You are on page 1of 36

Deloitte Consumer Insights

Embracing bricks and clicks in Indonesia


June 2017
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
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Foreword
Indonesia is often described as Southeast Asias most populous economy. With its
consumers increasingly gravitating towards online consumption, it is not inconceivable that
it might one day become the regions 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 Indonesias 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 consumers 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 Ho
Southeast Asia Industry Leader
Consumer & Industrial Products

03
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.

Methodology
The 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 Indonesias 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 Household Appliances (Small) (refers to portable
to audio visual products, as well as related or semi-portable appliances usually placed on
accessories and gadgets) counters or other platforms, such as microwave
Beverages ovens and rice cookers)
Clothing and Footwear Household Cleaning Products
Confectionery Packaged Food
Household Appliances (Major) (refers to non- Personal Hygiene Products
portable appliances, such as refrigerators and Tobacco
washing machines) Transportation

04
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Demographics of survey respondents

Geographical distribution of survey respondents Gender distribution of survey respondents

Surabaya
10%
Medan
10%

Makassar 10%

60% Jakarta
10%
Bandung

50% 50%

Age distribution of survey respondents


Age group, years

15-24 19%
25-34 29%
35-49 36%
50-64 16%

Monthly household income distribution of survey respondents


Monthly household income
level, IDR million
Less than 1 11%

1-2 22%

2-3 30%

3-5 29%

5-7.5 6%

7.5-10 1%

More than 10 1%

Monthly household income distribution by city

Bandung 6% 28% 16% 15% 18% 12% 5%


Monthly household
income level,
IDR million
Jakarta 3% 9% 11% 13% 10% 13% 41% Less than 1
1-2
Makassar 5% 26% 13% 18% 16% 13% 9% 2-3
3-5
5-7.5
Medan 4% 30% 14% 19% 21% 11% 1%
7.5-10
More than 10
Surabaya 8% 19% 18% 21% 19% 12% 3%

05
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

1. Overall consumer sentiment


Optimism on the rise Figure 1: Overall consumer sentiment on economy
Overall consumer sentiment in Indonesia has been consistently
positive over the last three years with only marginal movements: 17% 15% 19%
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 years results, we see a significant


increase in the proportion of respondents indicating clearly
positive sentiments, relative to those expressing moderately
83% 85%
optimistic sentiments (see Figure 2). 81%

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 2015 2016 2017
President Joko Widodo has boosted confidence and employment
Positive Negative
prospects.
Source: Deloitte Consumer Insights survey (2015, 2016, and 2017)

Figure 2: Breakdown of positive consumer sentiment

2017
2016
24%
Moderate
50%

57%
Optimistic
35%

Source: Deloitte Consumer Insights survey (2016 and 2017)

1 Population Estimates and Projections. The World Bank.

06
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

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).

Figure 3: Consumer sentiment by city

Level of consumer
Bandung 59% 21% 20%
sentiment
Optimistic
Jakarta 57% 24% 19% Moderate
Pessimistic

Makassar 78% 20% 2%

Medan 45% 28% 27%

Surabaya 51% 27% 22%

Source: Deloitte Consumer Insights survey (2017)

Figure 4: Minimum wage increase by city

150 2015
Bandung 171 2016
185
2017
203
Jakarta 233
252

156
Makassar 174
188

153
Medan 171
190

204
Surabaya 229
248

Monthly minimum wage, USD

Source: Statistics Indonesia (Badan Pusat Statistik)

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
07
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Prudence persists
Consumer 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

Monthly household income


Level of consumer
level, IDR million
sentiment

Less than 1 23% 47% 30% Pessimistic


Moderate
Optimistic
1-2 24% 26% 50%

2-3 22% 24% 54%

3-5 20% 26% 54%

5-7.5 22% 24% 54%

7.5-10 13% 23% 64%

More than 10 15% 18% 67%

Source: Deloitte Consumer Insights survey (2017)

08
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 6: Overall trend among Indonesian consumers with positive sentiment in 2017 vs. 2016

4% Intended increase in spending


9%
10% More than 50%
26% 26-50%

Percentage of population planning


14%
10-25%
Percentage of respondents

Less than 10%


to increase spending
33%
28%

74%

53% 49%
Plans for increased
spending
Yes
No
2017 2017 2016

Source: Deloitte Consumer Insights survey (2016 and 2017)

Figure 7: Correlation between Indonesia consumer sentiment and plans for increased spending in 2017

Plans for increased


spending

Pessimistic 83% 17% No/Unsure


Yes

Moderate 85% 15%

Optimistic 65% 35%

Source: Deloitte Consumer Insights survey (2017)

