New era of growth and transformation
Modern Indonesia is being shaped by sizeable forces – some old, some new – and to understand their effects is to begin to appreciate the changing expectations and opportunities of the Indonesian consumer market.
This is a land of contrasts and contradictions. There is tension between young and old, modernity and tradition, aspiration and risk-aversion. Overwhelmingly, though, this is a market being driven forward by the youth of its population – among the youngest in the region – and by the energy of its people.
There is growing wealth in Indonesia; many millions of people are enjoying their first taste of discretionary spending, as they move from subsistence living to stability and the ability to plan. The ranks of the middle classes, meanwhile, are expanding apace, and are forecast to represent between 130 and 140 million people by 2030. At the top end of the income spectrum, a small but significant group of super rich are living truly luxurious lives.
This contrast, not just between rich and poor but also between the country’s rich heritage and the onslaught of modern life, is evident all over the country.
Cybercafés, designer boutiques and traffic jams are juxtaposed with the simplicity of life for those who remain reliant on the land and the sea for their livelihoods. Tiny street-side warungs – family-run shops often crafted from wood – still have a place in a retail landscape that runs from wet markets to gleaming malls.
Urbanization is intensifying, as Indonesia’s cities act as beacons of opportunity; the number of Indonesians living in urban areas is expected to reach 71 percent of the total population, or 209 million people, by 2030. And while city dwellers have much in common, there are still significant distinctions between the country’s urban centers. Jakarta is the country’s financial powerhouse, a cosmopolitan center with a worldly population, while the city of Yogyakarta, just an hour’s flight away, has a distinctly different flavor, retaining greater closeness to Javanese heritage and traditional values.
But differences such as these have always been synonymous with Indonesia. Diversity runs deep through this nation, which unites 17,000 islands, 700 languages and dialects, and 300 ethnicities.
What’s exciting now is the sense that Indonesia is entering a new, pivotal stage in its development, and that the consumer and brand landscape is, therefore, on the cusp of tremendous change.
Just five years ago, building a brand in Indonesia tended to involve two steps: first, ensuring national distribution of the product, and second, achieving widespread visibility on television. Those days are gone, and a very different dynamic is at work.
Consumers are now far more sophisticated and selective; they expect a more complex relationship with the brands they make part of their lives, and they are being influenced by an ever greater range of media – often using several at the same time.
For the businesses seeking to build brands here, these winds of change signal a great opportunity. Not only do people have more money to spend, they are buying a greater range of products and are increasingly interested in brands. They’re also increasingly likely to become brand advocates; research shows that consumers are 29 percent more likely to recommend a brand to family and friends than they were just three years ago. Kantar Worldpanel data shows that consumers are shopping less frequently than before, but for a more varied range of goods. In 2013, the average Indonesian family bought from 45 different product categories over the course of the year – up from 43 just a year earlier.
With an increasingly alluring consumer market, however, also comes more intense competition from newcomers. In 2013 alone, there were 173 new food brands launched in the country, 61 new drinks brands, and 26 new names in personal care. This all makes the task of a brand owner more challenging, as they seek to be heard above the growing chorus, but it is also more complicated. Brands need to ask a new set of questions: How well does the brand meet the functional needs of consumers? Are they communicating the brand’s story in a meaningful way? And how does this combination of story and function make people feel?
To many international brand managers, and to the most successful and nimble brands in Indonesia, these are questions they are already addressing, but they are especially important to appreciate now. Indonesian people are seeking out the brands that help them embrace modernity, progress and technology - but without having to sacrifice their heritage and spiritualism.
Just four years ago, a BrandZ™ study into what was setting the strongest brands apart from the competition found that saliency played the dominant role in consumer choice – essentially, the ease with which a brand name sprang to mind was the key to its success. Now, however, the role of saliency has declined significantly, and it is a brand’s ability to make a meaningful connection with a consumer that matters most. It is no longer enough to be visible; brands must have something relevant to say after they get noticed.
Advertising has tremendous power to help consumers identify the brands and products that can enrich their lives. But to advertise successfully in Indonesia means achieving a delicate balance between reflecting cultural values that resonate across a diverse nation, and at the same time being sufficiently creative to stand out in a cluttered advertising environment.
Successful brands – both local and international – are telling stories that reach across the diversity of modern Indonesia, and are helping people navigate the tensions they manage as their lives change.
Few Indonesian brands have established a global presence, but those pioneering names expanding across the region are doing so from a strong position in this complex and demanding home market. More local brands will, in the coming years, start to realize their regional and global aspirations.
There remains a sizeable, long-term opportunity for brands to grow in Indonesia. While personal wealth is greater and more widely distributed than it’s ever been before, affluence is still a relative concept, and much potential remains unmined.