Consumer goods to Indonesia

Trends and opportunities

The market

Indonesia is currently the world’s fourth most populous country, with a population of  264 million. Before Covid-19, Indonesian middle class has been a major driver of economic growth as the group’s consumption has grown at 12% annually since 2002 and now represents close to half of all household consumption in Indonesia. (Source: World Bank, Aspiring Indonesia: Expanding the Middle Class, January 2020). This consumer class, more commonly known as the middle-income group, has created a consumer boom in Indonesia that is expected to grow over the next two decades.

Domestic consumption makes up a high proportion of the gross domestic product (GDP) on a comparative basis with other emerging economies, meaning that increased GDP growth will see an accelerated growth in consumption compared to regional neighbours.

Increasing access to credit among domestic consumers also plays a crucial role in the increased spending on discretionary goods and other non-essentials. Fitch Solutions reports there are approximately 15 million credit cards in circulation in Indonesia. (Source: Fitch Solutions, Indonesia Consumer and Retail Report –Q3 2020— fee-based access. Accessed August 2020). The ease of obtaining a credit card from most banks is contributing to growing consumerism in the country. Aligned to this, a number of banks are facilitating ease of access to debit cards to ensure more Indonesians than ever have access to growing retail opportunities.

Similar to many other emerging economies, e-commerce is growing rapidly, posing a threat to conventional bricks-and-mortar shops. The improvements in connectivity and infrastructure contribute greatly to the growth. Fitch Solutions reports that there are approximately 90 million internet users in the country and total e-commerce sales are forecast to reach US$ 50.7 billion at 2024. (Source: Fitch Solutions, Indonesia Consumer and Retail Report –Q3 2020— fee-based access. Accessed August 2020).

Opportunities

Indonesia's changing consumption patterns and unique position as a developing country with a sizeable youth population and growing middle class in Jakarta and other second tier cities, presents numerous opportunities for Australian exporters.

Indonesia’s emerging middle class with rising disposable incomes and a desire for imported, high-quality products, sees a beauty and wellness sector expected to grow. Euromonitor suggests that year on year growth to 2025 will be more than nine per cent, making Indonesia the fastest growing beauty and wellness market in Asia. The demand is largely driven by middle class consumers, especially females. In addition, there is an increasing trend of men in urban areas spending more on cosmetics and skin care products – indeed the sale of men’s grooming products increased by 7.6 percent by 2019  (Source: Euromonitor International, Beauty and Personal Care in Indonesia—fee-based access. Accessed August 2020)

Opportunities also exist in the fashion industry. The growing youth population and the increasing purchasing power is resulting in higher spending on fashion. Improved internet access has also allowed local consumers to access what’s trending in fashion capitals around the world, creating a stronger appetite for foreign brands. The shift in behaviour towards new and fashionable trends is supporting 'fast-fashion', where chain stores will turn over stock regularly to create emerging trend opportunities for consumers.

Competitive environment

Competition in the Indonesian retail sector is intense due to the large number of players, both local and foreign. Some larger players continue to expand their distribution channels to enlarge their customer base.

For cosmetics and skin care products, international brands still dominate the market. Renowned players such as Unilever, P&G, and L’Oreal lead the market, offering a wide range of products to meet consumer’s needs. However, smaller foreign brands with an established presence in international markets are also attracting the interest of new consumers who prefer high quality brands and are looking to distinguish themselves from the mass goods market. Indonesia is also looking to strengthen its own domestic production, and this will only increase competition in the Indonesian market.

Distribution channels

The distribution channels for consumer products rely heavily on modern retail channels – department stores, and specialty stores located in shopping malls. These retailers either source the products from importers and distributors, or import directly from manufacturers.

Regardless of global e-commerce growth, e-commerce in Indonesia is still less than one per cent of total retail sales. The regulatory environment means that cross-border e-commerce opportunities are limited, and Australian companies must have a local partner to register and import the product before it can be marketed online or in-store.

There are quite a number of importers in Indonesia specialising in different types of consumer products. Austrade is able to assist Australian exporters in identifying a suitable partner based on your product and business expectations. For companies looking to manufacture their products in Indonesia, Austrade is also able to assist in assessing the most suitable manufacturing partners for your business.

Marketing your products and services

Market entry

To successfully market to Indonesia consider:

• participating in major local trade shows
• highlighting your international track record to customers, especially in the ASEAN region
• engaging a local distributor (crucial to effective business penetration in Indonesia)
• visiting the market on a regular basis and investing time (relationship based market)
• opening a representative office or presence in Indonesia / engaging a local partner
• engaging Austrade in tailored services to help you identify opportunities or connect you with key distributors and buyers.

Distribution channels

• department stores
• specialty stores
• modern retail stores
• e-commerce (but only if your product is registered to be sold in Indonesia)

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

Contact details

The Australian Trade and Investment Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:

• develop international markets
• win productive foreign direct investment
• promote international education
• strengthen Australia's tourism industry
• seek consular and passport services.

Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.