09
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

2. Spending patterns
Inflection point lingers Packaged Food categories. Between 2015 and 2016, there was a
Food and beverage items accounted for 38% of overall monthly 6% increase in the share of expenditure for these categories, and
expenditures, with the remaining 62% accounted for by non-food a 5% increase between 2016 and 2017. This in line with overall
items (see Figure 8). Across all income segments, there was an macroeconomic trends such as a growing Indonesian middle
overall increase in monthly household expenditure levels ranging class, with the growth of incomes amongst low and middle class
from 15% to 34% or an overall average 25% increase in monthly households enabling them to increase their expenditures in these
household expenditures from last year (see Figure 9). areas in order to obtain greater quantities and varieties of products
(see Figure 10).
Despite this trend, the inflection point observed in previous
editions of this survey continues to linger. This inflection point, The overall distribution of expenditures between the three main
identified as the monthly household income level of IDR 5 million, product clusters Basic Necessities, Welfare and Leisure, as well as
remains a reliable indicator of the point at which consumers make Housing and Transportation remained relatively constant, with a
the shift from prioritising basic needs to making a greater number slight increase in the Basic Necessities cluster (from 33% in 2016 to
of discretionary purchases. 38% in 2017) and a marginal decrease in the Welfare and Leisure
(from 15% to 13%) and Housing and Transportation (from 20% to
Over the last three editions of the survey, we have observed a 17%) clusters (see Figure 11).
steady increase in consumer spending for the Beverages and

Figure 8: Breakdown of monthly household expenditures


Percentage point
(pp) gap between
Overall By monthly household income level, IDR million
highest and
2% 1% 1% 2% 2% 2% lowest household
3% 2% 4%
2% 3% 4% income levels
6% 1% 6% 3%
4% 3% 3% 3%
2% 2% 12% Electronics
4% 4% 5% 10%
4% 4% 8%
4% 4% Products
4%
1% ~13pp
4% 9% 8%
5% 5% 8% 7%
3% 9%
6% 6% 1%
7%
Non-food 11% 2% 10%
15% 7% 7% Welfare and
items Leisure
9% 9% 7%
62% 5% ~19pp
6% 8% 6%
6% 5% 5%
5% 6%
6% 5% 8%
5% 4% 5%
5% 6% 4%
7% 4% 4%
5% 5% 4% 8%
6% 4%
5% Housing and
5% 6% 5% Transportation
4% 8% 6% 6%
5%
5% 3% ~5pp
5% 5% 4% 5%
3%
3%
5%
Food and
33% 30% 34% 35% 34% 2%
beverage 30% 32%
items
38%
18% Basic
Necessities
~16pp
5% 6% 6% 5% 4% 4% 4%
3%
Less than 1 1-2 2-3 3-5 5-7.5 7.5-10 More than 10
Beverages Household Cleaning Products Transportation Audio and Video Electronics Increase in percentage
Packaged Food Personal Hygiene Products Credit Card Instalments Products contributions between highest and
lowest household income levels
Tobacco Communication and Media Lesiure and Holidays Household Appliances (Major)
Clothing and Footwear Housing and Utilities Welfare and Savings Household Appliances (Small) Decrease in percentage
contributions between highest and
lowest household income levels
Source: Deloitte Consumer Insights survey (2017)

10
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 9: Change in monthly household income and expenditure levels

Monthly household
income level, IDR million
Surplus/Decit Index*
2015
1.10
Less than 1 1.14 2016
1.40 2017

1.70
1-2 1.77
2.40 Basic
necessities
3.20 are
2-3 2.50 prioritised
3.30

3.70
3-5 4.20
4.90

4.30
5-7.5 4.76
5.50

4.90 Discretionary
7.5-10 4.96 spending
6.10 increases

5.90
More than 10 6.30
8.40

Monthly household expenditure level, IDR million

*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)

Figure 10: Overall spending trend on Beverages and Packaged Food as part of total expenditure
over 2015-2017
38%

33%

27%

33%
27%

22%

6% 5%
5%

2015 2016 2017

Beverages Packaged Food

Source: Deloitte Consumer Insights survey (2015, 2016, and 2017)

11
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 11: Allocation of monthly household expenditure across the three main consumer product clusters

38%

33% 16%
11%

4% 7%

4%

9%
5%
3%

Basic Necessities Welfare and Leisure Housing and Transportation

Beverages Welfare and Savings Transportation


Packaged Food Leisure and Holidays
Housing and Utilities
Credit Card Instalments

Source: Deloitte Consumer Insights survey (2017)

Packaged Food are the popular good


By comparing last years planned increases in expenditures with this years 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
30% Planned increase (2016) A

Actual increase (2017) B

18% 18%

15%
14% 14%
13%
12% 11%
10%

6%
5% 5% 5% 5%
4% 4%
2%

Packaged Clothing and Personal Household Tobacco Beverages Household Audio Video Household
Food Footwear Hygiene Cleaning Appliances Electronics Appliances
Products Products (Major) Products (Small)
Ratio of actual (2017) to planned
(2016) increase in expenditure 300 43 42 38 36 36 28
B A x 100 22 13

Source: Deloitte Consumer Insights survey (2016 and 2017)

12
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 consumers 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 increases


As 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 increases


As 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.

