INDONESIA – Pack-sized incentives that meet daily-shopping needs will be what appeals to the growing Indonesian middle-class consumer, says AC Nielsen.
As Asia’s middle class continues on its growth track to comprise 52% of the region’s population by 2020, Indonesia is becoming the most important consumer market that businesses need to consider.
According to recent research by AC Nielsen, Indonesia’s middle-income segment is expected to more than double in size by 2020, ahead of other fast-emerging middle classes from the Philippines, Thailand, Malaysia and Singapore.
With US$5.3 trillion in new household consumption expected from Asia in 2020, expenditures are up for grabs, particularly in Indonesia.
Increasing consumer confidence
Indonesia’s high consumer confidence scores have consistently topped Nielsen’s global rankings, and according to the research company, Indonesians typically report household budget flexibility that “far exceeds” the global average.
Hence, Indonesians are constantly upgrading their shopping baskets, though prudently. Their 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% were mainstream, and 22% were value-oriented.
About 60% 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,” noted Nielsen. “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.”
Growth of modern retail
While traditional retail – wet markets, roadside vendors etc – currently hold the majority 54% share of the retail landscape across Southeast Asia, that share is expected to erode.
By 2020, Nielsen estimates that modern trade (from sources like big retail chains and supermarkets) will take the lead with 53% of the market.
Nielsen highlighted Indonesian women as the key influencers in both traditional and modern trade stores, and said that as a newly middle class female Indonesian consumer becomes savvier about her shopping prowess, her focus will extend beyond price and promotions to choice.
“Pack sizes and daily promotions will appeal to her, as the majority of trip missions are planned and occur daily,” commented Nielsen.
“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,” it recommended.