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Consumer Behaviour Towards Gold Jewellery in Indonesia

By Jennifer Heryanto, Chief Executive Officer, SKK Jewels

Published on June 10, 2020

As the world’s fourth most populous country, Indonesia has become the focus of many global firms and industries. With more than 270 million inhabitants spread out across 34 provinces on seven big islands, the country is considered Southeast Asia’s economic engine. Although it has favourable prospects for sustainable businesses and is forecast to be among the world’s four largest economies by 2030 (Economist Intelligence Unit), the country is still considered a blank canvas for many global firms, including gold industry players, due to its unclear regulation, sophisticated demographic segmentation, and lack of information of the industry landscape.

DEMOGRAPHIC DIVIDEND

A large share of Indonesia’s population will be of working age in the coming decades – what is known as the demographic dividend or the demographic bonus – giving it a competitive advantage compared to more developed countries facing an ageing population. The size of the country’s economically active population – aged between 16 and 65 – is growing and expected to peak at 70% of the total by 2030. The median age of Indonesia’s population is currently 29.7 years old – an attractive proposition for any business (fig.1).

Gold jewellery’s main consumer demographic – females from 20 to 54 years old – comprises around 26% of the population, or 69 million people, which is more than Italy’s total population and almost 12 times of Singapore’s total population. The income of this population is also growing along with the share of employment of the total female population (from 45% in 2011 to 50% in 2019, according to the Indonesia Statistics Bureau). Additionally, the minimum salary has also increased significantly in the past 10 years. For example, in Jakarta province, it has grown almost fourfold from IDR 1.11 million (US$79) per month in 2010 to IDR 4.27 million in 2020.

The country has another competitive advantage: its growing middle class, fuelled by rising incomes. In general, Indonesia’s population is divided into three segments: upper class, middle class, and lower class, with the majority falling into the lower-middle class segments. The middle class is estimated to comprise 62% of the population, having grown by 47 million in the past three years (fig.2).

Figure 1 : Indonesia’s population by age (2020)

Source: Indonesia’s National Statistics Bureau, 2019

Figure 2 : Indonesia’s demographics

Source: Various Sources of Internal Market Research, 2019

CONSUMER PROFILE

There are four significant behavioural differences within each socio-economic class. The upper class can be divided into the higher and the upper middle sub-economic class to differentiate behavioural patterns. Unlike more developed countries, which have more uniformity in behaviour, consumers in Indonesia have more diverse preferences. As such, engagement channels that introduce the product or service, variety of product price and quality, and buying channels, vary widely for each social class (fig.3).

Figure 3 : Indonesian consumer profiles

Source: Various Sources of Internal Market Research, 2019

GOLD BUYING BEHAVIOUR

According to Metals Focus, Indonesia’s gold jewellery market size reached 40 tonnes in 2018. Gold jewellery purchases among consumers fall into two categories: investment and fashion. Gold jewellery with cubic zirconia stones are popular in Indonesia, as the lower and middle classes cannot afford diamond jewellery, but want a similar look. While the gold consumption figures of each social economic class is not known, the figure for the lower class can be biased as the same product can have a turnover of six to eight times among retailers and consumers (fig.4)

Upper class consumers typically choose 99.99% fine gold bars for investment and diamond jewellery as their main fashion purchase. They also buy plain gold jewellery, usually 18K, in the form of curb chain necklaces, chokers, and hoop earrings. In contrast with the upper class, the lower class segment combines investment and fashion purchases, and has a preference for 8K–10K gold jewellery, followed by cubic zirconia jewellery with the same range of gold content. The behaviour of the middle class segment is a hybrid of the upper and lower class. They have a preference for cubic zirconia jewellery with gold content in the range of 17K–18K. However, for big occasions such as weddings, they usually buy the most affordable diamond wedding rings (fig.5).