13
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 13: Expenditure patterns of product classes across household income levels

Clothing and Footwear Packaged Food Transportation


Percentage share Percentage share Percentage share
Pattern 1 of expenditure of expenditure of expenditure
Constant
across
monthly
household
income
levels

Less 1- 2- 3- 5- 7.5- More Less 1- 2- 3- 5- 7.5- More Less 1- 2- 3- 5- 7.5- More


than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10
Monthly household income level, IDR million Monthly household income level, IDR million Monthly household income level, IDR million

Beverages Household Cleaning Products Personal Hygiene Products Tobacco


Percentage share Percentage share Percentage share Percentage share
Pattern 2 of expenditure of expenditure of expenditure of expenditure
Decreases
as monthly
household
income
levels
increase

Less 1- 2- 3- 5- 7.5- More Less 1- 2- 3- 5- 7.5- More Less 1- 2- 3- 5- 7.5- More Less 1- 2- 3- 5- 7.5- More
than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10
Monthly household income level, IDR million Monthly household income level, IDR million Monthly household income level, IDR million Monthly household income level, IDR million

Credit Card Instalments Electronic Products and Appliances Leisure and Holidays Welfare and Savings
Percentage share Percentage share Percentage share Percentage share
Pattern 3 of expenditure of expenditure of expenditure of expenditure
Increases as
monthly
household
income
levels
increase

Less 1- 2- 3- 5- 7.5- More Less 1- 2- 3- 5- 7.5- More Less 1- 2- 3- 5- 7.5- More Less 1- 2- 3- 5- 7.5- More
than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10 than 1 2 3 5 7.5 10 than 10
Monthly household income level, IDR million Monthly household income level, IDR million Monthly household income level, IDR million Monthly household income level, IDR million

Source: Deloitte Consumer Insights survey (2017)

14
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

3. Brand preferences and


buying behaviour
Local flavour, global fervour
Indonesian 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

Beverages Confectionery Packaged Personal Clothing and Household Tobacco Audio and Household Household Brand
Food Hygiene Footwear Cleaning Video Appliances Appliances preference
Products Products Electronics (Major) (Small)
Products
6% 5% 1% 12% 4% Foreign
94% 95% 99% 88% 35% 65% 100% 96% 74% 26% 73% 27% 48% 52% Local

Source: Deloitte Consumer Insights survey (2017)

A passion for fashion


With the growth of a young and trendy middle class, Indonesias 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, and
Deloitte analysis

15
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 15: Brand preferences by product category and monthly household income level
Monthly household
income level, IDR million
Beverages Confectionery Packaged Personal Clothing and Household Tobacco Audio and Household Household
Food Hygiene Footwear Cleaning Video Appliances Appliances
Products Products Electronics (Major) (Small) Brand
Products preference

Less than 1 100% 100% 100% 5% 95% 10% 90% 100% 100% 62% 38% 44% 56% 21% 79% Foreign

Local
1-2 100% 100% 100% 4% 96% 8% 92% 100% 1% 99% 55% 45% 52% 48% 22% 78%

2-3 100% 4% 96% 100% 7% 93% 17% 83% 100% 1% 99% 64% 36% 69% 31% 38% 62%

3-5 14% 86% 3% 97% 100% 8% 92% 22% 78% 100% 3% 97% 73% 27% 75% 25% 44% 56%

5-7.5 25% 75% 4% 96% 100% 12% 88% 24% 76% 100% 4% 96% 66% 34% 71% 29% 48% 52%

7.5-10 11% 89% 4% 96% 100% 14% 86% 42% 58% 100% 8% 92% 74% 26% 76% 24% 51% 49%

More than 10 21% 79% 8% 92% 3% 97% 21% 79% 62% 38% 100% 8% 92% 88% 12% 81% 19% 62% 38%

Source: Deloitte Consumer Insights survey (2017)

Figure 16: Brand preferences for electronic products and appliances categories by monthly household income level
Monthly household
income level, IDR million Brand
Audio and Video Electronics Products Household Appliances (Major) Household Appliances (Small) preference

Less than 1 21% 13% 28% 38% 3% 22% 17% 3% 55% 5%5%11% 79% Chinese
Japanese
1-2 10% 21% 21% 3% 45% 5% 27% 18% 2% 48% 5% 9% 78% Korean
5% 3% Western
2-3 8% 26% 24% 6% 36% 3% 37% 23% 6% 31% 5%5%10% 17% 63% Local

