickets 2% 2%2% 91% 1%
Books 2% 52% 1%3% 1% 8% 33%
Audio and Video 2% 25% 3% 49% 4% 16% 1% Electronics roducts
Household 3% 23% 46% 11% 17% Appliances a or)
Household Appliances Small) 6% 13% 4% 53% 4% 3% 17%
Source: Deloitte Consumer Insights survey (2017)
30 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Deterrents differ by city Across all income levels, the top deterrents to online shopping include concerns over security, lack of knowledge, and perceived difficulties in returning or exchanging products (see Figure 37).
In order to address these barriers to adoption, however, localised approaches may be necessary as the various cities face their own unique sets of challenges (see Figure 38). For example, the need to invest in consumer education is more pronounced in Medan and Surabaya. Consumers in Bandung, however, are more price- sensitive, while those in Makassar are more concerned about the difficulties they face in returning or exchanging products.
In Jakarta and Makassar, consumers are also deterred by long delivery times. To overcome this, e-commerce players are increasingly looking to collaborate with logistics partners to offer next-day delivery options. Examples include Bukalapak’s collaboration with GoJek, and Tokopedia’s partnership with Go Send and Grabexpress. Other players have also opted to set up their own delivery services instead, with Lazada launching its own delivery service, Lex, to address this need. Other innovative solutions, including automated parcel lockers such as PopBox, are also being explored in order to bridge the chasm with consumer expectations.
Low credit card penetration rates also remain a key barrier to e-commerce adoption in Indonesia. With only 6.6% of the population having access to credit cards6, some providers, such as Krevido, have also developed solutions to extend credit to consumers without credit cards, for instance, by conducting some basic background checks (see “No credit card? Get Kredivo”).
For consumer products and retail companies looking to expand their e-commerce presence in Indonesia, now is the time to identify and prioritise specific regions or cities for growth, as well as customise strategies and campaigns to accelerate success. This is particularly crucial for product categories where the market is becoming increasingly saturated and competitive.
Other than e-commerce, digital innovation also provides companies with a way to address challenges, strengthen competitive advantages and leverage new growth opportunities (see “Craving for Korea” and “GO-JEK just keeps going”).
No credit card? Get Kredivo Kredivo is an instant credit solution for online shopping that gives consumers the convenience to buy now and the option to pay later within 30 days without interest, or in three, six or 12-month instalments. Operating through the Kredivo Andriod app, it is currently supported by PT BFI Finance Indonesia Tbk, a financial company based in Indonesia and the lender for all Kredivo loans.
In contrast to traditional instalment programmes, which were available to the approximately 6 million credit card holders in Indonesia, Kredivo provides everyone with access to instalment programmes, whether they possess a credit card or not, as long as they are between the ages of 18 and 60 and earn more than IDR 3 million a year.
Using information posted on social media sites such as Facebook, LinkedIn and Instagram, Kredivo conducts background checks on their customers and evaluates up to 1,000 variables in just 24 hours. Once their application is approved, customers can gain access to 40 e-commerce sites such as Bhinneka.com, Jualo. com and Wellcomm Shop.
Source: Finaccel.com, Kredivo.com, Tech in Asia
6 Indonesia Country Report. Lafferty Global Research.
31 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Craving for Korea Elevenia is an online, open marketplace based in Indonesia with over 2 million members, 30,000 sellers and more than 4 million products that is attempting to create its niche and differentiate itself with global products and unique services.
With surging demand for global products, Elevenia launched its “Titip Beli dari Korea” (literally translated as “Help Me Buy from Korea”) offering. Through this new offering, consumers can obtain their desired Korean products within less than a month. This service proved to be so popular on its launch that Elevenia received orders for 10,000 packets of a Korean branded instant noodle in just one day.
In addition, Elevenia also created a “Korea Avenue” section that focuses on selling various Korea-related products including fashion, accessories, beauty, food and K-pop items.
Source: Elevania.com
GO-JEK just keeps going Launched in July 2014, Go-JEK started with a call centre and a fleet of 20 motorcycle riders as a pick-up and delivery service. Often considered a successful competitor of Uber, it also provides motorcycle taxi services for Indonesians and is now a leading provider of on-demand transportation that operates through mobile phone apps.
The success and evolution of Go-JEK reveal some insights into how specific business challenges in Indonesia can provide opportunities for digital innovation. For Go-JEK, its critical success factors include its success in integrating separate offline competencies into a seamless digital experience for consumers; gaining consumer loyalty and trust with personalisation; providing convenience and transparency; and accumulating a substantial amount of consumer information and insights through its digital channels to drive future growth.
Integrating separate offline competencies into a seamless digital experience With its infamous traffic jams, Indonesia presents major execution challenges for companies when it comes to last mile delivery services. In this aspect, GO-JEK provides a solution for digital retailers and e-commerce companies who are looking to differentiate themselves from the competition with attractive shipping options.
But Go-JEK has also been able to leverage its competencies in delivery to expand its suite of services. GO-Food and GO-Mart, for example, are its food delivery and convenience store shopping arms respectively, enabling consumers to order products through its mobile interface and then to receive the delivery via GO-JEK. GO- Massage, on the other hand, delivers on-demand massage services.
