Why Chinese brands are aggressively expanding in Indonesia

Indonesia, with its youthful population, burgeoning economy, and rapidly expanding digital landscape, presents an irresistible opportunity for Chinese brands seeking to escape slowing growth and fierce competition at home.

Indonesia's allure is multifaceted. Its population of over 270 million, predominantly young adults, fuels a dynamic consumer market. With a median age of 28 to 30, this demographic dividend is further amplified by robust economic growth, consistently exceeding the global average at 5% GDP growth. Lower labour and rental costs compared to many other Southeast Asian markets add to its cost-effectiveness. Crucially, with over 185.3 million internet users, internet penetration stands at over 66%. With over 185 million internet users at the start of 2024, a digitally savvy consumer base is readily accessible through online channels.

“Driven by the faster pace of information, Indonesians are increasingly open to exploring a wider range of brands,” explains Adji Saputro, director and head of the business unit of partnership clients at Kantar Indonesia.

This openness has created fertile ground for the influx of Chinese brands. The timing of the ripening of Indonesia as a market was ‘just right’ for many Chinese companies looking to expand outwards due to ferocious competition and slowing economic growth at home, and they started making inroads in the archipelago.

Today, Chinese companies are everywhere. They have a presence in almost every growing sector—from nickel ore and steel to clothing, smartphones and electric vehicles. Four of every five EVs sold in Indonesia are from Chinese brands such as Wuling, BYD, Chery, and Neta, according to data from the Indonesian Automotive Industry Association (Gaikindo). Meanwhile, Indonesia happens to be one of TikTok’s most attractive markets, and it entered into a very expensive marriage with Tokopedia to circumvent the government ban in 2023.

Retail is another sector China is aggressively wooing as its companies look outward due to ferocious competition and slowing economic growth at home. Indonesia’s retail market was valued at $46.34 billion in 2022 and is projected to reach $71.89 billion by 2031, according to data released by Statista.

According to a leading mall owner in Indonesia, who preferred to remain anonymous, there’s been a noticeable surge of inquiries from China for almost every premium mall landlord in Jakarta in the past year. More than half of the inquiries come from the F&B category, such as Cotti Coffee, Naixue, Jiguang, Mixue, Wallace, and Yao Yao. On the retail side, there are brands such as Huawei, Oppo, Pop Mart, M&G Life, Anta, Vivaia, and HLA.

“The proliferation of several Chinese lifestyle brands in the retail space in Indonesia is an exciting development,” notes Sameer Prasad, CEO and group business development director at PT Mitra Adiperkasa Tbk, a retail organisation.

“A wider choice creates more interest and inevitably generates buzz in the category. [We are] also actively exploring several such brand partnerships and will soon be bringing them to the Indonesian marketplace. From a real estate perspective, we believe there is enough room for everyone to co-exist. Plus, choice brings more footfall to the malls, hopefully benefiting all retailers. The more the merrier.”

The success story of Miniso

One Chinese brand that has managed to carve a niche for itself in Indonesia and can be a case study for brands looking to enter the country is the variety shop Miniso. For Miniso, Indonesia has consistently ranked in the top five of the 111 countries in which the retailer is present in terms of gross merchandise volume (GMV). The launch of their largest global store in Indonesia in July 2024, after opening close to 300 stores in seven years, only cements this market’s importance.

The world's largest Miniso store opened in Jakarta in August. First-day sales of 1.18 million RMB set a new record.

“For retailers, the more stores you open, the more consumers you reach, naturally increasing brand awareness. It is important to have significant recognition in the local market,” says Robin Liu, vice president and chief marketing officer of Miniso.

Miniso—known for impulse buys and value offerings—expanded its footprint in the country through premium retail spaces, bringing affordable products to the consumer in upscale settings. As part of its ‘super store strategy’, Miniso opened its flagship store, the largest in the world, in Jakarta’s Central Park Mall.

Since entering Indonesia, Miniso has aggressively used IP as a differentiator. In Southeast Asia, particularly in Indonesia, consumers tend to favour Japanese and Korean IPs. For instance, One Piece was quickly sold out upon release, and Zanmang Loopy, a Korean animation, has the highest viewership in Indonesia among overseas markets.

“Miniso has increased the introduction of Japanese and Korean IPs in Indonesia,” added Liu. “We aim to become a top-of-the-mind brand whenever consumers think of purchasing IP co-branded products.”

Bella Tu, vice president and general manager of Miniso’s overseas directly operated markets, says: “When we first entered Indonesia, we were purely exporting a Chinese brand. After eight years of learning, we have localised our products, workforce, and store models.”

Miniso has collaborated with the local supply chain in Indonesia, producing many locally sourced items like skincare, cosmetics, perfumes, and fragrances.

“Currently, we estimate that about 30% of products in Indonesia differ from those in China,” says Liu.

In eight years, Miniso has cracked a supply chain hybrid combination of headquarters and local suppliers, offering over 10,000 SKUs. The retailer is now focusing on opening larger and better stores in Indonesia, upgrading store locations, expanding the product range, and investing in local staff training.

“In the past, our stores were often located on the second or third floors of shopping malls. Now, we’re securing more prime locations, working with local retail partners who have a deep understanding of the Indonesian market,” adds Liu.

According to Miguel Simoes, vice president of the kid's division at retail conglomerate MAP Active, Chinese brands have disrupted the Indonesian retail space. He says that multi-branded retail concepts in Indonesia—both local and foreign—are facing stiff competition from the burgeoning of Chinese brands such as Miniso, which relies heavily on its IP collectables category.

“Creating hype about their IP collectables through social platforms like TikTok and Meta, and playing into their audiences ‘keeping up with the Joneses’ psyche, the Chinese brands are milking an opportunity that is currently sweeping Asia—the collectables,” says Simoes. “This is aided by an omnichannel approach and large experiential stores. Half the conversion has already been done even before they enter the physical store.”

Miniso’s products may not be entirely unique to their stores, yet the retailer manages to source, curate and display products attractively to get customers’ attention and present values. IP products, or blind box toys usually expensive in the secondary market, have now become accessible.

According to Simoes, Chinese retailers' sourcing competitive advantage allows them to offer prices that are almost impossible for big retailers to match.

“However, we also need to see if this is just a fad. [At one point], young adults were spending money on the latest sneakers or apparel, emulating the West. Now they are spending their limited disposable income on kidult collectables. It could just well be a cyclical trend before the next big thing comes up,” adds Simoes.