3-5 6% 36% 27% 4% 27% 2% 34% 35% 3% 26 % 2% 19% 12% 11% 56%

5-7.5 5% 28% 30% 3% 34% 2% 28% 36% 5% 29% 3% 20% 15% 10% 52%

7.5-10 4% 31% 37% 2% 26% 3% 32% 38% 3% 24% 2% 27% 9% 13% 49%

More than 10 4% 35% 45% 4% 12% 5% 34% 36% 6% 19% 3% 24% 16% 21% 36%

Source: Deloitte Consumer Insights survey (2017)

Figure 17: Brand preferences by city

Beverages Confectionery Packaged Personal Clothing and Household Tobacco Audio and Household Household
Food Hygiene Footwear Cleaning Video Appliances Appliances
Products Products Electronics (Major) (Small) Brand
Products preference
Bandung 100%
100% 100% 100% 100% 1% 99% 100% 100% 13% 87% 15% 85% 11% 89% Foreign
Local
Jakarta 9% 91% 6% 94% 1% 99% 17% 83% 50% 50% 100% 10% 90% 87% 13% 84% 16% 56% 44%

Makassar 2% 98% 100% 100% 12% 88% 7% 93% 100% 1% 99% 64% 36% 67% 33% 50% 50%

Medan 4% 96% 3% 97% 100% 5% 95% 14% 86% 100% 100% 39% 61% 37% 63% 81% 19%

Surabaya 100% 100% 100% 100% 3% 97% 100% 2% 98% 64% 36% 70% 30% 62% 38%

Source: Deloitte Consumer Insights survey (2017)

16
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 years 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.

17
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 18: Drivers of purchase for different product categories

Beverages Packaged Food

Taste 33% Taste 27%


Price 13% Price 15%
Health 12% Health 14%
Overall Quality 9% Overall Quality 9%
Smell 8% Safety 9%
Trust 8% Trust 8%
Safety 7% Smell 7%
Availability 3% Availability 4%
Packaging 3% Promotion 4%
Promotion Innovation 2%
2%
Innovation Packaging 1%
2%

Clothing and Footwear Household Cleaning Products

Comfort 22% Price 19%


Size Fit 17% Safety 14%
Price 14% Overall Quality 13%
Appearance 13% Promotion 11%
Durability 9% Availability 10%
Overall Quality 9% Trust 9%
Promotion 6% Smell 7%
Popularity 4% Health 7%
Safety 3% Innovation 6%
Availability 2% Packaging 4%
Packaging 1%

Personal Hygiene Products Household Appliances (Major)

Price 19% Technology 23%


Overall Quality 13% Price 18%
Promotion 12% Trusted Brand 17%
Safety 10%
Overall Quality 16%
Trust 10%
Design 9%
Smell 10%
Health Promotion 7%
8%
Availability 8% Innovation 6%
Innovation 6% After Sales Service 2%
Packaging 4% Availability 2%

Household Appliances (Small) Audio and Video Electronics Products

Technology 21% Technology 20%


Price 20% Price 19%
Overall Quality 17% Trusted Brand 16%
Trusted Brand 15%
16% Overall Quality
Promotion 8% 11%
Design
Design 8% 8%
Innovation Innovation
5% 7%
Availability Promotion
3% 2%
After Sales Service 2% After Sales Service 2%
Availability

Source: Deloitte Consumer Insights survey (2017)

18
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 19: Drivers of purchase for Clothing and Footwear by monthly household income level

Monthly household
income level, IDR million Drivers of
1% purchase
Less than 1 20% 22% 16% 12% 11% 3% 5% 2% 4% 4% Comfort
1% Size Fit
1-2 20% 20% 18% 10% 8% 8% 7% 2% 2% 4% Price

2% Appearance
2-3 23% 19% 16% 13% 10% 6% 5% 3% 3% Durability

1% Overall
Quality
3-5 22% 15% 15% 13% 10% 7% 7% 4% 3% 3%
Promotion
1% 1% Popularity
5-7.5 22% 16% 12% 13% 11% 12% 5% 5% 2%
Safety
2%
Availability
7.5-10 24% 19% 11% 14% 9% 7% 6% 5% 2% 1% Packaging

More than 10 21% 14% 12% 14% 9% 12% 6% 5% 4% 2%1%

Source: Deloitte Consumer Insights survey (2017)

Figure 20: Drivers of purchase for Personal Hygiene Products by monthly household income level

