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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
03
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
ForewordIndonesia 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 HoSoutheast Asia Industry LeaderConsumer & Industrial Products
04
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.
MethodologyThe 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 to audio visual products, as well as related accessories and gadgets)
• Beverages • Clothing and Footwear • Confectionery • Household Appliances (Major) (refers to non-portable appliances, such as refrigerators and washing machines)
• Household Appliances (Small) (refers to portable or semi-portable appliances usually placed on counters or other platforms, such as microwave ovens and rice cookers)
• Household Cleaning Products • Packaged Food • Personal Hygiene Products • Tobacco • Transportation
05
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
50%50%
Demographics of survey respondents
Geographical distribution of survey respondents
15-24
25-34
35-49
50-64
Age group, years
36%
16%
29%
19%
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
Monthly household incomelevel, IDR million
1%
1%
6%
29%
30%
11%
22%
Less than 11-22-33-55-7.57.5-10More than 10
Monthly householdincome level,IDR million
6%
3%
5%
4%
8%
28%
9%
26%
30%
19%
16%
11%
13%
14%
18%
15%
13%
18%
19%
21%
18%
10%
16%
21%
19%
12%
13%
13%
11%
12%
5%
41%
9%
3%Surabaya
Jakarta
Makassar
1%
Bandung
Medan
Age distribution of survey respondents
Monthly household income distribution of survey respondents
Monthly household income distribution by city
Gender distribution of survey respondents
60%10%
10%
10%
10%Medan
Jakarta
Makassar
Surabaya
Bandung
06
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
1. Overall consumer sentiment
Optimism on the rise Overall consumer sentiment in Indonesia has been consistently positive over the last three years with only marginal movements: 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).
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 President Joko Widodo has boosted confidence and employment prospects.
Figure 2: Breakdown of positive consumer sentiment
1 Population Estimates and Projections. The World Bank.
Source: Deloitte Consumer Insights survey (2016 and 2017)
Source: Deloitte Consumer Insights survey (2015, 2016, and 2017)
Optimistic
Moderate
2017
2016
57%
50%
24%
35%
Figure 1: Overall consumer sentiment on economy
83% 85% 81%
17% 15% 19%
2015 2016 2017
Positive Negative
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Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 3: Consumer sentiment by city
Figure 4: Minimum wage increase by city
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).
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
Source: Statistics Indonesia (Badan Pusat Statistik)
Source: Deloitte Consumer Insights survey (2017)
59%
57%
78%
45%
51%
21%
24%
20%
28%
27%
20%
19%
27%
22%Surabaya
Makassar
Bandung
Jakarta
2%
Medan
Level of consumer sentiment
OptimisticModeratePessimistic
150
203
156
153
204
171
233
174
171
229
185
252
188
190
248
2017
2016
2015
Monthly minimum wage, USD
Surabaya
Makassar
Bandung
Jakarta
Medan
08
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Prudence persistsConsumer 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
Source: Deloitte Consumer Insights survey (2017)
Level of consumer sentiment
OptimisticModeratePessimistic23%
24%
22%
20%
22%
13%
15%
47%
26%
24%
26%
24%
23%
18%
30%
50%
54%
54%
54%
64%
67%
Monthly household incomelevel, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
09
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 6: Overall trend among Indonesian consumers with positive sentiment in 2017 vs. 2016
Figure 7: Correlation between Indonesia consumer sentiment and plans for increased spending in 2017
Source: Deloitte Consumer Insights survey (2016 and 2017)
Source: Deloitte Consumer Insights survey (2017)
26%
74%
NoYes
53% 49%
33%28%
10%
14%
4% 9%More than 50%
Less than 10%
26-50%10-25%
Intended increase in spending
Plans for increasedspending
Perc
enta
ge o
f pop
ulat
ion
plan
ning
to in
crea
se s
pend
ing
Perc
enta
ge o
f res
pond
ents
2017 2017 2016
83%
65%
85%
17%
35%
15%Moderate
Pessimistic
Optimistic
No/Unsure
Yes
Plans for increasedspending
10
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
2. Spending patternsInflection point lingersFood and beverage items accounted for 38% of overall monthly expenditures, with the remaining 62% accounted for by non-food items (see Figure 8). Across all income segments, there was an overall increase in monthly household expenditure levels ranging from 15% to 34% – or an overall average 25% increase in monthly household expenditures – from last year (see Figure 9).
