Retail Industry Faces Challenges as Consumers Become More Selective: Nielsen

Indonesian consumers have become more selective when purchasing daily necessities, presenting a delicate challenge for Indonesia's fast-moving consumer goods producers to boost sales, according to global information and measurement firm Nielsen Company. (Antara Photo/Aprillio Akbar)

By : Tabita Diela | on 12:56 PM October 13, 2017
Category : Business, Economy

Jakarta. Indonesian consumers have become more selective when purchasing daily necessities, presenting a delicate challenge for Indonesia's fast-moving consumer goods producers to boost sales, according to global information and measurement firm Nielsen Company.

Consumers are now buying food, beverages, household items, personal care and pharmaceutical products in higher frequencies but spend less to better manage their cash flow, Nielsen said.

More than half of respondents in a recent Nielsen survey -- which monitored consumer purchasing trends from 2015-2017 -- said they plan to reduce the frequency or number of items they purchase this year. Only 4 percent say they would increase spending.

Consumers from higher socioeconomic statuses are willing to spend more if they see discounts or promotional deals. Middle and lower socioeconomic classes, on the other hand, have to sacrifice items in their daily consumption due to limited cash.

Consumers also cut visits to supermarkets and traditional grocery stores over the period, but they have shown they are more willing to shop in minimarkets, wet markets and at local vegetable vendors.

"There is a major shifting happen on the way consumers use and spend their money [...] at the same time, consumers are still willing to spend more if they are driven by an exciting event," according to Nielsen's presentation on its findings received by the Jakarta Globe on Wednesday (11/10).

Fast-moving consumer goods only accounted for 3.2 percent of Rp 74 trillion ($5.5 billion) online shopping purchases last year, Nielsen said. But they showed rapid growth. In the first seven months this year, personal care online sales increased 247 percent to Rp 89.5 billion, compared to the same period last year.  Online sales of food rose eight fold to Rp 34 billion in the same period.

"[Consumers] are more impulsive when purchasing personal care products and more experimental when purchasing food," Nielsen said.

Nielsen offers key strategies for retailers to face the market's shifting behavior, including to properly manage promotions, address issues across consumer groups, use small format channels and attract consumer excitement through events and product innovation.

Weak Consumption to Continue

Nielsen said the retail industry has suffered since the second half of last year with some positive influences including stable GDP growth, a high consumer confidence index and expectations on future economic conditions.

Indonesia's economic growth stagnated at 5.01 percent annually in the second quarter, still lower compared to the government's target of 5.3 percent growth this year. On its latest publication last week, the World Bank said the country is unlikely to reach its target.

The development bank noted that private consumption growth — which accounts for over half of Indonesia's GDP — did not pick up in the second quarter partly because of a temporary spike in inflation due to electricity tariff adjustments in the first half of the year.

Annual headline consumer prices rose 3.72 percent in September, compared with 3.82 percent in August.

 

 

 

 

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