Monthly household
Drivers of
income level, IDR million
purchase
Less than 1 23% 6% 11% 11% 10% 12% 9% 9% 4% 5% Price
Overall
Quality
1-2 23% 11% 8% 11% 9% 11% 10% 9% 5% 3%
Safety
Trust
2-3 22% 11% 8% 11% 8% 11% 8% 11% 7% 3%
Health

3-5 21% 14% 10% 10% 10% 9% 7% 8% 8% 3% Smell


Promotion

5-7.5 17% 15% 6% 13% 10% 10% 11% 7% 6% 5% Availability


Innovation
7.5-10 16% 15% 8% 13% 11% 8% 8% 8% 9% 4% Packaging

More than 10 17% 14% 9% 13% 11% 9% 12% 7% 5% 3%

Source: Deloitte Consumer Insights survey (2017)

19
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

14% Selected product option


Lower price
Similar price
Higher price

60%

26%

2017

Source: Deloitte Consumer Insights survey (2017)

Figure 22: Indonesian consumers selecting different price options, by household income level
Monthly household Selected product
income level, IDR million option

Less than 1 36% 55% 9% Lower


price

1-2 31% 60% 9% Similar


price
2-3 37% 53% 10% Higher
price
3-5 30% 60% 10%

5-7.5 22% 65% 13%

7.5-10 27% 60% 13%

More than 10 29% 55% 16%

Source: Deloitte Consumer Insights survey (2017)

20
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 products price range and its specific drivers of purchase.

Figure 23: Key drivers when purchasing products at different price points

Beverages Confectionery Packaged Food

#1 Taste (26%) Taste (21%) #1 Taste (25%) Taste (27%)


#1 Health Trust (16%)
#2 Price (16%) Health (15%) #2 Health Price (15%)
(19%)
(16%)
#3 Health Price (13%)
#2 Taste (16%) Price (15%)
(14%) #3 Price (15%) Overall
#3 Price (15%) Safety (15%) Quality
(13%)

Personal Hygiene Products Clothing and Footwear Household Cleaning


Products

#1 Price (20%) Price (17%)


#1 Comfort Comfort #1 Price (22%) Safety (29%)
#2 Safety Health (13%)
(19%) (23%)
(12%) #2 Promotion Trust (16%)
#2 Price (17%) Size Fit (16%)
#3 Promotion Overall
(17%)
(11%) Quality #3 Overall Smell (8%)
(13%) #3 Size Fit Appearance Quality
(11%) (17%) (12%)

Tobacco Audio and Video Electronic Household Appliances


Products (Small)

#1 Price (25%) Trust (18%)


#1 Price (25%) Technology #1 Price (25%) Technology
#2 Smell (13%) Price (16%)
(23%) (32%)
#3 Taste (11%) Safety (15%)
#2 Technology Trusted #2 Overall Trusted
(16%) Brand (20%) quality Brand (20%)
(18%)
#3 Overall Price (15%)
Quality #3 Technology Overall
(15%) (15%) Quality
(14%)

Lower priced option Higher priced option

Note: % denotes percentage of survey respondents

21
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

4. Buying channels
A big market for Minimarkets
Although 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

20%

18%

11%

10%

10%

10%

8%

7%

6%

Source: Deloitte Consumer Insights survey (2017)

4 Rise of Minimarkets: Indonesias Purchase Shift from Super and Hypermarkets to Minimarkets. Snapcart, 10 March 2016. https://
snapcart.asia/rise-minimarkets-indonesia

22
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 25: Drivers of purchase for Traditional Trade and Modern Trade channels

Drivers of
Warungs 10% 14% 6% 6% 34% 4% 3% 23% purchase
Assortment
Wet Markets 16% 19% 18% 3% 9% 18% 12% 5%
Availability
Convenience
Street Hawkers 15% 15% 11% 3% 24% 12% 12% 8%
Opening
Non-chain Individual Hours
Electronic Stores 23% 23% 15% 4% 3% 18% 13% 1%
Price
Promotion
Minimarkets 5% 7% 8% 14% 25% 3% 5% 33%
Service
Location
Supermarkets 14% 14% 5% 7% 33% 6% 3% 18%

Hypermarkets 19% 19% 16% 6% 8% 18% 10% 4%

Brand Stores 11% 13% 16% 10% 9% 20% 8% 13%

Electronic Chain 29% 20% 15% 3% 7% 17% 8% 1%


Stores

Source: Deloitte Consumer Insights survey (2017)

Figure 26: Preference for Traditional Trade and Modern Trade channels by city

Channel preference
Bandung
43% 57% Traditional Trade

Modern Trade
Jakarta 23% 77%

Makassar 45% 55%

Medan 45% 55%

Surabaya 42% 58%

Source: Deloitte Consumer Insights survey (2017)

