M2insights offers market research and consulting services to assist our clients in navigating through the archipelago nation. Indonesia is the largest economy in Southeast Asia, with around half of its population under the age of 30 years old. The country is also one of Asia’s most vibrant democracies and have successfully maintained political stability in the last two decades. The working-age population ratio is expected to rise in the next ten years. The country’s middle-class population has been growing rapidly, which results in higher living standards and increase in disposable income. In the last 20 years, and the country’s economy has proven to be resilient in going through the Asian financial crisis of 1998 and the great recession of 2008. In recent years, GDP growth has averaged around 5%, and poverty rates have fallen in both rural and urban areas.
Our team consist of professionals who have experience working in FMCG, agriculture, investment banking, and management consulting, and we have a deep understanding of the local business practice in Indonesia. M2insights employs full time Indonesian staffs to perform market research projects in the country.
M2ingishts is here to assist your business in understanding and winning the Indonesian market.
Quantitative Market Research
Quantitative market research methods are useful in discovering what is the latest consumer trend. M2insights perform quantitative market research studies with CAPI (computer assisted personal interviewing), CATI (computer assisted telephones interviewing), and CAWI (computer aided web interviewing). Depending on the project scope, we may also suggest using online panel surveys.
Qualitative Market Research
M2insights provides qualitative market research services by conducting in-depth interview of consumers and industry experts for a deep dive analysis of a company or an industry. Our team can also organize focus group discussion, home visit, and mystery shopping to uncover the reasons behind the consumer trend, and how it might evolve in the future.
Market Entry Strategy
M2insights assists clients in evaluating their unique selling points and their competitors’ strategies and capabilities in Indonesia. We help our clients in analyzing the potential market size in the country. As part of our market research and consulting services, our team will deep dive into the competitors’ products or services and their strengths, weaknesses, and market shares to create a tailored strategy to assist our clients entering the Indonesian market.
Products or services that work well in your home markets may not be suitable for Indonesia. Localization maybe driven by regulatory requirements or a cultural preference.
In recent years, Indonesia has passed regulations requiring certain pharmaceutical products to be manufactured locally with local partners. The government has also required mobile phones sold in the country to contain locally made components. It is also essential for food, beverage, and pharmaceutical principals to understand the local Halal requirements and consumers’ preference.
Our market research service will allow your business to identify what needs to be localized to improve your consumer satisfaction, to comply with local regulation, and to increase your consumer base.
Technology Startups Investments
M2insights provides industry or country specific analysis, analysis on a target company for investment purposes, and due diligence research to investors looking to invest in Indonesia technology startups. Our firm has also assisted investment companies who are performing market research on M&A targets to determine the actual market size, value, and potential return on the investment.
Recent Developments in Indonesia
Relocation of the Capital City
President Joko Widodo has announced in 2019 on the relocation plan of the capital city from Jakarta to a newly proposed city in East Kalimantan, close to Balikpapan. The government has planned for the new capital to be built by 2024. Softbank and Saudi Arabia were reportedly interested in investing on the construction of the new smart capital.
Draft Omnibus Law
Since late 2019, the Indonesian government has been preparing a new law that would regulate several provisions from various industries into one law. The aim of the new law is to improve the ease of doing business, strengthen the Indonesian economy, increase competitiveness, and create jobs. The draft introduced the new concept of risk-based business licensing requirement which clearly divides the application process for licensing and certification for businesses into low-risk, medium-risk, and high-risk. The new law is also expected to simplify land acquisition processes and investment requirements.
Impact of Covid-19
Indonesia’s capital city Jakarta has been on locked down since 10 April 2020. The lockdown is scheduled to be lifted on 4 June 2020. In April 2020, The Jakarta Post reported that as many as 1.2 million Indonesian workers have either been put on furloughed or laid off due to the pandemic. Bank Indonesia, the country’s central bank, reported that fashion related product retail spending growth were down 38% year-on-year in first quarter of 2020. Retail spending on IT and communication categories were also down by 6% year-on-year in first quarter of 2020.
Why invest and do business in Indonesia?
According to the Asian Development Bank, Indonesia’s economy has grown tenfold and the per capita income has risen eightfold since the Asian financial crisis in 1998. By 2004, Indonesia has reached middle-income status, and poverty levels fell to single digits for the first time in 2018.
