How will local and more international countries’ retail and travel industries benefit from the world’s fourth-largest market?
In Indonesia, rising incomes, higher employment rates, and growing consumer confidence mean the country is gradually strengthening its reputation in the global economy.
- Indonesians report second-highest spending in APAC region between January and August 2017
- Luxury goods purchases rise by +6% over the same period
- Sales of men’s apparel significantly higher than women’s
Indonesia has averaged +6% annual growth between 2007 and 2016, largely due to the increased numbers joining the middle class. According to Boston Consulting Group research, 52 million people – 20% of the population – are now middle class, while the upper middle class currently number 44 million and make up 17% of the population. By 2020, the middle class is projected to rise to 68 million and 25%, and the upper class 73 million and 27%. Both groups exhibit strong consumer confidence.
The key demographic force in the Indonesian market are the growing numbers of young, affluent and brand-savvy professionals, according to Euromonitor. With an annual income of USD4,188, they are the new wave of luxury consumers in the country, who are highly engaged with shopping apps, aspirational social media like Instagram, and celebrity endorsement.
Indonesians are one of the top Globe Shopping nations in the APAC region, with the second-highest spending between January and August 2017 (after China), buying USD405 million worth of goods over the period. Luxury goods purchases grew by +6%, while the value of their shopping at contemporary and fast fashion brands increased +18%. Fashion purchases, from across the spectrum, make up 48% of their purchase, while Watches and Jewellery makes up 19.5%.
Research from Euromonitor suggests that Indonesian men continue to drive interest in luxury goods, with sales for men’s apparel and accessories significantly higher than for women’s items. Due to the casual nature of dressing in Indonesia, branded jeans are popular, while major luxury names are popular because they offer goods at a variety of different price points. Meanwhile, an influx of new retailers in Indonesia are broadening consumers’ brand awareness as well as global retailers like bringing labels from France, South Korea and Japan into the country’s fast evolving retail landscape.
Indonesians’ appetite for outbound travel continues to grow with their incomes, with Mastercard Intelligence projecting annual growth of +9% over the next five years, to hit 10.6 million travellers by 2021. Nearby destinations are popular, led by Malaysia and Singapore, but Indonesians are increasingly looking at far-flung destinations too, with bookings to European destinations rising +38% over the last year.
While their destinations may be getting more adventurous, many Indonesians prefer the peace of mind and simplicity offered by group trips, according to Euromonitor. Affluent Millennials, meanwhile, are more likely to book trips themselves, based on recommendations from online reviews or word of mouth.