The changing Indonesian consumer
One of the most important success factors for doing business with Indonesia is understanding the Indonesian consumer.
The composition of Indonesian society is changing at an unprecedented rate, with about five million people entering the consuming class each year, according to McKinsey research.
Millions of Indonesians are also joining the workforce each year and the country’s population is now entering its prime. For the next 15 years, Indonesia will have more people working than not.
The flow-on effects of this colossal labour force are very important for Australian exporters, according to Victorian Government Senior Trade Manager Amelia Fyfield.
“Indonesia’s demographic dividend is going to provide a lot of opportunities in coming years for Australian products, which are often seen as being superior in quality,” Fyfield told the Melbourne forum.
Despite relatively modest discretionary spending, many Indonesian middle class consumers are “aspirational buyers,” Fyfield said. They favour high-quality brands and nutritional products and treat themselves and their families to such purchases.
It is these transactions Australian exporters should be targeting to build brand loyalty among Indonesian households.
Know your customer
But exporters cannot rely on their experiences selling to the Australian market alone. Extensive market research into the consumer purchasing habits of the Indonesian market and adapting Australian products to the market is needed first.
Herbert Smith Freehills (Jakarta) partner David Dawborn gave the example of the considerable differences between Australia and Indonesia’s product packaging.
Indonesian packaging is generally smaller than Australian packaging and food and liquids often come in sachets rather than bottles or large packets.
“There is no point trying to sell a two-litre bottle of sauce when warungs (small stores) sell sauce in sachets,” Dawborn said.
Likewise, an understanding of on-the-ground logistics in Indonesia is crucial.
Cold chain storage for fresh food products, for example, is really only a reality in Jakarta and Bali, said Fyfield.
Understanding Indonesian business culture
Indonesia’s complex business culture has also at times vexed Australian companies and according to Dawborn is “about as far from Australian culture as you will find”.
Indonesians are indirect communicators and place significant importance on building personal relationships. A professional connection can often only be reached after a strong personal connection is established.
Blackmores Deputy Managing Director for Asia, Dean Garvey, told the business forum it was vital for Australians to endear themselves to their Indonesian partners by immersing themselves in Indonesian culture.
“My first piece of advice is to quickly move from a corporate relationship to a personal relationship,” Garvey said.
Cultural nuances often also make the recruitment process in Indonesia “really tough”, he said. “Indonesians can be cautious of appearing over ambitious.”
To recruit truly motivated staff, Garvey said Australian companies must cast their net wide in Indonesia and look particularly at candidates from public universities.
Corruption and regulatory risk
Australian companies do need to be wary of potential corrupt practices in day-to-day business in Indonesia.
Corruption was recognised as the most problematic factor for doing business in Indonesia in the 2016-17 World Economic Forum Global Competitiveness Report.
Despite significant recent efforts at a national and provincial level to quell its influence, corruption still plays a regular part in business transactions.