Jakarta, May 8, 2018. Neuroscience and Artificial Intelligence-powered market research agency Neurosensum has revealed results of its exhaustive study on consumer behaviour and consumption pattern in Indonesia, which has long-term ramifications not only for companies but the economy as a whole. This research comprises of 1000 face to face interviews during March – April 2018 across Jabodetabek, Surabaya, Medan, Makasaar, Yogyakarta, Palembang, Bandung and Balikpapan. Sample of the study reflects urban population.
According to Rajiv Lamba, Managing Director of Neurosensum, the research was a comprehensive study of consumer’s behaviour and consumption pattern in Indonesia. This will have long term ramifications for companies and the country’s economy. “The result of our research shows significant changes in consumers’ behaviour in term of how they spend their money. This will create greater challenges for FMCG and Personal Care industry in Indonesia. Agile and new companies can leapfrog the long-established companies,” Rajiv Lamba said.
Rise of the ‘experiential’ economy
- The Indonesian consumers are no longer satisfied with mere products. She/he is now a discerning, aware buyer who seeks ‘experience’ over traditional goods and services.
- Consumers are shifting expenditure from traditional FMCG categories to categories/products providing experience such as leisure, travel electronic gadgets and mobile data.
- Share of wallet on Categories such as Food and Beverages has gone down 2 pts from 33% to 31% in past 2 years.
- Consumers across age groups and income levels are cutting down their share of expenditure on FMCG categories, decline is more prominent among Gen Z.
Need for Leisure
- Participants across age groups and income levels have pointed out that stress in daily life is rising. Consequently, the need for escapism is leading to the rise in leisure. This pattern is reflected in movement of consumer expenditure as well.
- Share of Wallet on Leisure has gone up by 40% (1.4 times) in past 2 years. This increase is especially driven by Gen Z.
- For example, Share of Wallet on categories like traveling (Domestic and International) is up by 30% (1.3 times) in past 2 years.
- Future for Leisure Traveling is bright as numbers of consumers opting for Leisure traveling is expected to rise by 3 times in next 2 years. Need for leisure has also shifted spending towards Watching Movies and concerts. Share of Wallet towards Movies and Concerts has increased by 40% (1.4 times) in past 2 years.
Rise of Consumer Electronics & Data
- Rise of Experiential economy has also boosted expenditure on Electronic Gadgets and Data. Consumers are sharing their experiences and key moments of their life on Instagram, Facebook and other social media.
- Share of Wallet on mobile phones grew by 21% (1.2 times) in past 2 years.
- For Electronic gadgets share of wallet has increased by 50% (1.5 times) in past 2 years.
- Curiosity for new experiences and need for sharing them has fuelled growth of Internet data. On an average consumer are spending more than 5 hours on social media. Share of Wallet for Mobile Data and Broadband categories has almost doubled in past 2 years.
Twin-blow for the FMCG companies
- Our study shows that FMCG makers are facing a dual threat. On one hand, consumers are scaling down purchases/downgrading within FMCG categories due to a shift towards an experiential economy as well as increase in planned purchases of electronics and leisure travel.
- The second factor is the rise of local brands. Local brands are taking away share from large established brands. Our study shows that people are willing to spend on new, upcoming brands if there is a unique offering and/or an experience which some of the established brands are not able to provide.
Rise of Health and wellness
- Results of the study show a strong movement towards Health and Wellness.
- Share of wallet on spa, massage and reflexology has rose by 40% (1.4 times) in past 2 years. It is especially driven by upper class and millennials, among whom it has almost doubled in past 2 years.
- While Share of Wallet on Medication and OTC Products has declined by more than 10%.
- Share of Wallet has increased by more than 80% for Fitness classes, Gym Membership and sports facilities etc.
- Rise of Health and Wellness is especially driven by Upper class and Genz. Among these segments share of wallet on health and wellness has more than doubled in past 2 years.
Capturing Gen z is key to the future
- One of the key findings of this research is the emergence of Gen Z (those born after 1996). While traditionally companies have focused on Millennials, in future they must target Gen Z to achieve growth. Current Gen Z are the future millennials.
- Gen Z consumers are growing fast in size and purchasing power.
- More importantly, traditional companies are losing out to this key demographic due to outdated messaging as well as offerings which are not relevant to them.
- The share of wallet for Gen Z is skewed towards eating out, internet, health and fitness as well as leisure.
In summary, Rajiv said ‘result from the research shows Indonesian consumers are becoming more discerning with their choices, they are becoming more health conscious, and they want more experiences from their brands and products’. It’s important for companies to move away from one-way communication to two way engaging conversations and provide consumers with innovative and relevant experiences.