VISTA Countries

Nov 21, 2012

VISTA Countries

In the early 2000s we had the new emerging economies called the BRIC countries. But now we also have the VISTA countries, meaning Vietnam, Indonesia, South Africa, Turkey and Argentina. In 2012, the rapidly growing VISTA countries are bringing us a completely new vista over consumer markets. So let's take a closer look of one of its most important countries: Indonesia.

Confidence matters

Indonesia, Southeast Asia's largest economy, has become one of the world's biggest and most attractive consumer markets. The country's GDP has been growing at an average 5.8%, year on year, since 2005 – way ahead of most of its Western counterparts.

Private consumption by Indonesians is making a huge contribution to Indonesia's GDP growth. Indonesia has posted the second-highest personal spending growth in Asia, after China only and ahead of India. Domestic consumption in
Indonesia has accounted for more than 55% of its growth over the past seven years.

Consumers in this country of many islands have a more optimistic consumer outlook compared with their neighbors in such countries as India and Vietnam. Indonesian consumers have full confidence in their country's development and in their own future, and now have the disposable income to pay for both domestic and imported goods.

Powered-up consumers

The Indonesian market has quietly become the most attractive consumer market in the Asia-Pacific region after China and India. Rapid economic development accelerated by heavy foreign investment has greatly boosted the country's consumption patterns. Many global investors have been attracted by the vast production base and capacity in Indonesia. A more stable political environment than many of its neighbor countries is another factor attracting foreign investment to Indonesia. With the influx of foreign capital and companies, the economy of Indonesia has been brought to a much higher level in recent decades, with consumer activity being sustained as well. A continuous reduction in unemployment and poverty has also been observed as a result of more jobs in factories and in the supply chain.

With all this economic development, a new middle class has boomed. Supported by ongoing robust economic growth, the size of the Indonesian middle class is now some 50 million. Some estimates even go as far as to predict that the middle class will number 150 million within three years. However exaggerated this may be, this huge segment of consumers is looking for a more luxurious lifestyle, and their wallets and purses contain the money to pay for it. With an average per capita GDP of around US$3,500, they are keen to buy new motorcycles, mobile phones, automobiles, and more upscale luxury goods.

Within 2011 alone, more than 890,000 vehicles were sold in Indonesia, a record high for the industry. The situation is even more heated in the digital-devices market; Samsung is forecasting total sales of US1.5 billion for 2012, double its number last year. The same intensity is found in the household electronics market; the Electronics Marketers Club (EMC) and the Indonesian Electronics Industry Association (GABEL) estimate that total sales for televisions, refrigerators, washing machines, air conditioners, and DVD and Audio players will reach US$3 billion this year, an increase of 12% over last year.

The middle class is growing so quickly that the Indonesian government is finding it hard to cope with the drastic increase in the demand for road networks (for private vehicles), air traffic (for travel) and electricity (for all-round consumption).

The relatively young age structure of the population in Indonesia is a key indicator of a booming consumer market. Indonesia has the second highest number of Facebook users, and third highest number of Twitter users. It is very common to find students paying for expensive meals and goods with their parents' debit cards. University undergraduates can easily apply for credit cards with credit limits as high as US $3,400, giving them unprecedented purchasing power for fashion, digital devices, dining and all kinds of entertainment.

Benefiting from this economic development, the number of people moving from rural to urban areas is rapidly increasing. The percentage of the urban population increased from 48.1% in 2005 to 53.7% in 2010. The capital, Jakarta, is the biggest conurbation in Indonesia. Home to over 12 million people, Jakarta is the hub of the country's commercial, financial, political, public and industrial functions. Signs of the new middle class and urbanization can be found everywhere: busy pedestrians with their blackberries or iPads; serious congestion on the roads; and new shopping malls and commercial buildings rising everywhere; as well as over 100 new public and private educational institutions.

As a relatively new consumer market, and considering that Indonesians are very open to foreign brands, the space available for retail brands to take root is not restricted. Several international and regional brands have already positioned themselves in this big market. Some of them succeed by opening grand flagship stores in prestige districts, some succeed by adopting different approaches in different malls even within same city, and some succeed by making use of social networking sites. The Indonesian Retail Merchants Association (APRINDO) forecasts 10% annual growth in the retail landscape over the next few years, all thanks to this new wave of consumers.

This VISTA country has been off the radar for most merchants for some time, but is now coming back with a vengeance. Can you afford to overlook this market?


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