Despite this trend, the inflection point observed in previous editions of this survey continues to linger. This inflection point, identified as the monthly household income level of IDR 5 million, remains a reliable indicator of the point at which consumers make the shift from prioritising basic needs to making a greater number of discretionary purchases.
Over the last three editions of the survey, we have observed a steady increase in consumer spending for the Beverages and
By monthly household income level, IDR millionOverall
More than 10Less than 1
Non-fooditems62%
ElectronicsProducts~13pp
Welfare andLeisure~19pp
Housing andTransportation~5pp
BasicNecessities~16pp
Food andbeverageitems38%
1-2 2-3 3-5 5-7.5 7.5-10
Household Cleaning ProductsPersonal Hygiene ProductsCommunication and MediaHousing and Utilities
TransportationCredit Card InstalmentsLesiure and HolidaysWelfare and Savings
Audio and Video ElectronicsProductsHousehold Appliances (Major)Household Appliances (Small)
BeveragesPackaged FoodTobaccoClothing and Footwear
Percentage point (pp) gap between
highest and lowest household
income levels
5%
33%
5%
5%
5%
5%
5%
9%
7%
3%4%4%4%4%2%
6% 6% 5% 4% 4% 4% 3%
30% 30%34% 35%
32%34%
18%
5% 5%
8% 5%
4%3%
2%
6% 4%
5%5%
6%5%
5%
7%6%
5%4%
4%4%
3%
6%6%
6%
4%
4% 4%
3%
6%
6%
5%
5%5% 5%
5%
11%15% 7%
9%
5%8%
6%
9% 8%9%
6%
7%7%
8%
4%
5%
2%1%
8%
4%2%
4% 4%
6%
8%
6%
3%4% 5%
5%
10%
10%
2%3% 3%
8%
3%
7%
6%3% 3% 4% 6%
2%
12%
2% 1% 1% 2% 2% 2% 4%1%
1%
Increase in percentage contributions between highest and lowest household income levels
Decrease in percentage contributions between highest and lowest household income levels
Source: Deloitte Consumer Insights survey (2017)
Packaged Food categories. Between 2015 and 2016, there was a 6% increase in the share of expenditure for these categories, and a 5% increase between 2016 and 2017. This in line with overall macroeconomic trends such as a growing Indonesian middle class, with the growth of incomes amongst low and middle class households enabling them to increase their expenditures in these areas in order to obtain greater quantities and varieties of products (see Figure 10). The overall distribution of expenditures between the three main product clusters – Basic Necessities, Welfare and Leisure, as well as Housing and Transportation – remained relatively constant, with a slight increase in the Basic Necessities cluster (from 33% in 2016 to 38% in 2017) and a marginal decrease in the Welfare and Leisure (from 15% to 13%) and Housing and Transportation (from 20% to 17%) clusters (see Figure 11).
