Yes, Indonesia is incredibly complex for brands. But here’s how you can win the market

According to a McKinsey and Co report, some 90 million Indonesians will join the consumer class by 2030. That’s more than in any other emerging market in the world, apart from China and India. For local brands, this will mean an additional US$1 trillion in annual spending by increasingly optimistic buyers.

Indonesia’s consumer spending currently sits at more than at 61 percent of the nation’s GDP. As the percentage of urbanites grows to roughly 71 percent of the total population in 15 years, spending is expected to grow in financial services, travel, leisure, and apparel.

It’s not just local firms and tech companies that can benefit. Tech lust among Indonesia’s consumers is increasingly geared toward Asian brands.

But Indonesia’s market is a complex one. It should be obvious to incoming startups and brands that localization is necessary. But that’s easier said than done in an economy where preferences are scattered across more than 17,000 islands. Here are a few points that tech brands should consider before coming to Indonesia.

Brand awareness

McKinsey claims Indonesians attach more importance to brands than any other nation it has seen at this stage of development, including China. 60 percent of Indonesian consumers prefer local brands. But interestingly enough, consumers aren’t strongly aware of brand ownership. Many consider Nestlé’s Kit Kat brand, for example, to be local. So multinationals aren’t exactly at a disadvantage, provided they can get good market positioning.

One way to do this is to partner with a local firm. Even if the brand or startup doesn’t actually have boots on the ground in Indonesia, it’s still worthwhile to form an alliance with a local marketing agency. A great example of this was Line, the popular messaging app, when it made an entrance into the Indonesian market. Line, which is based in Japan, partnered with local PR company FleishmanHillard in Jakarta, and set up seasonal promotions and pop-up stores around the capital. Indonesians have responded well to Line. It now has 30 million users nationwide as it battles WhatsApp.

Different strategies in different cities

Understanding the dynamics and differences between Indonesia’s major cities is crucial. McKinsey found that the behavior of buyers in Surabaya, for example, tends to be influenced more by brand and image than that of consumers in Jakarta. Surabaya’s consumers are also twice as likely to seek advice from family and friends before making purchase decisions. Incoming startups and growth businesses alike should be sure to do their homework with this in mind.

A report from global business strategy advisor Boston Consulting Group says:

Many companies choose to enter the megacities before expanding beyond. This strategy has merit in terms of establishing a presence and brand recognition, and it can yield the quickest returns. But companies should not be lulled into a false sense of security from double-digit growth in these cities. They represent only a fraction of the opportunity – and a shrinking one at that, as smaller cities continue to experience higher growth rates.

See: Why Indonesia is an upcoming tech market that can’t be ignored

Getting with the culture

A new report from global consumer insights company Trend Watching cites the now popular selfie tool Tongsis as one of the most successful products to capitalize on Indonesia’s cultural nuances. The report says:

Tongsis is short for Tongkat Narsis – literally ‘Narcissism Stick’, but better translated as ‘Selfie Stick’. It’s actually a monopod with a metal clamp at one end that holds a mobile phone, allowing users to take ‘massfies’ or ‘selfies’ with a wider angle. A perfect innovation in light of the popularity of spontaneous group photos in Indonesia.

Going digital

In Indonesia today, product information flows primarily from TV advertising and personal recommendations. McKinsey claims fewer consumers use the web for pre-purchase decisions – five percent in Indonesia versus 28 percent in China. But internet access is rising at an annual rate of 20 percent, and 100 million Indonesians will be connected to it by 2016.

Already, 60 percent of Indonesian adults own a mobile phone, Facebook usage is strong, and higher-income residents are flocking to the internet before buying cars. One major commercial bank has reported a 300 percent increase in online transactions over the past year.

In theory, it should be easier to localize an early-stage startup than an international conglomerate. But no matter how big or small, companies that plan to set up shop in the world’s largest archipelago will adapt or die as the market decides who is worthy. By embracing the nation’s complexity and diversity, overseas entrepreneurs may be able to catch a rising wave of consumerism in Indonesia.

Featured image via Flickr user Hairi; image of Tongsis boat user via Flickr user Didit Putra.

Yes, Indonesia is incredibly complex for brands. But here’s how you can win the market