Figure 27: Preference for Traditional Trade and Modern Trade channels by product category and city

Beverages Clothing and Confectionery Household Packaged Personal Hygiene Tobacco


Footwear Cleaning Products Food Products Channel preference

Bandung 53% 47% 56% 44% 52% 48% 43% 57% 50% 50% 41% 59% 70% 30% Traditional
Trade

Jakarta 35% 65% 15% 85% 36% 64% 15% 85% 41% 59% 13% 87% 57% 43% Modern
Trade

Makassar 54% 46% 36% 64% 58% 42% 24% 76% 55% 45% 27% 73% 86% 14%

Medan 51% 49% 41% 59% 49% 51% 38% 62% 56% 44% 40% 60% 80% 20%

Surabaya 62% 38% 31% 69% 41% 59% 44% 56% 57% 43% 41% 59% 89% 11%

Source: Deloitte Consumer Insights survey (2017)

23
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Filling the (virtual) shopping carts


On 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

Average shopping cart size per visit, IDR

105,795
10.4%
93,427 94,777
+24.6% +4.2% 84,757
81,314
74,953

+9.7% 60,465
55,133

2016 2017 2016 2017 2016 2017 2016 2017


Beverages Packaged Food Personal Hygiene Products Household Cleaning Products

Source: Deloitte Consumer Insights survey (2016 and 2017)

24
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 trust


Although 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 Indonesias 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

TV 25%

In Store Promotion 24%


Friends and
Colleagues 21%

Relatives 18%

Outdoor Ads 5%

Digital Media 2%

Experts 2%

Print Ads 2%
Radio 1%

Source: Deloitte Consumer Insights survey (2017)

25
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 30: Preferred sources of information by product category

Sources of
information
1% 1%
TV
Beverages 26% 20% 23% 18% 5% 2% 4%
2% 1% 1% In Store
Promotion
Confectionery 27% 22% 24% 16% 5% 1%
Friends and
1% 1% 1% Colleagues
Packaged Food 28% 20% 23% 20% 5% 1% Relatives
2% 2%
Personal Hygiene Outdoor Ads
Products 27% 24% 20% 16% 5% 2%2%
Digital Media
1% 1%
Experts
Clothing and Footwear 15% 28% 26% 18% 3% 6% 2%
Print Ads
1% 1%
Household Cleaning Radio
Products 28% 24% 18% 19% 5% 2% 2%
1% 1% 2%
Tobacco 25% 16% 25% 19% 8% 2%

Audio and Video


24% 25% 17% 16% 7% 4% 3%3%1%
Electronics Products
Household
Appliances (Major) 25% 26% 15% 15% 8% 3% 3% 4%1%

Household
Appliances (Small) 25% 26% 16% 17% 6% 1% 3% 4% 2%

Source: Deloitte Consumer Insights survey (2017)

Figure 31: Preferred sources of information by monthly household income level

Monthly household
income level, IDR million Sources of
1% 1% 1% information
Less than 1 25% 22% 25% 19% 4% 2% TV
1% 1% 1% In Store
Promotion
1-2 26% 22% 23% 19% 6% 1%
1% 1% Friends and
Colleagues
2-3 26% 24% 21% 17% 6% 2% 2%
Relatives
2% 2% 1%
Outdoor Ads
3-5 26% 23% 21% 17% 6% 2%
2% 2% Digital Media

5-7.5 25% 22% 20% 19% 6% 2% 2% Experts


2% 1% Print Ads
7.5-10 25% 25% 20% 16% 6% 3% 2% Radio
1%
More than 10 25% 25% 20% 16% 4% 4% 2% 3%

Source: Deloitte Consumer Insights survey (2017)

26
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

TV vs. Digital: The battle begins


Although 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

Beverages Confectionery

26% 27%
Lower priced Lower priced
2% 1%

21% 20%
Higher priced Higher priced
8% 3%

Packaged Food Household Cleaning Products

Lower priced 29% Lower priced 29%


1% 1%

Higher priced 27% Higher priced 19%


1% 4%

Clothing and Footwear Personal Hygiene Products

Lower priced 13% Lower priced 26%


5% 1%

Higher priced 11% Higher priced 20%


7% 4%

Tobacco Audio and Video Electronic Products

Lower priced 25% Lower priced 22%


1% 4%

Higher priced 21% 21%


Higher priced
1% 4%

Household Appliances (Major) Household Appliances (Small)

Lower priced 24% 23%


Lower priced
2% 1%

23% 20%
Higher priced Higher priced
4% 3%

Sources of information
TV Digital Media

Source: Deloitte Consumer Insights survey (2017)

27
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

6. e-Commerce

High growth, even higher potential Figure 33: The rise of online shopping
Driven by increasing mobile data usage, smartphone
Percentage of respondents with prior
penetration and Internet penetration levels, this
online shopping experience
edition of the survey revealed a significant increase
83%
in the percentage of respondents with prior online
2016
shopping experience. Last year, only 17% reported
having shopped online, but this figure has since more 2017
than doubled to 42% this year, indicating rapid growth 58%
(see Figure 33).