Figure 8: Breakdown of monthly household expenditures
11
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
Monthly householdincome level, IDR million
Monthly household expenditure level, IDR million
Surplus/Deficit Index*
Basic necessities
are prioritised
Discretionary spending increases
2015
2016
2017
1.101.14 1.40
3.70 4.20 4.90
8.40
4.90 4.96 6.10
5.90 6.30
4.30 4.76 5.50
3.20
3.302.50
1.701.77 2.40
Figure 9: Change in monthly household income and expenditure levels
Figure 10: Overall spending trend on Beverages and Packaged Food as part of total expenditure over 2015-2017
*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)
Source: Deloitte Consumer Insights survey (2015, 2016, and 2017)
27%
33%
38%
Packaged FoodBeverages
2015 2016 2017
5%
33%27%
6%5%
22%
12
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 11: Allocation of monthly household expenditure across the three main consumer product clusters
Packaged Food are the popular goodBy 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
5%
33%
4%
4%
3%
Basic Necessities Welfare and Leisure
Leisure and Holidays
Credit Card Instalments
Welfare and Savings
Packaged FoodBeverages
7%
9%
Housing and Transportation
Transportation
Housing and Utilities
38%
11%16%
Source: Deloitte Consumer Insights survey (2017)
Source: Deloitte Consumer Insights survey (2016 and 2017)
30%
6%5% 5%
4% 5% 5%4%
2%
PackagedFood
300
Clothing andFootwear
43
PersonalHygieneProducts
42
HouseholdCleaningProducts
38
Tobacco
36
Beverages
36
HouseholdAppliances
(Major)
28
Audio VideoElectronicsProducts
22
HouseholdAppliances
(Small)
13
10%
14%
12%13%
11%
14%
18%18%
15%
Planned increase (2016)
Actual increase (2017)
Ratio of actual (2017) to planned (2016) increase in expenditure ÷ x 100
A
B
AB
13
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
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 increasesAs 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 increasesAs 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.
14
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 13: Expenditure patterns of product classes across household income levels
Source: Deloitte Consumer Insights survey (2017)
Packaged Food TransportationClothing and Footwear
Pattern 1Constant across monthly household income levels
Pattern 2Decreases as monthly household income levels increase
Pattern 3Increases as monthly household income levels increase
Percentage shareof expenditure
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Percentage shareof expenditure
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Percentage shareof expenditure
Percentage shareof expenditure
Percentage shareof expenditure
Percentage shareof expenditure
Percentage shareof expenditure
Percentage shareof expenditure
Percentage shareof expenditure
Percentage shareof expenditure
Percentage shareof expenditure
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Monthly household income level, IDR million
Electronic Products and AppliancesCredit Card Instalments Welfare and SavingsLeisure and Holidays
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Monthly household income level, IDR million
Beverages TobaccoHousehold Cleaning Products
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
Personal Hygiene Products
Monthly household income level, IDR million
3-5
2-3
1-2
7.5-10
5-7.5
Lessthan 1
Morethan 10
15
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
1%
99%
6%
94% 65%35%
5%
95%
12%
88%
4%
Local
Foreign
Brandpreference
52%100% 48%74% 26% 73% 27%96%
Audio and Video
Electronics Products
Beverages Clothing and Footwear
Confectionery Household Appliances
(Major)
