Indonesia’s young population is increasingly making more money year on year. Women especially have seen an increase in the employed rate from 46% of the working age of women population to 52% in a decade. What does this mean for businesses looking at this market? A growing opportunity for health, fashion cosmetics companies.
It’s no surprise then that Indonesia is named as the fastest-growing market for beauty in Asia in terms of compound annual growth rate according to the latest report by Euromonitor International, Markets of the Future: ASEAN in 2020. Domestic sales of beauty products in Indonesia totaled IDR 11 trillion or $818 million in 2015 based on data from the Ministry of Industry.
The country’s growth for Beauty and Personal Care (BPC) market has successfully outperformed its more mature sisters – China and South Korea – as seen below. Indonesia’s Government Regulation No. 14 Year 2015 has also named the high performing sector as a primary mover of the future economy.
As the largest market in Southeast Asia with a GDP of $888.5 billion and a population of 250 million, analysts predict Indonesia could rise up to the top five markets for cosmetics in 10 – 15 years. While women continue to be the dominant shopper of cosmetics, the male market segment is steadily increasing and richer, younger generations are becoming regular consumers.
A player who has been in the game since 2015 is Sociolla, Indonesia’s first beauty retailer that offers brands such as Marc Jacobs, Laneige and Shiseido to go head to head with Sephora Digital. Chrisanti Indiana, one of the co-founders and CMO of Sociolla, shares the company’s story with ecommerceIQ.
Local versus international brands
International beauty brands and imported goods accounted for 60-70% of total 2015 domestic sales in Indonesia, roughly $441 million. Brands from the US experienced a 3% boost in total imports due to an increase in demand from Indonesians, particularly in Jakarta and tier-2 cities.
Popular Indonesian players like Mustika Ratu, Sari Ayu Martha Tilaar and Wardah are facing fierce competition with international household names such as longstanding L’Oreal, Unilever, and Sephora, Kiehl’s that have entered the market through specialty stores.
Reputation and name-recognition continue to be the drivers for cosmetics purchase in Indonesia.
Sociolla understands its Indonesian audience has low levels of brand-loyalty and more than 30% are willing to try a new product next purchase. This means the company consciously works with a variety of brands overseas and local brands, especially the up and coming ones like Polka and Rollover Reaction to attract more shoppers.
While personal care products from giant brands such as P&G are available even at the local mom and pop stores across the country, imported and niche cosmetics brands are limited to the big cities. The lack of an offline footprint outside big cities in Indonesia is causing people to turn online to find their favorite brands.
Channeling beauty online
WeAreSocial estimated 132.7 million Indonesians are now online and 48% of them use the internet to find products and/or services. A recent survey conducted by ecommerceIQ found that 57% of Indonesians shoppers start their product search on an e-marketplace like Lazada.
With so many Indonesians browsing online, it would make sense for brands to have a bigger presence on the web. However, there aren’t many options for personal care products online as shown in ECOMScape: Indonesia, the country’s ecommerce landscape by ecommerceIQ.
“The digital sector began to take off at the beginning of 2015 so knew we wanted to focus on a vertical. It wasn’t hard to choose beauty as I’m a beauty enthusiast and we didn’t see any strong players in the sector at the time,” says Chrisanti.
Going online was a no-brainer for the founders but convincing local and global beauty brands – many of them already established companies – was one of the biggest hurdles.
Educating brands like Menard and Bioderma to utilize the internet as a sales channel became the company’s standard operandi. To date, there are 197 brands registered on Sociolla’s platform and the team continues to work closely with each one to optimize product assortment and seasonal campaigns.
“I would say one of Sociolla’s largest achievements is unlocking the potential of these brands online and gaining their trust to work exclusively with us,” Chrisanti comments.
BLP Beauty is a local lipstick brand that sells exclusively online through an Instagram account and Sociolla platform. Through a series of marketing campaigns on Instagram, BLP was able to successfully sell more than 4,000 lipsticks in only two hours.
Sociolla is also using content SEO to educate and attract people to visit the website using its ‘Beauty Journal’ blog. With more than 2,000 entries published on the blog since late 2014, Sociolla regularly writes about beauty tutorials, product reviews, and events.
The main site attracted more than 2.4 million visitors in March alone, leaving behind its closest competitor – Sephora Digital.
Indonesia’s grey market
Brands were not the only ones they had to convince. Getting customers to shop on its platform was another hurdle they had to overcome.
“I think our fiercest competition is the grey market, especially popular sellers on Instagram because they can price items for very cheap while as an official partner, we adhere to brand guidelines to provide quality goods,” says Chrisanti.
In 2016, almost 70% of Indonesian internet users were using Instagram according to data from JakPat. It isn’t surprising that over 4 million posts show up in the search results for #kosmetik, the Indonesian word for cosmetics. Meanwhile, search results for #kosmetikmurah (cheap cosmetics) and #jualkosmetik (sell cosmetics) showed up with more than 3 million and 2 million posts, respectively.
Although prices may be cheaper, the biggest problem with these social sellers is the disappointing counterfeits and unlicensed products by the National Agency of Drugs and Food Control in Indonesia.
“Shopping online in the region has always been shrouded by trust issues. Through official partnerships with brands, we are assuring customers they can trust our products. Our relationship with the brands is our biggest advantage,” says Chrisanti.
BeautyLink is the company’s answer to a ‘regulated’ grey market. The marketplace is a space for certified third-party merchants to sell brands that aren’t being offered on Sociolla due to lack of local licenses, the number of minimum SKUs, etc. To ensure the authenticity and quality of the products, Sociolla does a careful check on all sellers during the initial agreement phase, monitors user feedback and regularly samples seller inventory.
Brands who want to manage their own online presence can also register on BeautyLink. The marketplace houses 480 brands, including The Body Shop, Jo Malone, and Clinique, which makes up over 8,000 SKUs.
Marketing channels beyond online
Aside from online marketing, the offline world plays a big part in its strategy. More than 50% of Sociolla buyers come from Java, followed by Sumatra (15%), and Sulawesi (5%).
To reach these markets, the company has hosted numerous activities such as Sociolla Soirée with the country’s top beauty bloggers/influencers, secret customer getaways, and organizing pop-up stores to try product samples.
The company also participated in Femme Expo, the biggest Women Expo in East of Indonesia, by opening its own beauty section named ‘Sociolla Beauty Week’ and bringing portfolio brands from Jakarta to showcase products at the expo to 39,000 attendees.
A pretty bright future
The company recently raised an undisclosed Series B from Istyle, the Tokyo-based internet company with @Cosme, the largest cosmetics and beauty product community website in Japan, under its belt. In light of its second anniversary, Sociolla is using the money to improve Sociolla Box — a subscription model it launched last year as one of its marketing initiatives.
They currently have around 370 individuals registered for the service who will receive a monthly beauty package filled with 4-5 beauty products chosen by Sociolla. The ability for customers to customize the beauty box is in the works.
To further cement its standing as a beauty ecosystem and improve user experience, the founders have also built Sociovit, ecommerce for healthy lifestyle products such as vitamins, fitness supplements, wellness products, etc.
“Customer feedback is the company’s main inspiration for every new product we develop,” says Chrisanti.
The dedication to its users and emphasis on localization is propelling Sociolla well on its way to becoming the online beauty destination in Indonesia.