High consumer confidence, digital prowess and travel enthusiasm are making Indonesians increasingly important.

Indonesian travellers have the fastest growth in Tax Free ShoppingA number of countries offer VAT/GST refunds to international... More across APAC, far ahead of Chinese and Japanese. Although they only account for 8% of Tax Free ShoppingA number of countries offer VAT/GST refunds to international... More (TFS) spend in the region, they record the highest increase of TFS sales out of all nationalities observed, +13% from December to February 2019 over the same period in 2018.

Confident consumers

The country’s first ever presidential election in April 2019 and the tax cuts proposed as part of candidates’ election program is providing a significant boost to the Indonesian economy and encouraging consumers’ spending. While GDP growth is predicted to slow slightly over the coming year, the country’s economy is stable and Indonesians’ consumer confidence remains buoyant. The Financial Times’ Economic Sentiment Index shows consumer confidence at its highest level since 2014, while Nielsen’s Global Consumer Confidence Survey has seen Indonesians in the world’s top 3 most optimistic nations for the last 2 out of 3 quarters.

At the end of 2018, 63% of Indonesians told Nielsen that the coming year would be “a good time for them to shop for the things they want and need”, up from 53% the previous year. That spending is increasingly focused on key categories such as technology and travel, as well as education, entertainment and groceries.

Growing middle class

Indonesia’s middle class is the fourth-largest in the world, according to Euromonitor, at 19.6 million households, a figure expected to rise to 23.9 million by 2030. The regions of Kepulauan Riau, Papua, and Kalimantan Timur are forecast to drive much of the growth in the country’s consumer market, due to expanding populations. With a young population (median age is 28) and strong consumer confidence, the Indonesian market has huge future potential.

To clarify the scope of opportunity in Indonesia, this is a similar rate of growth to that experienced in China between 2010 and 2015

Always online

One of the defining characteristics of Indonesian consumers is their high level of technology adoption, making them confident online shoppers and social media mavens. Empowered by affordable mobile data and surrounded by innovative start-ups, Indonesians are open to digital tools and online businesses. The country is home to some of the world’s biggest tech startups, most notably Traveloka, an online travel booking system that boasts around 900,000 downloads of its booking app every month.

McKinsey estimates that Indonesia’s digital economy will boom from $8bn in 2017 to $65bn by 2022. To clarify the scope of opportunity in Indonesia, this is a similar rate of growth to that experienced in China between 2010 and 2015, and Indonesia’s boom could be equally transformative for the travel and retail industries worldwide.

As elsewhere, Indonesia’s young “digital natives” are fuelling growth in technology and travel. Key to young Indonesians’ travel experience is social media inspiration and easy online booking. The Travelport Global Digital Traveller index places Indonesia as the second-most digitally advanced travellers (after India), using 10-12 apps during the search, booking and destination parts of their trips.

Traveller woman exploring the small alleys of Singapore

Where do they go?

Indonesians have long been an important nationality for Singaporean merchants, and that influence looks set to continue. Global Blue predicts a +5% in Indonesians TFS spend in the Singapore from March to May 2019. A closer look at Indonesians’ average spending brackets in Singapore shows that they are the one nationality increasing the most when compared to Chinese, Malaysians’ or other nationalities. Most importantly, the highest Indonesian average spendRefers to average value of a transaction (usually applying t... More bracket of 20.500SGD increases by an impressive +15%. The nationality continues to show strong growth across its other less important spending intervals.

As Indonesians become more confident travellers abroad, they venture towards new locations including India. Indeed, the county has recently introduced a visa waiver for incoming Indonesian travellers. Research by Traveloka shows that Japan, Australia, Taiwan were in the must-visit lists for Indonesians in 2018. Japan holds strong appeal: despite a new 1,000 yen departure tax, Indonesians are one of the country’s fastest-growing visitor groups.

All pointers show that Indonesians are set to be APAC’s most important TFS growth drivers in the coming years.