Household Appliances
(Small)
Household Cleaning Products
Packaged Food
Personal Hygiene Products
Tobacco
Source: Deloitte Consumer Insights survey (2017)
3. Brand preferences and buying behaviour Local flavour, global fervourIndonesian 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
A passion for fashionWith 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, andDeloitte analysis
16
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 16: Brand preferences for electronic products and appliances categories by monthly household income level
Figure 17: Brand preferences by city
Source: Deloitte Consumer Insights survey (2017)
Source: Deloitte Consumer Insights survey (2017)
Audio and Video Electronics Products Household Appliances (Major) Household Appliances (Small)
Monthly householdincome level, IDR million Brand
preference
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
21%
10%
8%
6%
5%
13%
21%
26%
36%
28%
31%4%
35%4%
28%
21% 3%
24%
27%
30%
37%
45%
6%
4%
4%
38%
45%
36%
27%
34%3%
26%2%
12%
5% 2%
5%
22%3% 3%
27%
37%3%
34%2%
28%2%
32%3% 3%
34%
17%
18%
23%
35% 3%
36%
38%
36%
6%
5%
6%
55%
48%
31%
26 %
29%
24%
19%
5%
5%
5%
5%
3%5%
19%2%
20%3%
27%2%
24%3%
11%
10%
12%
15%
9%
16%
79%
9%
17%
11%
10%
13%
21%
78%
63%
56%
52%
49%
36%
ChineseJapaneseKoreanWesternLocal
5%
99%100%
100%
50%
93%7%
86%14%
97%3%
50%91%9%
98%
96%4%
2%
94%6%
97%3%
56%
50%
81% 19%
62%
89%11%
44%
50%
38%
99%1% 83%17%
88%12%
95%5%
90%10%
99%1%
98%2%
Foreign
Local
Brandpreference
Surabaya
Makassar
Bandung
Jakarta
Medan
Audio and Video
Electronics Products
Beverages Confectionery Household Appliances
(Major)
Household Appliances
(Small)
Household Cleaning Products
Packaged Food
Personal Hygiene Products
Tobacco
100%100% 100%100% 100% 100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%100%
1%
Clothing and Footwear
87% 13%
64%
39%
64%
36%
61%
36%
87%13%
84% 16%
67%
37%
70% 30%
85%15%
63%
33%
Figure 15: Brand preferences by product category and monthly household income level
Source: Deloitte Consumer Insights survey (2017)
86%14%
75%25%
89%11%
79%21% 97%3%
Audio and Video
Electronics Products
Beverages Clothing and Footwear
Confectionery Household Appliances
(Major)
Household Appliances
(Small)
Household Cleaning Products
Packaged Food
Personal Hygiene Products
Tobacco
62%
55%
64%
73% 27%
66%
74% 26%
88% 12%
38%
45%
36%
34%
42%
62%
90%10%100%
100%
100%
92%8%
83%17%
78%22%
76%24%
58%
38%
96%4%
97%3%
96%4%
96%4%
92%8%
44%
52%
69%
75% 25%
71% 29%
76% 24%
81% 19%
56%
48%
31% 38%
44%
48%
51%
62%
79%
78%22%
62%
56%
52%
49%
38%
95%
96%
93%
92%
88%
86%
79%
5%
4%
7%
8%
12%
14%
21%
99%
99%
97%
96%
92%
92%
1%
1%
3%
4%
8%
8%
Monthly householdincome level, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
100% 21%
100% 100%100%
100%100%
100%100%
100%100%
100%
100%
100%
100%100%
100%
Local
Foreign
Brandpreference
17
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
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.
18
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
13%12%
33%
7%
2%
3%
2%
8%8%
3%
9%
TastePrice
HealthOverall Quality
SmellTrust
SafetyAvailabilityPackaging
PromotionInnovation
27%15%
14%9%
9%8%
7%
4%4%
2%1%
TastePrice
HealthOverall Quality
SafetyTrustSmell
AvailabilityPromotionInnovationPackaging
ComfortSize Fit
PriceAppearance
DurabilityOverall Quality
PromotionPopularity
SafetyAvailabilityPackaging
19%14%
13%11%
10%
9%7%
7%
6%4%
Price
Safety
Overall Quality
Promotion
Availability
Trust
Smell
Health
Innovation
Packaging
13%
10%10%
4%6%
10%
8%
12%
8%
19%PriceOverall Quality
PromotionSafetyTrustSmell
HealthAvailabilityInnovationPackaging
18%
23%
17%
16%
6%
2%2%
7%
9%
Technology
