Indonesia’s skincare industry is a rapidly growing market, with revenue reaching $2.05 billion in 2022 according to Statistika. The National Drug and Food Monitoring Agency (BPOM) reports that the number of players in the beauty industry increased by 20.6% from 819 in 2021 to 913 in 2022, with 83% of these companies being micro, small, and medium-sized enterprises (MSMEs). For global beauty and personal care, this is a good opportunity to expand their brand in Indonesia.
Indonesia Market Potential
The beauty and personal care product market in Indonesia is a large and growing market that every global beauty and personal care company should consider. Revenues are projected to reach $7.5 billion in 2021 and grow at a 6.5% compound annual growth rate through 2025, according to Statista. In terms of market segments, personal care is the largest with $3.2 billion, followed by skin care ($2.1 billion), cosmetics ($1.7 billion), and fragrances ($0.4 billion).
Trends in beauty industry have also been boosted by the increasing popularity of South Korean beauty products, or K-beauty, in the market. In 2020, Indonesia ranked second among the countries with the highest K-beauty popularity. Besides, around US$ 38.5 million worth of beauty and skincare preparation imports in Indonesia were from South Korea, accounting for the second largest import value in that segment that year.
However, local brand Wardah – the pioneer of halal cosmetics and skincare products in Indonesia – recorded the highest sales among other leading cosmetic brands in Indonesian online stores, with 7.37 million items sold as of January 2020. Data from the Statistics Indonesia (BPS) reported that the cosmetics industry, which encloses the pharmaceutical, chemical and traditional medicine industries, grew by 9.61% in 2021.
Additionally, the Food and Drug Monitoring Agency (BPOM) also recorded an increase in the number of cosmetic companies by 20.6%. From 2021 to July 2022, the number of cosmetic industry players increased from 819 to 913, 83% of them are small- and medium-enterprises (SMEs).
Local Brands Lead the Market
Local brands and Indonesian-made companies dominate the market, with a low barrier to entry as many of these companies source ingredients locally and manufacture products in the country. Brands such as Somethinc, Avoskin, and Dear Me Beauty release new products every 3 to 6 months, ranging from simple products like lip gloss to new variants of existing products. These local brands excel in turning over new products, as they can launch a product from ideation to market release within the same time frame it would take international corporations to do research and development alone.
Indonesian consumers are highly price-sensitive when it comes to skincare products. Local skincare brands are affordable, with regular products costing Rp. 80,000 to Rp. 150,000, and anti-aging or hyperpigmentation products costing up to Rp. 250,000. Pricing is a crucial factor, as the majority of skincare consumers are women and also purchase cosmetics and other personal care products as additional. Women in Indonesia especially those in the smaller city also have lower incomes than Men and those who are stay home mothers rely on their husband’s incomes.
Target Market: Women of All Ages
The target market for Indonesia’s skincare industry is primarily female, encompassing Gen X, Millennials, and Gen Z. Gen X tends to purchase from established local brands like Wardah or international companies like L’Oreal, while Millennials and Gen Z are more adventurous and willing to try new brands. Millennials are heavily influenced by products with large user bases and strong promotional campaigns. Brands like MS Glow and Scarlett have gained popularity with Millennials during the pandemic, with MS Glow leading the market with a share of 8.2% in the first quarter of 2022 compared to Somethinc. Their low prices, wide variety of products, and local distribution make them appealing, but their reseller program is the main differentiator, allowing women in smaller cities to earn extra income by becoming distributors.
Overcoming the Challenges of High-Growth Markets in the Indonesian Beauty and Personal Care Industry
The Indonesian skincare industry is thriving with competition as new players enter the market and established local brands increase their ad spending. With so many options, reaching the right customer and differentiating from the competition is becoming increasingly difficult. The problem with competing in a high-growth market:
1. Competitive Advantages May Not be Enough
Many skincare brands think they have a competitive advantage, but when their products are released to the market, they may find that customers are not as interested as they had hoped. The race to the bottom on price, free delivery, and bombarding customers with sponsored content is not a strategy that is exclusive to one brand.
2. Lack of Distinct Differentiation
Customers have a multitude of brands to choose from that all offer similar products. They often choose based on which brand has the best deal at that moment, not on a strong enough proposition to choose a particular brand. Differentiation is not widely distinct and customers are starting to feel that all the products are the same. Brands need to offer a proposition that addresses their customers’ pain points and makes them care enough to purchase the product.
3. Consumer Overload with Advertisements
As more players enter the market, ad spending is increasing, and established local brands are flooding the market with new products. Reaching the right customer is becoming increasingly difficult as they are bombarded with numerous value propositions. Bigger brands have an advantage with heavy placement on e-commerce sites and social media platforms, but even if customers purchase from these brands, it remains to be seen if they will repurchase after the product runs out.
Key Strategies to Develop Competitive Positioning in Indonesia Market
To reach sustainable growth in the Indonesian skincare industry, brands need to up their game in offering value to customers. This means finding unique ways to differentiate themselves and address their customers’ pain points to make their proposition worth the customer’s effort to purchase. This is key strategies to develop competitive positioning :
1. Utilizing Insights from Consumer and Competitor
The success of any business in a rapidly growing market depends on its ability to understand the needs and preferences of its target consumers. By conducting thorough research and analysis of both the market conditions and your competitors, you can identify opportunities to develop a unique and valuable competitive advantage and by making sure that this advantage is difficult for your competitors to replicate, you can position yourself for success in a rapidly growing market.
2. Deriving Competitive Advantages from Unmet Needs and Pain Points
To gain a competitive edge in a high-growth market, you must understand what your consumers want and need. This can be achieved through research, surveys, and other forms of customer feedback. Use this information to identify gaps in the market, as well as any shortcomings in your competitors’ offerings. This will give you the insights you need to develop a unique and valuable product or service that meets the needs of your target audience.
3. Creating Distinct and Un-replicable Competitive Advantages
Your competitive advantage should not be something that can easily be replicated by your competitors. It should be a combination of unique company capabilities, customer insights, and market conditions. When developed correctly, your competitive advantage should be so distinct that it is difficult for your competitors to duplicate. This gives you a significant advantage in the market, as your competitors are likely to stay in their lane and not try to compete with you.
Find Your Local Distribution Partner in Indonesia
Global beauty and personal care companies can take this opportunity to step into the breach — partnerships with local companies, including joint ventures and private equity investment, can help the Indonesian fashion industry raise its game while affording foreign investors the chance to participate in the leading clothing and fashion markets, both for production and sales.
AsiaCommerce provides several services such as comprehensive market research, arranging partnerships in local industry, and creating sales programs based on market research.
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If you’re interested in exploring beauty and personal care opportunities in Indonesia, visit our service page for more information. Our team will work with you every step of the way, from finding a supplier, shipping door-to-door, and handling import documents to ensure your success in importing from Indonesia.