Market Research: Cosmetics Market In Indonesia (2007) part.4. Market Entry and Obstacles
MARKET ENTRY
In Indonesia, cosmetics are sold through specialty stores, drug stores, department stores, supermarkets, multi-level marketing, skin care clinics, and beauty salons. U.S. exporters wanting to sell their cosmetics products in this market should appoint a local distributor that will conduct the registration process, and introduce the products to the market.
Indonesia consumers have an aversion to low-quality products and are attracted to branded products. They also tend to be image conscious. Brand loyalty is most likely to be gained by products that are of good quality, well packaged, well-distributed, well-promoted and competitively priced, rather than by cheap products.
Indonesian women are market followers. They try to follow the fashion trends that are popular in other Asian countries, e.g., Singapore and Hong Kong. According to industry sources, products that are popular in Singapore would have good prospects in Indonesia.
The cosmetics market in Indonesia is highly competitive. Hence creation of a strong brand through promotion is recommended for substantial entry into the market. Successful products tend to contain unique formula or ingredients not available in Indonesia. In addition strong marketing campaigns and advertising play a major role in promoting awareness of products and brands and in expanding market reach. Business sources indicate that cosmetics companies use print media as their primary advertising channels to promote imported cosmetics.
U.S. manufacturers seeking to enter the Indonesian market should consider the following points:
• Work closely with the local agent/partner giving full support to product launch and marketing.
• Support the local agent/partner with the necessary papers required for registration at the National Agency of Drug and Food Control (Indonesian acronym BPOM).
• Be responsive and flexible in complying with consumer needs/demands.
MARKET ISSUES AND OBSTACLES
The National Agency of Drug and Food Control (Indonesian acronym BPOM), regulates and controls the registration, distribution and quality of cosmetics. Imports of cosmetics must comply with Indonesian Law. Sales of cosmetics products are regulated through the Directives to Register Cosmetics stated in the “Stipulation on Registration Implementation” and through the Decision of BPOM No. HK 00.05.4.1745, dated May 5, 2003.
Registration of imported cosmetics can be done only by local distributors that have authorization from overseas manufacturers.
There are no formal import barriers on cosmetics. The import duty for cosmetics is 10 percent plus 10 percent VAT. Rates are 0-5 percent for products originating in ASEAN FTA members.
Manufacturers or importers must register all cosmetics whether locally produced or imported with BPOM. Likewise, the manufacturer or importer must fulfill the criteria for registered cosmetics regarding the safety, quality, packaging, and labeling of the products. Labeling must contain honest and complete information that is not misleading and must not contain unwarranted claims. Products should be of good quality, use proper manufacturing methods, and use only safe materials outlined by the BPOM.
Documents required to register cosmetics in Indonesia include:
• The formula and manufacturing process
• Raw material specifications
• Finished product specifications and usage
• Labeling and samples
The foreign company must also provide the following documents:
• Letter of Distributorship Agreement: appointing the local company as the agent or distributor.
• Letter of Authorization: from the foreign manufacturer requesting the agent or distributor to register product(s).
• Certificate of Free Sale: stating that the particular products are produced and marketed in the United States in general conformity with U.S. requirements.
