Indonesian Skincare eCommerce Market Trends: Paying for The “Glow”
Skincare, a product deemed as a luxury a few years back for many Indonesians, has now become a lifestyle for a lot of Indonesians. In fact, research shows that Indonesian women do purchase beauty products in times of economic slowdown.1Being the largest economy in Southeast Asia, Indonesia has enjoyed healthy and steady economic growth over the years. Indonesia is now home to an increasingly more sophisticated group of consumers who are concerned about their looks and well-being.
January 10, 2020
Skincare, a product deemed as a luxury a few years back for many Indonesians, has now become a lifestyle for a lot of Indonesians. In fact, research shows that Indonesian women do purchase beauty products in times of economic slowdown.1
Being the largest economy in Southeast Asia, Indonesia has enjoyed healthy and steady economic growth over the years. Indonesia is now home to an increasingly more sophisticated group of consumers who are concerned about their looks and well-being.
In this article, we’ll zoom specifically into Indonesia’s skincare market and uncover Indonesians’ growing fondness towards skincare products. We will look closely into what’s driving the demand, what makes specific types of skincare products sell well in Indonesia, where they are coming from, and how cross-border eCommerce fits into the picture.
However, before we deep dive into the skincare trends in Indonesia, let’s take a closer look into Indonesia’s market overview and its potential for beauty and personal care products.
Indonesian Market Overview:Solid & Youthful Digitally Native Middle Class
Indonesia has always been known as a market with a lot of potential for eCommerce businesses. As of 2019, Indonesian eCommerce revenue amounts to US$ 18.7 billion.2 McKinsey’s projection predicts that this number is due to grow to a staggering US$ 40 billion by 2022.3 When it comes to the skincare market specifically, the projection also shows a healthy growth. The market that is worth US$ 1.98 billion at the moment is projected to grow by more than 20% by 2023. Above figures considered, space is definitely not a problem for eCommerce businesses wanting to join the skincare market race in Indonesia.
What makes the market even more attractive is that even now, the consumer base in Indonesia is still growing fast and strong, be it in terms of purchasing power and willingness to spend. As of today, 12-15% of Indonesia’s 267 million population4 are considered as middle to high income earners. Not only that, Indonesia’s Minister of National Development Planning, P.S. Brodjonegoro, projected in 2019 that Indonesia’s middle class population will grow to 45 million people in 2021 and double in size in the following year.5
It is understood that capabilities to spend do not always translate to willingness to spend, but that is not the case for Indonesians, especially the millennials. Economists found out that Indonesian millennials spend up to 50% of their disposable income on what is called the 4S, that is skin, sugar, sun, and screen.6 These figures are a clear positive signal of the huge potential in the spending power of Indonesian consumers in the years to come and the willingness to spend in the skincare market.
The good news does not stop there for eCommerce businesses looking to expand or strengthen their offerings in the country. Indonesian consumers are youthful and digitally savvy, given their relatively young and productive population age of 30.2 years old.7 They are also well-connected to the internet, with slightly more than 50% of them using the internet8 regularly.
An interesting point to note is that Indonesians are avid social media dwellers, with 81% of its online population having an account on Facebook. Indonesia is also a powerhouse for Instagram, housing the platform’s biggest user base in Asia.9
With so many Indonesians leaving their digital footprints on social media platforms, eCommerce businesses are presented with a huge social media marketing opportunity, whether in the form of organic or paid marketing activities through viral marketing, paid ads, influencer marketing, and many more. This healthy appetite for social media and internet usage also explains the rapid growth projection for online sales channel attribution in the personal care market, including skincare, which is expected to more than double between 2019 and 2023.
Now that we have established the huge potential of the Indonesian skincare market, it is important for us to dig deeper into the insights to understand what consumer behaviours are driving the phenomenal growth.