Price
Trusted Brand
Overall Quality
Design
Promotion
Innovation
After Sales Service
Availability
16%8%
8%
5%3%
2%
17%
20%
21%TechnologyPrice
Overall QualityTrusted Brand
PromotionDesign
InnovationAvailability
After Sales Service2%2%
20%
19%16%
15%11%
8%
7%
Technology
Price
Trusted Brand
Overall Quality
Design
Innovation
Promotion
After Sales Service
Availability
Beverages
Personal Hygiene Products
Packaged Food
Household Appliances (Major)
Clothing and Footwear
Household Appliances (Small)
Household Cleaning Products
Audio and Video Electronics Products
22%
17%14%
13%
9%9%
6%4%
3%2%
1%
Source: Deloitte Consumer Insights survey (2017)
Figure 18: Drivers of purchase for different product categories
19
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Source: Deloitte Consumer Insights survey (2017)
Figure 19: Drivers of purchase for Clothing and Footwear by monthly household income level
20%
20%
23%
22%
22%
24%
21%
22%
20%
19%
15%
16%
19%
14%
16%
18%
16%
15%
12%
11%
12%
12%
10%
13%
13%
13%
14%
14%
11%
8%
10%
10%
11%
9%
9%
3%
8%
6%
7%
12%
7%
12%
5%
7%
5%
7%
5%
6%
6%
3%
2%
2%
2%
4%
5%
5% 2%
5%
4%
3%
2%
4% 2%1%
1%
4%
4%
3%
3%
2%
Monthly householdincome level, IDR million Drivers of
purchase
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
ComfortSize FitPriceAppearanceDurabilityOverallQualityPromotionPopularitySafetyAvailabilityPackaging
2%
1% 1%
1%
1%
1%
Figure 20: Drivers of purchase for Personal Hygiene Products by monthly household income level
Monthly householdincome level, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
PriceOverallQualitySafetyTrustHealthSmellPromotionAvailabilityInnovationPackaging
23%
23%
22%
21%
17%
16%
17%
6%
11%
11%
14%
15%
15%
14%
11%
8%
8%
10%
6%
8%
9%
11%
11%
11%
10%
13%
13%
13%
10%
9%
8%
10%
10%
11%
11%
12%
11%
11%
9%
10%
8%
9%
9%
10%
8%
7%
11%
8%
12%
9%
9%
11%
8%
7%
8%
7%
4%
5%
7%
8%
6%
9%
5% 3%
5%
3%
3%
3%
5%
4%
Drivers ofpurchase
Source: Deloitte Consumer Insights survey (2017)
20
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
Source: Deloitte Consumer Insights survey (2017)
Figure 22: Indonesian consumers selecting different price options, by household income level
Source: Deloitte Consumer Insights survey (2017)
Lower price
Similar price
Higher price
Selected product option
2017
14%
60%
26%
Monthly householdincome level, IDR million
Selected productoption
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
Lowerprice
Similarprice
Higherprice
36%
31%
37%
30%
22%
27%
29%
55%
60%
53%
60%
65%
60%
55%
9%
9%
10%
10%
13%
13%
16%
21
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
Audio and Video Electronic Products
#1 Price (25%) Technology (23%)
#2 Technology (16%)
Trusted Brand (20%)
#3 Overall Quality (15%)
Price (15%)
Confectionery
#1 Taste (26%) Taste (21%)
#2 Price (16%) Health (15%)
#3 Health (14%)
Price (13%)
Packaged Food
#1 Taste (25%) Taste (27%)
#2 Health (16%)
Price (15%)
#3 Price (15%) Overall Quality (13%)
Clothing and Footwear
#1 Comfort (19%)
Comfort (23%)
#2 Price (17%) Size Fit (17%)
#3 Size Fit (11%)
Appearance (17%)
Household CleaningProducts
#1 Price (22%) Safety (29%)
#2 Promotion (16%)
Trust (16%)
#3 Overall Quality (12%)
Smell (8%)
Tobacco
#1 Price (25%) Trust (18%)
#2 Smell (13%) Price (16%)
#3 Taste (11%) Safety (15%)
Beverages
#1 Health (19%)
Trust (16%)
#2 Taste (16%) Price (15%)
#3 Price (15%) Safety (15%)
Household Appliances(Small)
#1 Price (25%) Technology (32%)
#2 Overall quality (18%)
Trusted Brand (20%)
#3 Technology (15%)
Overall Quality (14%)
Personal Hygiene Products
#1 Price (20%) Price (17%)
#2 Safety (12%)
Health (13%)
#3 Promotion (11%)
Overall Quality (13%)
