Baby steps: Why Indonesia’s parenting market is drawing investors’ eyes

Even without the Covid baby boom, Indonesia’s baby and maternity market is becoming increasingly attractive to investors, thanks to a strong forecasted growth that’s partly due to the country’s high fertility rate.

My company predicts that the Indonesian baby and maternity market – covering retail, telemedicine, and digital parenting content – will reach a total available market of US$3.8 billion by 2027, with a 6.8% compound annual growth rate (CAGR).

It’s not just rocketing growth that provides opportunities, as the sector’s current inefficiencies mean it’s ripe for the taking by savvy startups.

A baby girl plays with her mother in Bandung, Indonesia. / Photo credit: Shutterstock

Fragmented market

In Southeast Asia, mothers’ thirst for caregiving knowledge drives consumer behavior in the baby and maternity space.

However, the Indonesian market for childcare information and goods is still fragmented. Also, despite the country’s growing digital economy, parents have not fully benefited from tech-powered services. For credible sources of parenting knowledge, for instance, parents typically rely on in-person visits to doctors.

A recent survey found that 78% of Indonesian mothers turn to social media for parenting tips and 51% use telemedicine apps for consultations. These stats suggest a need for more reliable local baby and maternity information.

No go-to babycare stores

Our research shows that Indonesian parents lack a go-to baby and maternity store.

Domestic demand for online baby and maternity products will double by 2025 as a result of accelerated ecommerce adoption and the pandemic-induced childbirth boom.

Retail sales of those products grew at an 8% CAGR from 2014 to 2018, with 60% of transaction value coming from online channels, according to industry stakeholders. Baby and maternity ecommerce sales increased by 32.8% during that period.

With a population of around 280 million and a fertility rate of 2.3 children per woman, Indonesia is estimated to have added at least 2 million parents in 2022. Research also shows that compared with the previous generations, middle-class millennials care more about kids’ health and hygiene, and they buy more baby products.

Local parents value authenticity, quality, and reliability over price when buying children’s products. Regardless, these parents lack reliable sources of information on which offline or online stores to shop from.

Offline, marketing analytics firm Kantar reports that parents buy baby products from minimarkets, general trade, supermarkets, and baby-focused stores. When choosing which brick-and-mortar business to go to and which items to purchase, the parents prioritize store proximity and shopping flexibility over brand loyalty.

Indonesian parents still struggle with mainstream online marketplaces despite a national ecommerce penetration of 64.1%. Due to desultory reviews and the lack of transparency on reviewers’ profiles, most consumers still doubt product authenticity.

India as a bellwether

Focus on hyperlocalization and conversion