Key Insights on Indonesia’s Skincare Market
1. Beauty is an Investment
Beauty is a serious game in Indonesia, especially for the female population who often face the pressure to look good even from an early age. Growing up, it is not uncommon for Indonesian women to be told to behave in certain ways and to always take care of their looks, all for the sake of having better prospects in life. For some, they are told that looking good is an obligation for women10, which is key to having a harmonious marriage.
This belief goes beyond societal expectations and is even reflected in the job market. It is not uncommon for job posters to add “attractive looking” as part of the job requirements for all kinds of openings. When one’s living and income are tied to one’s look, it is not odd to consider skincare as an investment after all.
Research by Euromonitor11 confirms the willingness for Indonesian women to dig deep to finance their skincare spending. Through trade interviews with two of the most popular micro-loan providers in Indonesia, Akulaku and Kredivo, it is identified that the majority of the loans on these platforms are driven by Indonesian women’s demand to purchase premium skincare and beauty products.
2. Natural Beauty Comes from Natural Products
Indonesia is a country abundant with natural resources, and Indonesians grow up knowing that they can reliably count on them. Have a fever? An Indonesian mom would be very likely to come up with some form of home remedy consisting of natural ingredients12 like basil leaves, garlic, ginger, cinnamon, turmeric, others found in Indonesia.
It is no wonder that Jamu, an Indonesian traditional herbal drink made of various spices, is considered a national pride. Not only is it considered as an effective drink to deal with physical ailments13, it is also said to promote beauty. Lulur (Indonesian traditional scrubs) and Jamu, which was mainly served to the royalties and nobles in Javanese keratons (royal palace), were said to be the secret to the beauty of the Javanese princesses and palace ladies.
On the other hand, Indonesians are also increasingly becoming more aware of the use of chemical products in their daily lives. While this can be attributed by how Indonesians are blessed to grow up with plentiful natural resources to practically fulfil their day to day needs, the mass media in Indonesia has also been very keen to cover how exposure to chemical ingredients found in day-to-day items including cosmetics and skincare may bring a negative impact to health.14
Kilala Tilaar, Corporate Director of Creative and Innovation from local beauty product giant Martha Tilaar Group believes that natural or organic beauty products will still be a significant driver for the country’s personal care industry.15 He added that research has shown that Indonesians, especially the millennials, still have a positive bias towards natural, organic and eco-friendly products.
Knowing this, it is clear that natural ingredients resonate well with Indonesians who are close to nature all their lives. This is one of the reasons why Innisfree, a Korean brand known for its use of natural ingredients, is widely popular in Indonesia16 even though it was only launched in 2017.
3. Halal Goes Beyond Food
With 87% of its population identifying as Muslims, Indonesia is home to the world’s largest Muslim population. Naturally, the halal status of a product becomes a big concern for most Indonesians. A misconception that is commonly observed is that some would think that halal requirements only apply to food products.
In reality, this is not the case as the requirements apply to anything that touches the skin. Knowing the public concerns very well, the Indonesian government released a regulation in October 2019 indicating that cosmetics and skin care products distributed and imported to Indonesia have until October 2026 to get halal-certified.17
Wardah, an early entrant in halal cosmetics and beauty product industry in Indonesia, mentioned that it was a “super” correct strategy to enter the halal scene, which led them to become the first Indonesian product to be included in Global Fastest Growing Brand 2014-2015. Interestingly, Sheilla Firdausa, Brand Manager of Wardah, also mentioned that the use of halal labelled cosmetic and skincare products is not only limited to Muslim women.
Halal certification is now deemed by the market as a mark of quality and safety assurance18, giving them an edge as compared to products without the certification. For businesses wanting to expand to Indonesia’s skincare industry, halal-certification has now become more of a necessity to compete in Indonesia, be it for the Muslim and non-Muslim segments.