Note: % denotes percentage of survey respondents
Lower priced option Higher priced option
22
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
4. Buying channels
Source: Deloitte Consumer Insights survey (2017)
20%
18%
11%
10%
10%
10%
8%
7%
6%
A big market for MinimarketsAlthough 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
4 “Rise of Minimarkets: Indonesia’s Purchase Shift from Super and Hypermarkets to Minimarkets”. Snapcart, 10 March 2016. https://snapcart.asia/rise-minimarkets-indonesia
23
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 25: Drivers of purchase for Traditional Trade and Modern Trade channels
Figure 26: Preference for Traditional Trade and Modern Trade channels by city
Figure 27: Preference for Traditional Trade and Modern Trade channels by product category and city
Source: Deloitte Consumer Insights survey (2017)
Source: Deloitte Consumer Insights survey (2017)
Source: Deloitte Consumer Insights survey (2017)
10%
16%
15%
23%
5%
14%
19%
11%
29%
14%
19%
15%
23%
7%
14%
19%
13%
20%
6%
18%
11%
15%
8%
5%
16%
16%
15%
6%
3%
3%
4%
14%
7%
6%
10%
3%
34%
9%
24%
3%
25%
33%
8%
9%
7%
4%
18%
12%
18%
3%
6%
18%
20%
17%
3%
12%
12%
13%
5%
3%
10%
8%
8%
23%
5%
8%
33%
18%
4%
13%
Street Hawkers
Warungs
Wet Markets
Brand Stores
Supermarkets
1%
Hypermarkets
Minimarkets
1%
AssortmentAvailabilityConvenienceOpeningHoursPricePromotionServiceLocation
Non-chain IndividualElectronic Stores
Electronic ChainStores
Drivers ofpurchase
Traditional Trade
Modern Trade
43%
23%
45%
45%
42%
57%
77%
55%
55%
58%Surabaya
Makassar
Bandung
Jakarta
Medan
Channel preference
Traditional Trade
ModernTrade
Surabaya
Makassar
Bandung
Jakarta
Medan
Confectionery Household Cleaning Products
Packaged Food
Personal Hygiene Products
TobaccoBeverages Clothing and Footwear
59%
87%
73%
60%
59%
50%
59%
45%
44%
43%
57%
85%
76%
62%
56%
48%
64%
42%
51%
59%
44%
85%
64%
59%
69%
41%
13%
27%
40%
41%
50%
41%
55%
56%
57%
43%
15%
24%
38%
44%
52%
36%
58%
49%
41%
56%
15%
36%
41%
31%
53%
35%
54%
51%
62%
47%
65%
46%
49%
38%
70%
57%
86%
80%
89%
30%
43%
14%
20%
11%
Channel preference
24
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Filling the (virtual) shopping cartsOn 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
Source: Deloitte Consumer Insights survey (2016 and 2017)
Household Cleaning ProductsPackaged Food Personal Hygiene ProductsBeverages
55,13360,465
20172016 2016 2017
105,795
94,777
84,757
2017
81,314
20162016
74,953
93,427
2017
Average shopping cart size per visit, IDR
+9.7%
+4.2%+24.6%
–10.4%
25
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 trustAlthough 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
Source: Deloitte Consumer Insights survey (2017)
2%
5%
2%
24%
2%
18%
21%
1%
25%TV
In Store Promotion
Friends andColleagues
Relatives
Outdoor Ads
Digital Media
Experts
Print Ads
Radio
26
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 30: Preferred sources of information by product category
Figure 31: Preferred sources of information by monthly household income level
Source: Deloitte Consumer Insights survey (2017)
Source: Deloitte Consumer Insights survey (2017)
TVIn StorePromotionFriends andColleaguesRelativesOutdoor AdsDigital MediaExpertsPrint AdsRadio
HouseholdAppliances (Major)
HouseholdAppliances (Small)
Household CleaningProducts
Personal HygieneProducts
Beverages
Clothing and Footwear
Confectionery
Packaged Food
Tobacco
26%
15%
27%
25%
25%
28%
28%
27%
25%
20%
28%
22%
26%
26%
24%
20%
24%
16%
23%
26%
24%
15%
16%
18%
23%
20%
25%
18%
18%
16%
15%
17%
19%
20%
16%
19%
5%
3%
5% 1%
8%
6%
5%
5% 1%
5% 2%2%
2%2%
2%
8% 2%
6% 2%
4%2%
3%3%
3%1%
Audio and VideoElectronics Products 24% 25% 17% 16% 7% 4% 3%3%1%
