Category Archives: Indonesia

Local insights on Indonesian emerging market

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Asian emerging market has become the business hotspot after global recession in 2008. Its fast growing economy and huge population result in enormous spending power in Asian countries, especially the big three: China, India, and Indonesia. Multinational companies realize the importance of the emerging markets, and immediately bombard those countries with aggressive invasion to secure their long-term business growth. Despite the slowing growth in 2013, experts still believe that emerging markets is the future of economy.

Out of the big three, Indonesia is probably out of the radar, outshined by the glimmering promise of China and India. However, middle class in Indonesia keep on growing, providing higher consumption in the country. The majority of middle class is young executive 25 – 35 years old focused in Jakarta, which has distinctive spending behavior.

 Dining Out

Like most Asian country, Typical Indonesian eats at home, since it is economically wise due to the high number of person in a house. However, the middle class are mostly single or married without kid, which give them incentive to dine out. This behavior justifies the huge growth in number of restaurant in Jakarta, ranging from independent one to international franchise brand. The successful one usually integrate the communal concept, a restaurant is a place to dine and  to hang out. As a result, the consumer turn over is slow.

The barrier of entry to restaurant industry is small, as well as the exit boundary. It is normal to see a new restaurant packed with customer, and out of the business in one or two years. Most restaurant operate until late at night, some even 24 hours. One thing in common of those restaurants is they are providing various kinds of menu, but Indonesian.

Travel

Due to the low annual leave provided by the company, the middle class mostly have a short travel period. Neighborhood countries, such as Singapore, Thailand, Malaysia, and Australia, enjoy huge visits by the middle class, who mostly spend the money on shopping. Domestic destinations are also popular, since Indonesia is blessed with the beauty of tropical beaches and mountains.

Driven by the raising demand, travel business sector is boomed in the country. Chained multinational hotel build new hotels and resorts, with roughly 10% property growth of  in 2012 (euromonitor). Most of the new hotels took place in Jakarta and Bali. Despite the rise of budget airlines that offer lower price, the high volume growth drive the whole airlines industry growth by 10%. In fact, Indonesian airlines are the most important client of Boeing and Airbus. Travel industry also benefit Indonesia’s small and micro industry, by providing services and products such as local guides and souvenirs.

Fashion

Another huge spending for the middle class is on fashion. Due to high social-communal activity, the middle class people have the tendency to show their success through the brands they are wearing. That leaves a huge opportunity for international brand to enter Indonesia. In 2013, H&M opens it first store in Jakarta and many other brands open their new stores. Those international brands enter Indonesian market through franchising with local companies.

Aside from those international brands, Muslim fashion industry also grows fast, dominated by several national brands. This industry is secured by the strong Muslim community network in Indonesia. Therefore, it is hard for international brands to enter the market.

Indonesian Economy in the future

The middle class in Indonesia drives national GDP growth. However, the saving rate is not increasing, which mean the middle class has high consumption rate. The country unique set makes multinational company reluctant to enter Indonesia. There are huge opportunities for Indonesian, or other’s who understand the unique Indonesian.

 

Male Grooming: A Perception Driven Market

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Personal care is perhaps one of the most mature industry in consumer goods, still the industry is both attractive and challenging. Within the industry, male grooming seems to be the most dynamic category, adding US$4 billion to its global size. Global recession recovery, high disposable income, and high lifestyle spending are said to be the key succes factor for this industry.

Two major product line in male grooming category are hair care and skin care, accounted for 23.5 and 27.2% global revenue share respectively, according to IBISWorld Global. The mature hair care line somehow has been outgrown by the younger fellow skin care, which grow tremendously well during the last decade. Euromonitor explain the issues behind the slow growth of hair care simply because men keep on using the unisex hair care instead, however for the skin care, men are reluctant to use such a feminine product. It seems that how consumer perceive the category is determing key.  How such a blurry perception occur in those products?

Perception towards a product usually build by the marketing activity and cultural view. Female and most unisex hair care products always use women as their ads model, thus possible of creating feminine image on the product. However, the most society live in the condition where hair care are used both sex. These contradictive facts result in a gender blurry perception on the product, and socially approve men to buy any kind of hair care. Therefore, male hair care need a lot of perception shift to succeed in general market.

Skin care category, mostly cost higher than the hair care. Therefore the company use a segment based marketing activity, targeting females who are much more promising to buy the product. This marketing activity somehow strengthen the feminine perception on the products, result in mens reluctant to buy the product, despite some of them might be interested with the benefit provided. This demand is captured by the industry, which product “for men” labelled skin care, and socially approve men to buy the product designated for them. This particular thing also happened in the parfum category, which female and male think it is not socially approved to use parfum designated for the other sex group.

Social perception is a very complex matter, and at most cases could be extremely different from one place to another. For example the perception towards male skin care in Thailand and in Indonesia, both located in South East Asia. People in Thailand think it is normal for a guy to use skin care, therefore Thai men are socially approved to buy one. In contrast, Indonesian think it is not normal for a guy to use skin care product. The social culture explain the slow growth of male skin care category, despite Indonesian high consumption habit and heavy marketing activity done by several International brand, such as Vaseline, Nivea, and L’oreal.

In conclusion, male grooming marketing require more cultural understanding instead of certain demographic potency identification. However, men are perceived as simple creature, aren’t they?