42%
This is likely to be only the beginning. Indonesias
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 17%
just be on the cusp of realising the full potential of its
e-commerce industry.

Yes No
To capitalise on this opportunity, companies must
first understand what their consumers want from Source: Deloitte Consumer Insights survey (2016 and 2017)
their online shopping experience. For Indonesian
consumers, the drivers of online purchase appear
to involve considerations on the dimensions of Topping it off
Practicality, Price and Product Range (Availability) Launched in February 2009, Tokopedia is now
(see Figure 34). one of Indonesias most successful and popular
e-commerce websites. It provides an online
Many Indonesian consumers, given their fixation platform for sellers to market and distribute
on bargain hunting, relish the opportunity to nab their products, connecting them to logistics
deals online that are not available elsewhere. agents and payment networks, such as BCA
Numerous companies have begun to capitalise on this KlikPay, ClickPay Mandiri, KlikBCA and Mandiri
observation to drive growth, for instance, by offering e-Cash, to facilitate transactions.
coupons and price comparison features to boost the
shopping experience and increase site traffic. Recently, Tokopedia announced the launch of its
Mitra Toppers programme, a partnership with
Overall, Clothing and Footwear, Tickets (including lenders to support e-commerce businesses in
airline and movie tickets), and Personal Hygiene raising capital to develop their ventures.
Products were the top three product categories
purchased through online channels. There are, Tokopedia is also the first Internet company in
however, some variances across the different income Southeast Asia to receive trust funds amounting
levels for categories such as Electronic Products (see to USD 100 million from Softbank and Sequoia
Figure 35). Capital in 2014, the largest investment in a
Southeast Asian start-up to date.

Source: Tech in Asia, Tokopedia.com

5 Indonesia will be Asias next biggest e-commerce market. TechCrunch. 29 July 2016. https://techcrunch.com/2016/07/29/indonesia-will-
be-asias-next-biggest-e-commerce-market

28
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 34: Drivers for online shopping

Practical 31%

Price 26%
Product Range
(Availability) 17%

Reliable Review 14%

Promotion 12%

Source: Deloitte Consumer Insights survey (2017)

Figure 35: Breakdown of online purchases by monthly household income level

Monthly household
income level, IDR million
Product categories

Less than 1 90% 10% Clothing and


Footwear
Electronics
1-2 44% 29% 13% 5% 7% 2% Products
1% 1%
Tickets
2-3 54% 12% 10% 3% 15% 2% 2% Books
1%
Personal Hygiene
3-5 48% 18% 13% 6% 7% 4% 3% Products
1% 1% Packaged Food
5-7.5 42% 18% 19% 6% 6% 3%1%4% Household
Cleaning Products
1% 1%
7.5-10 32% 19% 16% 9% 14% 2% 3% 3% Confectionery
1% Beverages
More than 10 31% 12% 17% 8% 11% 5% 5% 8% 2% Others

Source: Deloitte Consumer Insights survey (2017)

29
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Emerging market players


Although Indonesias 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, Elevenias 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


e-Commerce
platforms

Beverages 50% 25% 25% Bli Bli

Bukalapak
Confectionery 14% 9% 18% 9% 50% Elevania

Lazada
Packaged Food 9% 9% 9% 4% 5% 64%
OLX
Personal Hygiene
Products 3% 2% 4% 43% 2% 45% 1% Toko Bagus

Tokopedia
Clothing and
Footwear 3% 10% 5% 38% 2% 1% 17% 24%
Traveloka
Household Zalora
5% 18% 4% 22% 4% 11% 36%
Cleaning Products
1% 1%
Tickets 2% 2%2% 91% 1%

Books 2% 52% 1% 3% 1% 8% 33%

Audio and Video


2% 25% 3% 49% 4% 16% 1%
Electronics Products

Household 3%
23% 46% 11% 17%
Appliances (Major)

Household
Appliances (Small) 6% 13% 4% 53% 4% 3% 17%

Source: Deloitte Consumer Insights survey (2017)

30
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Deterrents differ by city


Across 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 Bukalapaks collaboration with GoJek, and Tokopedias 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).