4%1%
4%
2%1%1%
2% 2%
1%1%1%
1%
1%1%
1%1%
1%1%2%
1%
Sources ofinformation
25%
26%
26%
26%
25%
25%
25%
22%
22%
24%
23%
22%
25%
25%
25%
23%
21%
21%
20%
20%
20%
19%
19%
17%
17%
19%
16%
16%
4% 2%
1%6%
6%
6%
6% 2% 2%
2%
2% 2%
6%
4% 4% 2% 3%
3% 2%
TVIn StorePromotionFriends andColleaguesRelativesOutdoor AdsDigital MediaExpertsPrint AdsRadio
1%
1%2%
2%
1%
1%
1%
1%1% 1%
1% 1%
1%
2%
2% 2%
Monthly householdincome level, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
Sources ofinformation
27
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
TV vs. Digital: The battle beginsAlthough 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
Lower priced
Higher priced
26%
29% 29%
27%
27%
13% 26%
20%
25%
21%
24%
23%
11%7%
5%
20%
1%
1%
1%
1%
1%
1%
3%
1%
1%
3%
4%
4%
4%
4%
4%
2%
22%
23%
20%
21%
19%
21%
2%
8%
Beverages
Lower priced
Higher priced
Packaged Food
Lower priced
Higher priced
Clothing and Footwear
Lower priced
Higher priced
Audio and Video Electronic Products
Lower priced
Higher priced
Household Appliances (Small)
Confectionery
Lower priced
Higher priced
Household Cleaning Products
Lower priced
Higher priced
Personal Hygiene Products
Lower priced
Higher priced
Tobacco
Lower priced
Higher priced
Household Appliances (Major)
Lower priced
Higher priced
TV Digital Media
Sources of information
Source: Deloitte Consumer Insights survey (2017)
28
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
6. e-Commerce
High growth, even higher potentialDriven by increasing mobile data usage, smartphone penetration and Internet penetration levels, this edition of the survey revealed a significant increase in the percentage of respondents with prior online shopping experience. Last year, only 17% reported having shopped online, but this figure has since more 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.
To capitalise on this opportunity, companies must first understand what their consumers want from their online shopping experience. For Indonesian consumers, the drivers of online purchase appear to involve considerations on the dimensions of Practicality, Price and Product Range (Availability) (see Figure 34).
Many Indonesian consumers, given their fixation on bargain hunting, relish the opportunity to nab deals online that are not available elsewhere. Numerous companies have begun to capitalise on this observation to drive growth, for instance, by offering coupons and price comparison features to boost the shopping experience and increase site traffic.
Overall, Clothing and Footwear, Tickets (including airline and movie tickets), and Personal Hygiene Products were the top three product categories purchased through online channels. There are, however, some variances across the different income levels for categories such as Electronic Products (see Figure 35).
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
Topping it offLaunched in February 2009, Tokopedia is now one of Indonesia’s most successful and popular e-commerce websites. It provides an online platform for sellers to market and distribute their products, connecting them to logistics agents and payment networks, such as BCA KlikPay, ClickPay Mandiri, KlikBCA and Mandiri e-Cash, to facilitate transactions.
Recently, Tokopedia announced the launch of its Mitra Toppers programme, a partnership with lenders to support e-commerce businesses in raising capital to develop their ventures.
Tokopedia is also the first Internet company in Southeast Asia to receive trust funds amounting to USD 100 million from Softbank and Sequoia Capital in 2014, the largest investment in a Southeast Asian start-up to date.
