Indonesia: Asia’s Next Big Opportunity

The Boston Consulting Group has a new report examining Indonesia’s rising middle-class and affluent consumers.

Indonesia’s middle class is growing in size and purchasing power. With a population of 248 million, it is already the fourth-largest in the world. Its middle class expected to double to 141 million by 2020. During that period, some 8 million to 9 million people will enter the middle class each year. More than 60 percent of its population are currently aged 20-65 – the principal working years – making it twice as large than Vietnam and nearly three times the size of South Korea’s entire population. Another 27 percent of Indonesia’s population is below age 15. For business and education, this growth trajectory is stunningly attractive.

Growth locations

Middle class growth is occurring throughout the country (both cities and regions). This grouping is particularly prominent now in 25 locations and expected to double by 2020. This has implications on business already in Indonesia and wanting to expand their presence – for example considering how a company organises its sales force, structure its supply-chain network or expand its distribution footprint. And for new business entering Indonesia, they would need to factor in the growth regions in any market entry strategy.

Social networking

Most if not all households throughout the country own a television. Digital technology is however becoming more prevalent. Consumers are extremely connected. In 2012, there were more than 50 million Facebook users in Indonesia, making it the fourth largest Facebook population in the world. There are 29 million Twitter accounts representing the fifth largest in the world. More Twitter posts originate in Jakarta than in any other city in the world. The majority of Internet users go online using a mobile device. Smartphones is proliferating and driving growth of mobile Internet.

Challenges

Despite Indonesia’s transforming demography, it will need to overcome several challenges. Infrastructure bottlenecks, including the quality and availability of airports, highways, railways, seaports and power plants are a priority. Developments have not kept pace with expectations.

Upgrading labor force training is another challenge. The sheer size of the working-age population requires significant investment from public and private entities to sustain long-term economic growth.

Opportunities

To win in Indonesia, BCG recommends targeting key regions where the middle class numbers will double by 2020. Focusing on different wealth segments (poor, aspirant, emerging middle, middle, upper middle, affluent and elite) in rural and urban settings is another consideration. Both will require customising regional strategies and crafting marketing messages to suit.



Categories: Economies

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