Gaining consumer loyalty and trust with personalisation Many Indonesian consumers use GO-JEK services to purchase and receive products (such as pizza) despite the fact that many of these retailers (pizza restaurants) operate their own delivery services. Two reasons have been cited for this. Firstly, the consumer’s GO-JEK app already contains all the necessary personal location-based data, and thus, the consumer does not need to repeat this information. Secondly, GO-JEK offers a digital wallet service, known as GO-Pay, which enables consumers to conveniently pay for products and delivery. Thirdly, GO- JEK offers transparent pricing and location, as well as real-time support, which enables it to gain the trust of the consumer.
Accumulating consumer information and insights Through its digital platforms, GO-JEK is constantly accumulating substantial amounts of customer information, including their demographics, address, product preferences and payment preferences. By leveraging this data, GO-JEK can capitalise on future opportunities to cross-sell different products to its customers, and conduct micro-segmentation to target, engage and advertise to its consumers.
Source: GoJek.com, primary discussions, and Deloitte analysis
32 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 37: Deterrents for online shopping by monthly household income level
on l o se old income le el I million 1% e erren s Don’t Know How Less than 1 30% 25% 13% 10% 8% 7% 6% 1% 1% ot Secure Delivery Time 1-2 23% 19% 5% 15% 10% 9% 14% 2%2% Difficult to 1% 1% Exchange or eturn 2-3 25% 19% 8% 14% 8% 6% 15% 3% o Credit Card Limited roduct ange Availability) 3-5 14% 25% 6% 19% 8% 10% 9% 5% 2%2% ore Expensive 1% 1% 1% rice 5-7.5 18% 25% 6% 14% 11% 9% 11% 3% Lack of Trust oor Quality 1% 1% Cannot See 7.5-10 13% 27% 14% 17% 3% 8% 10% 4% 2% roduct Directly 1% 1% Bad Experience ore than 10 25% 25% 12% 20% 3% 8% 4% 1% Cannot Choose roduct ust Install Application Source: Deloitte Consumer Insights survey (2017) Troublesome
Figure 38: Deterrents for online shopping by city
1% 1% e erren s Don’t Know How Bandung 12% 24% 2% 15% 5% 7% 26% 3% 2% 2% ot Secure 1% Delivery Time Jakarta 26% 26% 11% 13% 9% 8% 3% 3% Difficult to 1% 1% Exchange or eturn akassar 6% 23% 13% 33% 1% 12% 9% o Credit Card Limited roduct edan 32% 14% 2% 13% 18% 6% 15% ange Availability) 1% ore Expensive rice Surabaya 31% 21% 1% 4% 8% 7% 15% 3% 7% 2% Lack of Trust oor Quality Cannot See roduct Directly Source: Deloitte Consumer Insights survey (2017) Bad Experience Cannot Choose roduct ust Install Application Troublesome
33 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Looking ahead
In this fourth edition of the Deloitte Consumer Insights report, we explored a number of macroeconomic and technological trends influencing the consumption preferences and buying behaviours of consumers in Indonesia. We also took a closer look at consumption patterns for specific product categories, and examined the impacts of digital technology on consumer behaviour, as its influence on consumers – both as a source of information as well as a purchasing channel – continues to grow.
There are three key takeaways. Firstly, with the rise of affluence, Indonesian consumers are becoming increasingly optimistic, buoyed by signs of rapid economic growth that will increase their employment prospects and, subsequently, income. This trend was especially pronounced in the middle to high income households, and has also translated to a greater willingness to increase spending in basic necessities. For incumbent companies and new entrants alike, making the right strategic choices on where to play in terms of product offerings and product range will determine the addressable market and growth potential of their businesses.
Secondly, several distinct patterns of consumer preferences and behaviours have been identified in this survey, which imply the need for customisation across different product categories. For instance, certain product categories provide opportunities to offer premium product lines and segmented pricing, while others require mass marketing for low to middle income consumers. In order to capitalise on these opportunities, companies will face a greater need for the competitive deployment of consumer insights across different areas of their businesses, including product development and pricing strategy.
Finally, and perhaps most importantly, we witnessed the rise of Indonesia’s digital market. Given Indonesia’s large population, the sheer magnitude of its potential e-commerce market cannot be ignored. With signs of accelerating growth and the rise of first-movers within the market, Indonesia looks to be on the brink of an e-commerce boom.
The bottom line is that companies who wish to capitalise on Indonesia as the next digital destination will need to focus on their fundamentals and innovation opportunities. They will need to gain an in-depth understanding of the product categories that are best served by digital channels, and work to tackle localised barriers to adoption in their priority markets and segments. But above all, they must focus on cultivating trust and mind share with their consumer sooner, rather than later, in the game – before market saturation inevitably sets in.
34 Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Contact us
Researched and written by:
Eugene Ho Stanley Song Executive Director, Consulting Director [email protected] Consulting +65 6232 7133 +65 6232 7303 [email protected]
Southeast Asia C&IP practice
Southeast Asia and Singapore Myanmar Eugene Ho Aye Cho [email protected] [email protected] +65 6232 7133 +65 6800 2255
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Indonesia Vietnam Xenia Ubhakti Nguyen Vu Duc [email protected] [email protected] +62 21 2992 3100 +84 4 6288 3568
Malaysia Kavita Rekhraj [email protected] +60 3 7610 9006
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