Source: Tech in Asia, Tokopedia.com
Source: Deloitte Consumer Insights survey (2016 and 2017)
Yes No
83%
58%
42%
17%
2017
2016
Percentage of respondents with prior online shopping experience
Figure 33: The rise of online shopping
29
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Figure 34: Drivers for online shopping
Figure 35: Breakdown of online purchases by monthly household income level
Source: Deloitte Consumer Insights survey (2017)
Source: Deloitte Consumer Insights survey (2017)
12%
14%
17%
26%
31%Practical
Price
Product Range(Availability)
Reliable Review
Promotion
Clothing andFootwearElectronicsProductsTicketsBooksPersonal HygieneProductsPackaged FoodHouseholdCleaning ProductsConfectioneryBeveragesOthers
1%1%
1%
1%
Monthly householdincome level, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10 2%
3%
4%
3%
8%
2%
1%
3%
5%
2% 2%
4%
3%
2%
5%
7%
15%
7%
6%
14%
11%
10%
5%
3%
6%
6%
9%
8%
13%
10%
13%
19%
16%
17%
29%
12%
18%
18%
19%
12%
90%
44%
54%
48%
42%
32%
31%
1%
1%
1%
1%
Product categories
30
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Source: Deloitte Consumer Insights survey (2017)
Emerging market playersAlthough 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
50%
14%
9%
3% 2% 2% 1%
1%
1%
3% 2% 1%
1% 8%1%2%
2%
5%
3%
6%
25%
9%
9%
10%
18%
52%
25%
23%
13%
25%
18%
9%
4%
5%
4%
3%
4%
9%
4%
43%
38%
22%
3%
49%
46%
53%
4%
4%
11%
4%
5%
11%
3%
50%
64%
45%
17%
36%
33%
16%
17%
17%
91%2%
1%1%
2%2%
24%
Bli Bli
Bukalapak
Elevania
Lazada
OLX
Toko Bagus
Tokopedia
Traveloka
Zalora
Beverages
Confectionery
Packaged Food
Personal HygieneProducts
Clothing andFootwear
HouseholdCleaning Products
Tickets
Books
Audio and VideoElectronics Products
HouseholdAppliances (Major)
HouseholdAppliances (Small)
e-Commerceplatforms
31
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Deterrents differ by cityAcross 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”).
6 Indonesia Country Report. Lafferty Global Research.
No credit card? Get KredivoKredivo 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
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Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Craving for KoreaElevenia 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 goingLaunched 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 experienceWith 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 personalisationMany 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 insightsThrough 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
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Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Surabaya
Makassar
Bandung
Jakarta
Medan
Must Install Application
Bad Experience
Lack of Trust
No Credit CardLimited ProductRange (Availability)More ExpensivePrice
Poor Quality
Troublesome
Not SecureDelivery Time
Cannot ChooseProduct
Cannot See Product Directly
Difficult toExchange orReturn
Don’t Know How12%
26%
6%
32%
31%
24%
26%
23%
14%
21%
2%
11%
13%
15%
13%
33% 1%
13%2%
4%1%
5%
9%
18%
8%
7%
8%
12%
6%
7%
26%
3%
9%
15%
15%
3%
3%
3%
2% 2%
7% 2%
1%
1%1%
1%
1%1% Deterrents
Source: Deloitte Consumer Insights survey (2017)
Source: Deloitte Consumer Insights survey (2017)
Figure 38: Deterrents for online shopping by city
Figure 37: Deterrents for online shopping by monthly household income level
30%
23%
25%
14%
18%
13%
25%
25%
19%
19%
25%
25%
27%
25%
13%
5%
8%
6%
6%
14%
12%
10%
15%
14%
19%
14%
17%
20%
8%
10%
8%
8%
11%
3%
3%
7%
9%
6%
10%
9%
8%
8%
6%
14%
15%
9%
11%
10%
4% 1%
5% 2%
2%2%
2%
3%
4% 2%
3%
Must Install Application
Monthly householdincome level, IDR million
Less than 1
1-2
2-3
3-5
5-7.5
7.5-10
More than 10
Bad Experience
Lack of Trust
No Credit CardLimited ProductRange (Availability)More ExpensivePrice
Poor Quality
Troublesome
Not SecureDelivery Time
Cannot ChooseProduct
Cannot See Product Directly
Difficult toExchange orReturn
Don’t Know How
1% 1%
1% 1%
1%1% 1%
1% 1%
1%
1%1%
Deterrents
34
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.
35
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia
Researched and written by:
Eugene HoExecutive Director, Consulting [email protected]+65 6232 7133
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