Figure 4 : Gold purchase behaviour by economic class

Source: Various Sources of Internal Market Research, 2019

MARKET CHALLENGE

The gold jewellery industry in Indonesia is still considered a blank canvas compared to other consumer-focused industries. The biggest challenge in the gold industry is the lack of standardisation of gold content, with the majority of gold jewellery distributed across the country containing less gold than their manufacturers claim. In 2020, authorities will introduce a national standard reference for gold jewellery content from 8K to 24K. However, much remains to be done in terms of implementation, as the standard will only be a guideline and not mandatory. In addition, enabling infrastructure, such as an independent institution to monitor gold content that can be used by gold shop owners and small-medium-enterprise gold entrepreneurs across the countries, is not available.

Another unique trait is the high buy-back rate of gold jewellery in Indonesia, particularly among gold shops that serve the lower class segment. Consumers in this segment trade in their gold jewellery more frequently (i.e. monthly or weekly). Such behaviour makes the business model for gold retailers more akin to that of a pawnshop than a commercial trade shop, as 50–80% of the products they sell return to them in a short period of time.

The third challenge – especially pertinent to manufacturers – is providing products with a wide range of gold content, as different regions have varying product preferences. For example, Java – an island that is home to 52% of Indonesia’s population – has 8K, 9K, and 10K gold jewellery for the lower class and 17K (yellow gold) and 18K (white gold and rose gold) for the middle class. However, 20K gold jewellery is preferred on islands such as Borneo (Kalimantan) and 21K gold jewellery is preferred in Celebes (Sulawesi).

In summary, Indonesia is a promising country with a huge business opportunity, including in the gold jewellery sector. However, knowing how to engage with consumers across all touch points and having strong relationship with stakeholders, from the government to the small retailers across all geographies, are critical to growing the business sustainably in this emerging market.

Figure 5 : Example of gold jewellery with cubic zirconia stone

BUILDING A BRAND

As the newest gold jewellery player in Indonesia, SKK Jewels has been welcomed by all industry stakeholders in the country. We take pride in our Hala Gold brand, which is built following our principles of being honest, authentic, lasting, and aspirational. As the first and the only gold jewellery manufacturer in Indonesia with certified gold content from the Ministry of Industry, SKK hopes to pioneer good industry practices. With this certification, SKK can put the Indonesian National Standard (SNI) mark on all our collaterals, which goes a long way to fostering trust in our brands. We also focus on producing innovative and authentic designs, and strictly prohibit our factories from producing counterfeit products or copying the designs of other factories.

SKK aims to provide a lasting product for our consumers. Our product craftsmanship has been recognised for its quality, which has been compared to diamond jewellery. We maintain high standards of quality control to ensure our gold jewellery products stand out from the competition. This has been a key success driver for our brands, and has allowed the public to acquire 18K gold jewellery with high craftsmanship at affordable prices.

Our last innovation, considered a breakthrough in Indonesia’s gold jewellery industry, is in creating an aspirational brand with a unique identity and precise consumer targeting. We have partnered with top local celebrities to grow our brands over its lifetime, which has created high brand awareness and trust from consumers. Our limited edition series have also created high demand and hype among retailers and consumers. As a result, the organic #HalaGoldHunter movement has grown among consumers who are fans of our products and appreciate our brand values.

Strong engagement from authorities, retailers, trendsetters and consumers, who have also become our advocates, are helping us educate the public on the importance of standardised gold content and high-quality gold jewellery products. This mutually beneficial ecosystem works for the greater good, and will only help develop and grow Indonesia’s gold jewellery industry even further.

JENNIFER HERYANTO is the founder and Chief Executive Officer of SKK Jewels, a gold jewellery manufacturer in Indonesia and subsidiary of CMK Group, Indonesia’s biggest diamond jewellery retailer. She led SKK to be the first and the only gold jewellery factory certified by the Indonesia government for trusted gold content. The company has two champion brands – Hala Gold and Sandra Dewi Gold, a partnership with a leading celebrity Sandra Dewi. Heryanto was previously a business leader in the consumer goods and beauty sector.

* This article was published in partnership with SKK Jewels

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Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

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Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

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Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

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Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

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Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

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Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

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Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

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Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

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Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

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Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

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Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

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Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

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Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

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Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

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Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

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Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.