Indonesia is a member of G20, and it is the 16th largest economy in the world by nominal GDP. The country’s nominal GDP grew by 5.2% in 2018, reaching US$1.042 trillion. Studies by various organizations expect Indonesia to be in the top 10 largest economies in the world by 2050.
Indonesia has the fourth largest population in the world at over 260 million people, and more than 56% of the people living in urban areas with a modern lifestyle and increasing purchasing power.
According to the World Bank, Indonesia’s middle-class population has grown from 7% to 20% of the population between 2004 and 2019. There are currently 52 million Indonesians classified as middle class. The aspiring middle class is currently 45% of the population, or around 117 million people. Indonesia has also successfully reduced its poverty rate to 9.4% of the population in 2019. Demand from the middle-class population is the driver of growth, as it is the source of almost half of the total household expenditure in Indonesia.
Around half of the Indonesia’s population is below the age of 30 years old. The World Bank reported that the working-age population ration in Indonesia was 47.95%. This is expected to rise in the next few years. The government is expecting demographic bonus in 2025-2035, when the number of people within the productive age bracket is higher than the number of elderly people and children.
Plenty of problems to be solved
Indonesia has plenty of fundamental challenges that offers opportunities to businesses and investors. The country is rapidly building infrastructure, securing food and energy supplies, and trying to boost financial inclusion.
President Joko Widodo announced in 2019 that the capital city will be relocated from Java to Borneo, to spread out the development in the country, and spur growth in central and east Indonesia. Infrastructure development has been focused on its main island Java. To put things in perspective, the first express way in Borneo was just opened in 2019.
Food production and agriculture are also centered in Java. In the energy sector, inefficient and extremely high distribution cost of oil and gas in east Indonesia have long been a hot topic that the government is trying to solve. When it comes to financial inclusion, as many as 95 million people Indonesians are still classified as unbanked by the World Bank in 2017.
Huge market for technology startups
The problems faced by Indonesia combined with large proportion of young and tech-savvy population present a golden opportunity for technology startups to flourish. Indonesia is currently home to six unicorn startups in e-commerce, travel, fintech, and ride hailing sectors. In recent years, logistic-tech startups and P2P online lenders are also seeing excellent growth in Indonesia. Even the more traditional local businesses have started building their online presence through e-commerce marketplaces or building their own online shops.
Indonesia has plenty of natural resources. Some of the country’s top export commodities are coal, crude palm oil (CPO), liquid natural gas (LNG), crude oil, and rubber. Indonesia also has large mineral deposits including tin, iron ore, bauxite, and nickel. Indonesia’s climate and fertile land are also well suited for the cultivation of coffee and cocoa.
Challenges in Understanding the Indonesian Market
Indonesia is a diverse country with many different tribes speaking local dialects and a sizeable overseas Chinese population, but most of the population speaks Bahasa Indonesia. The working language for government and business is Bahasa Indonesia, and most of its citizens do not speak foreign language. Understanding the language is essential to perform market research in the country. Products and services also need to be translated to local language to comply with regulation. M2insights employs full-time staffs who are native Bahasa Indonesia speakers to assist our clients in market research.
Almost 57% of the Indonesian population live in Java island, and more than 87% of the population are Muslims. The Indonesian culture is heavily influenced by these two factors. It is essential for consumer goods companies trying to penetrate the Indonesian market to understand the Halal certification requirements to cater to the large Muslim population. Business activities tends to slow down during the Ramadhan, Islam’s holy fasting month, but consumer spending tends to pick up as the population are preparing for the Eid al-Fitr celebration. M2insights team offers market research and consulting services to companies trying to understand the Indonesian consumers and their culture.
Since 2015 Indonesia has jumped 34 places in the World Bank’s Ease of Doing Business ranking, the country is currently ranked 72nd. Despite the significant improvement, Indonesia is still far behind its Southeast Asian neighbors Singapore, Malaysia, and Thailand. Foreign companies often find the Indonesian market tough to conquer because of the complicated bureaucracies and protectionism laws. Our market research and consulting services to assist companies in understanding and complying with these regulations.
Looking at other emerging Southeast Asian markets?
M2insights offers market research and consulting services to businesses looking to expand in the region.
Don’t forget to check out Our Observations!
It is a collection of our thinking and insights on business and economic developments that are happening in Southeast Asia.