East Asian Beauty Goes After Southeast Asia’s Biggest Population Group
When it comes to the frontrunners of the skincare market in Indonesia, multinational corporations with a local presence in the country are still enjoying the biggest shares of the pie with Unilever Indonesia, P&G Indonesia, and L'Oréal Indonesia leading the race. However, they are facing fierce competition from Korean brands who are aggressively taking bigger shares in the Indonesian skincare market. This is shown by how the top three players are seeing a decline in market share despite their ever increasing sales in 2018.11
The Korean wave is definitely a huge thing in Indonesia, and eCommerce companies in Indonesia know this very well. In fact, two of the largest eCommerce platform leaders in Indonesia really went full force in capitalizing the K-wave trend with Tokopedia working together with the widely popular K-pop boy group, BTS19, and Shopee Indonesia partnering with other very popular K-pop girl groups, Blackpink and Gfriend.20
On a similar note, crossborder eCommerce shops like StyleKorean who ship directly from Korea also partner up with local influencers like Sunny Dahye, who is a Korean but can speak the Indonesian language fluently, to reach their target consumers in Indonesia. This strategy has proven to be quite effective considering Rakuten Insight’s research in 2019 that finds out that out of Indonesians who use Korean beauty products, 39% of them found the information from social media beauty influencers.21
Euromonitor’s report shows that Korean sheet masks are now the darling of Indonesians. Aside from being an important part of the religious 10 step Korean skincare routine, their compactness and ease of use are the winning attributes that win the hearts of local people.
That said, businesses need to keep their eyes wide open when it comes to the Korean beauty trends as Indonesian people are very much up to date to the latest happenings in the industry thanks to their social media fondness and the sheer number of successful influencers in Indonesia. Preparing to sell products for the ever popular Korean glass skin trend in Indonesia? You may also want to look deeper into the up and coming cream skin22 trend for 2020.
Challenges of Crossborder eCommerce for Skincare Products in Indonesia
Despite the enticing prospects of Indonesian skincare market, selling skincare products in Indonesia can prove to be a challenge for a lot of eCommerce players outside of Indonesia. For one, skincare products are considered as controlled goods by the Indonesian customs, and companies who would like to send skincare products to Indonesia are required to register for a license with Indonesia’s National Agency of Drug and Food Control (BPOM). With this in mind, companies can either try to apply directly to the government or they can work with logistics companies like Janio to secure such a license.
Not only that, recent Indonesian changes to customs regulations have also lowered the de minimis value for parcels being sent to Indonesia from USD 75 to USD 3 per consignment note. This means that tax and duties now apply to B2C shipments with a value above USD 3.
However, there is also an upside to this change as the Indonesian government also introduced lower applicable tax and duties to all goods except for garments, shoes and bags. The reduction of tariffs from approximately 40% to about 19% of CIF (costs, insurance, and freight expenses) opens up an opportunity to compete better in the more premium segment of the market. Combined with the knowledge that Indonesian women are willing to pay for premium skin care products, this segment can be a sweet spot to hit.
Ship Your Products to Indonesia
Despite the challenges, the skincare market in Indonesia is still an attractive one for eCommerce players wanting to take a share of the Indonesian skincare market. Overseas businesses can enter the market with less hassle by engaging companies like Janio who can facilitate the import of their products to Indonesia.
Depending on the amount of inventory that your company wants to keep in Indonesia, you can explore B2C and B2B shipping methods to Indonesia. B2C cross-border shipments involve the delivery of a parcel directly from the origin to the end consumer, which is a suitable shipping model for companies who do not want to keep heavy inventory in the destination country or Indonesia in this case.
Janio’s been helping a health and beauty eCommerce store, Australian Gallery, ship their products into Indonesia. If you’d like to know more, get our case study!
Alternatively, if you project that the demand for your skincare products in Indonesia will be a sizable one, you can also explore B2B shipment method which involves sending your products to Indonesia in bulk. With proper fulfilment management, this model can significantly reduce the shipping time from order to delivery for your customers.
To find out more about how we can help you import your skincare products to Indonesia via B2C or B2B eCommerce logistics channels, get a free consultation with our team today!