Asia’s middle class is on track to comprise 52 percent of the region’s population by 2020, with the fastest emerging middle classes hailing from Indonesia, the Philippines, Thailand, Malaysia and Singapore, according to Nielsen estimates. With US$5.3 trillion in new household consumption, expenditures are up for grabs. Are you ready for the next big “shopportunity”?
Indonesia is at the forefront of this trend, with a middle-income segment that we expect to more than double in size by 2020. Much attention has been focused on Asia’s two biggest growth engines—China and India—but now is the time to get better acquainted with what drives and motivates Indonesian shoppers.
Rising confidence and upgrading baskets
Indonesians are confident about tomorrow, but they are also mindful of their budgets today. Historically, the country’s high consumer confidence scores consistently top Nielsen’s global rankings, and Indonesians typically report household budget flexibility that far exceeds the global average. So while Indonesians are eager to upgrade their shopping baskets, they will likely do so judiciously and prudently.
Indonesian shopping baskets are increasingly dominated with premium-type products, reflecting their rising aspirations. Analysis undertaken by Nielsen of 13 fast-moving consumer goods (FMCG) categories revealed almost half (46%) of the products were categorized as premium, 32 percent were mainstream, and 22 percent were value-oriented. About 60 percent of the products that make up the super-premium basket are discretionary items in categories such as chocolates, biscuits and moisturizing creams dominated by multinational companies.
But going premium is not about spending irresponsibly. The best way to merchandise premium categories to the discriminating Indonesian shopper is to visibly show price tags to aid comparison spending. And image counts and superior packaging are the shelf talkers that speak volumes to these consumers.
Trade wars and the battle for market share
Today, traditional trade (from small roadside vendors, food stalls, etc) holds a majority share (54%) of the retail landscape across Southeast Asian markets, but that share is eroding. By 2020, Nielsen estimates that modern trade (from sources like big retail chains and supermarkets) will take the lead with 53 percent of the market. Because not all stores are created equal, the best way to leverage the right channel is to know the who, what and how of shopper behavior.
As in almost any country in the world, Indonesian women are the key influencers in both modern and traditional trade stores. But as a newly middle class female Indonesian consumer becomes savvier about her shopping prowess, she cares about choice—not just price and promotions. Smaller pack sizes and daily promotions will appeal to her, as the majority of trip missions are planned and occur daily.
Winning practices will include good, better and best pricing tiers, pack-sized incentives that meet daily-shopping needs and a differentiated value proposition that sets your products apart. The opportunities to engage with the growing middle class are abundant, but you’ll need to nurture the consumer up the value chain to ensure success.