Indonesia is an economy that relies heavily on domestic consumption. In 2014, Indonesia’s consumer spending was at 57% of GDP – significantly higher than its neighbors China, Malaysia and Thailand – all largely export-driven nations.
The largest growing contributors to this pot are Generation Y, the increasingly affluent millennials.
“The Millennials have incredible buying power,” said Visa Worldwide Indonesia president director Ellyana Fuad. “In the Asia Pacific, their disposable income is around $907 billion.”
JakPat, a popular opinion poll in Indonesia, recently released data revealing the spending habits of over 500 single 25 – 45 year old Indonesians to shed some light on what this bracket spends on.
What is their average monthly income? How much of it is spent on meals? Fashion? Hanging out? And why do these differences exist?
Indonesian spending habits
The average income in a month of most respondents ranges from IDR 1 million ($75) to IDR 5 million ($375.60) while monthly ‘outcome’ ranges IDR 1 million to IDR 3 million ($220.36).
1 USD = 13,313 IDR
Their occupations most likely fall under these categories according to Salary Explorer.
Deloitte research shows that once an Indonesian household’s income climbs above IDR 5 million a month, there is a large jump in the percentage of income put into savings and spent on luxury items for leisure activities.
Out of fashion, make-up, body treatments, sports, meals, and ‘hang out’ activities (coffee, bars, etc.), Indonesians unsurprisingly spend most of their income on mobile data and meals.
For households making IDR 5 million to IDR 7.5 million, 20% of income is devoted to leisure activities, and increases to 26% when monthly income increases to IDR 7.5 million to IDR 10 million.
Stanley Song, Director, Consulting Monitor Deloitte, points out that businesses in Indonesia have to narrowly target sales to consumers.
What does this mean? Brands need to understand what their audience can afford.
For example, groceries on demand service honestbee has found success because they only work with partners that speak to their target demographic: the top 10% money makers in each market
“If a brand wants to succeed, the company’s product offering and their audience cannot be disjointed,” says Bounthay Khammanyvong, honestbee Thailand Country Manager.
What can Indonesians not afford?
The survey’s respondents’ average outcome in a month for credit cards ranges from less than IDR 500,000 to IDR 1.5 million. Interesting enough, 46% of all respondents don’t actually have any credit to pay.
“I hardly ever use it [credit card],” said an 28-year-old art director at an advertising agency. “I always keep it at a minimum. I hate having debts.”
About 52% of a Visa survey conducted a few years ago revealed that respondents choose debit cards rather than credit cards (15 percent) and prepaid cards (33 percent) to make purchases.
As the young Indonesian population grows, General manager of the Indonesia Credit Card Association (AKKI) Steve Marta, believes that Gen Y will recognize the importance of credit cards.
“Most people use debit cards for daily and routine spending. But they’ll also need credit cards for large and unpredictable expenses.”
We can expect that consumer spending in Indonesia will increase as the young population grows in affluence and financial maturity but companies shouldn’t mistaken this as overall spending across all categories.
Money will not necessarily be spent on luxury goods as more income is generated, instead, companies have a higher chance of success if their services/product offering caters to a specific demographic with a specific expenditure allowance.
Popular payment methods in Southeast Asia here.
Sign up for the eIQ Network here.