The Indonesian consumer packaged goods (CPG) market has steadily grown over the past decade in view of rising purchasing power and improving living standards among the urbanising population. Demand of consumer durables including home & kitchen electronic appliances, smartphones and gadgets, as well as fast moving consumer goods (FMCGs) have both witnessed a steady growth, though in 2015, a weakening economy and inflationary pressures somewhat dampened the consumer sentiment, driving down demand.
Better times are expected ahead as consumers are seemingly more optimistic about spending, as per Bank Indonesia’s monthly survey in November, which showed consumer confidence index improve by 4.4 points to 103.7, crossing the 100-mark for the first time since August 2015.
As demand for CPGs rise amidst tightening competition from local and foreign players in the wake of AEC, it is imperative for marketers to understand better, the evolving tastes and preferences of Indonesia’s large middle class consumer segment. From online marketplaces to social media selling, internet connectivity is fuelling a fundamental change in the way consumers buy CPGs.
As youth become more armed with greater disposable incomes, women become more independent in their decision making and netizen transact more and more online, it is important that businesses study carefully these Youth, Women & Netizen (YWN) as core segments of the consuming class. In order to understand their anxieties and desires, needs and demands as well as to assess their financing spending behaviour, choice of brands and preferences, MarkPlus has been conducting YWN Surveys for five years now. Some of the interesting insights from 2015 study are as follows:
Women – Key decision-makers for durables
It is largely known that women are key household financial managers as well as decision-makers for most household FMCG products, including groceries, staples, and toiletries. However, based on the 2015 YWN survey conducted by MarkPlus Insight across 18 cities in Indonesia earlier this year, it seems that women in Indonesia are also self-reliant in terms of determining their product preferences for durables including furniture and home electrical appliances. Among the 5,728 total respondents – out of which 64.7% were married – 57% of the women aged between 20 and 49 years old were primary decision makers while buying household electronic items by themselves, while 22.6% of them decided with the help of spouse/partner. Even for furniture, 44% of the women took the decision on their own, compared with 26% with the help of spouse/partner.
In fact, for their personal gadgets like smartphones and tablets, women in Indonesia seem to be well-informed to make their own choices, as up to 70% of them take their own decision, while 15% decide on their gadgets with the help of their partners.
The results do not vary any significantly based on social economic classes, which means women across all SECs, from lower middle income groups to affluent, are becoming increasingly independent to not only determine their own choices, but also key decision-makers for household durables.
Brand Reputation is Top Consideration
Source: MarkPlus Insight Women Study 2015, n=5,728
Further, we also tried to determine the top consideration factors for women consumers when purchasing consumer durables and FMCGs. For consumer durables including home appliances and electrical and electronic gadgets, Indonesian consumers consider brand reputation to be the most important factor, followed by product features, and promotion. More than half of all respondents said brand reputation was their top consideration when buying a TV, Fridge, or AC for household. Product features were slightly more important for ACs, compared with more commonplace electronics such as TV or Fridge, while brand reputation for ACs was the least important, among the three items.
Furthermore, for FMCGs as well, women pay close attention to brands. This points to an increasing level of affinity for brands in the FMCG sector, though it may not be particularly so for a particular brand and rather a number of brands in within the same product category. This explains the stiff competition among several strong brands in FMCGs, from foreign as well as local players. It also points to increasing ability of upper middle class and emerging affluent consumers to pay a premium for better quality as they are more drawn to higher priced goods.
Minimarkets – Expanded service offerings
Indonesian consumers are also increasingly shopping for their staples at nearby convenience stores, or minimarkets. Such stores which are mostly part of chains, often located in residential dwellings are preferable to consumers due to proximity and convenience. More and more such chain stores are springing up each year, prominent ones including Indomaret and Alfamart, the two arch-rivals which have expanded to total just under 10,000 stores each throughout all major cities in Indonesia. MarkPlus Youth Study shows how minimarkets are the most popular channels to buy daily need items, across 18 cities in Indonesia, though traditional markets are still preferred as well.
Source: Youth Study 2015, n=6,798
Not only to buy groceries, but consumers increasingly frequent these minimarkets for services including mobile recharges, water and electricity bill payment, cable TV, taxes, financial credit even for buying train tickets. Indomaret, for example, says it offers 150 transaction payments, even partnering with universities for payment of student fees. The expanded service offerings have certainly added to their appeal in line with consumers’ changing lifestyles and needs. Their rapid growth has however created some friction from smaller wet market stores which is why there are regulations which prevent establishment of minimarkets closer to existing traditional markets.
Even as consumers stick with existing retail channels, the emergence of online grocers – currently still at infancy – is also capable of changing market dynamics in the coming years, as urban dwelling consumers could be drawn towards saving time and home delivery.