No credit card? Get Kredivo


Kredivo 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

6 Indonesia Country Report. Lafferty Global Research.

31
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Craving for Korea


Elevenia 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 going


Launched 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 experience


With 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 personalisation


Many 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 consumers 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 insights


Through 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

32
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Figure 37: Deterrents for online shopping by monthly household income level

Monthly household
income level, IDR million 1% Deterrents

30% 25% 13% 10% 8% 7% 6% Dont Know How


Less than 1
1% 1% Not Secure
Delivery Time
1-2 23% 19% 5% 15% 10% 9% 14% 2%2% Dicult to
1% 1% Exchange or
Return
2-3 25% 19% 8% 14% 8% 6% 15% 3% No Credit Card
Limited Product
3-5 14% 25% 6% 19% 8% 10% 9% 5% 2% 2% Range (Availability)
More Expensive
1% 1% 1% Price
5-7.5 18% 25% 6% 14% 11% 9% 11% 3% Lack of Trust
Poor Quality
1% 1%
Cannot See
7.5-10 13% 27% 14% 17% 3% 8% 10% 4% 2% Product Directly
1% 1% Bad Experience
More than 10 25% 25% 12% 20% 3% 8% 4% 1% Cannot Choose
Product
Must Install
Application
Source: Deloitte Consumer Insights survey (2017) Troublesome

Figure 38: Deterrents for online shopping by city

1% 1% Deterrents
Bandung Dont Know How
12% 24% 2% 15% 5% 7% 26% 3% 2% 2%
Not Secure
1%
Delivery Time
Jakarta 26% 26% 11% 13% 9% 8% 3% 3% Dicult to
1% 1% Exchange or
Return
Makassar 6% 23% 13% 33% 1% 12% 9%
No Credit Card
Limited Product
Medan 32% 14% 2% 13% 18% 6% 15% Range (Availability)
1% More Expensive
Price
Surabaya 31% 21% 1% 4% 8% 7% 15% 3% 7% 2% Lack of Trust
Poor Quality
Cannot See
Product Directly
Source: Deloitte Consumer Insights survey (2017) Bad Experience
Cannot Choose
Product
Must Install
Application
Troublesome

33
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 Indonesias digital market. Given Indonesias 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.

34
Deloitte Consumer Insights | Embracing bricks and clicks in Indonesia

Contact us
Researched and written by:

Eugene Ho Stanley Song


Executive Director, Consulting Director
eugeneho@deloitte.com Consulting
+65 6232 7133 +65 6232 7303
stansong@deloitte.com

Southeast Asia C&IP practice

Southeast Asia and Singapore Myanmar


Eugene Ho Aye Cho
eugeneho@deloitte.com aycho@deloitte.com
+65 6232 7133 +65 6800 2255

Brunei Lao PDR


Pengiran Moksin Choopong Surachutikarn
pmoksin@deloitte.com csurachutikarn@deloitte.com
+673 222 5880 +66 2676 5700

Cambodia Philippines
Kimleng Khoy Melissa Delgado
kkhoy@deloitte.com medelgado@deloitte.com
+855 2396 3788 +63 2 581 9000

Guam Thailand
Mike Johnson Manoon Manusook
mikjohnson@deloitte.com mmanusook@deloitte.com
+1 671 646 3884 +66 2676 5700

Indonesia Vietnam
Xenia Ubhakti Nguyen Vu Duc
xubhakti@deloitte.com nguyenvu@deloitte.com
+62 21 2992 3100 +84 4 6288 3568

Malaysia
Kavita Rekhraj
krekhraj@deloitte.com
+60 3 7610 9006

35
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private
company limited by guarantee (DTTL), its network of member firms, and their
related entities. DTTL and each of its member firms are legally separate and
independent entities. DTTL (also referred to as Deloitte Global) does not provide
services to clients. Please see www.deloitte.com/id/about to learn more about our
global network of member firms.

Deloitte provides audit, consulting, financial advisory, risk management, tax


and related services to public and private clients spanning multiple industries.
Deloitte serves four out of five Fortune Global 500 companies through a globally
connected network of member firms in more than 150 countries and territories
bringing world-class capabilities, insights, and high-quality service to address
clients most complex business challenges. To learn more about how Deloittes
approximately 225,000 professionals make an impact that matters, please
connect with us on Facebook, LinkedIn, or Twitter.

About Deloitte Southeast Asia


Deloitte Southeast Asia Ltd a member firm of Deloitte Touche Tohmatsu Limited
comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia,
Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam was
established to deliver measurable value to the particular demands of increasingly
intra-regional and fast growing companies and enterprises.

Comprising 270 partners and over 7,300 professionals in 25 office locations, the
subsidiaries and affiliates of Deloitte Southeast Asia Ltd combine their technical
expertise and deep industry knowledge to deliver consistent high quality services
to companies in the region.

All services are provided through the individual country practices, their
subsidiaries and affiliates which are separate and independent legal entities.

2017 Deloitte Southeast Asia Ltd