Why Indonesia’s digital parenting startups must go hyperlocal
Published on December 19, 2022
Even without the Covid baby boom, the baby and maternity market in Indonesia is attractive to investors for its strong forecasted growth due, in large part, to high fertility rates.
Based on an internal sizing exercise, we predict the Indonesian baby and maternity market will reach a US$3.8 billion total available market across retail, telemedicine, and digital parenting content, growing at 6.8% CAGR.
Parents want the best for their kids. Southeast Asian mothers are still the primary caregivers of children, and their thirst for knowledge drives consumer behavior across the board. This includes healthcare, skincare, supplements, and more.
A recent Hechinger Report found that moms trust immediate family more than friends or acquaintances for parenting advice.
Despite Indonesia’s growing digital economy, local parents only have fragmented childcare information, goods, and resources. For credibility, moms and dads in the country can mostly only learn about parenting from doctors, who have traditionally required offline consultations.
Despite the success of HaloDoc and Alodokter, most domestic telemedicine adoption is ailment-driven, with few pediatricians or obstetricians on these platforms.
A recent survey found that 78% of Indonesian parents use social media for parenting tips and 51% use it for medical consultations. These stats suggest a need for more reliable local baby and maternity information.
Indonesian parents have no go-to source
In our exercise, we concluded something simple: Indonesian parents have no go-to baby and maternity store.
By 2025, accelerated e-commerce adoption and the pandemic-induced infant boom will double domestic online baby and maternity product demand.
Retail sales of baby and maternity products grew at an 8% CAGR from 2014 to 2022, with 60% of transaction value coming from online channels, according to industry stakeholders. Baby and maternity e-commerce sales increased by 32.8%.
Indonesia expects at least 2 million new parents in 2022 with over 270 million people and a fertility rate of 2.3 children per female. Middle-class millennials care more about kids’ health and hygiene than previous generations. They buy more baby products.
91% of parents read reviews before buying products for their kids and 53% compare prices. Local parents value authenticity, quality, and reliability over price when buying children’s products. Regardless, Indonesian parents’ offline and online purchasing sources remain many and disjointed.
Offline, Kantar reports that parents buy baby products from minimarkets, general trade, supermarkets, and baby-focused stores, prioritizing proximity and flexibility over brand loyalty. Indonesian parents also shop online at Shopee, Tokopedia, and Lazada.
Indonesian parents still struggle with mainstream e-marketplaces despite a national e-commerce penetration of 64.1%. Due to the lack of transparency on reviewers’ profiles and desultory reviews, most consumers still doubt product authenticity.
Merchants specialize and only carry a few goods (think small stores that offer stuff like supplements, clothes, consumables, tools, etc). This increases delivery costs and biased reviews. Moms seeking trustworthy information and affordable products are harmed by this.
India as a bellwether
As Indonesia-focused investors, we have begun to use India as a reliable market comparable, as internal studies reveal that investors have historically granted similar value to a single individual in Indonesia as they do in India. This is especially true when we look at the unicorn valuation per capita in these two countries. As such, we continue to scout for business models in India that can be well replicated here in Indonesia.
In India’s baby and maternity space, we have seen two very successful plays that have achieved billion-dollar valuations, ‘vertical commerce’ and ‘direct-to-consumer’ (D2C). FirstCry and MamaEarth are the unicorns in question.
FirstCry is perhaps the most complete online-turned-offline brand in the segment. Its online platform achieved profound reach and and its offline stores serve as both physical, tangible activation channels and sales drivers for harder-to-reach audiences, especially in second- and third-tier cities.
FirstCry owns inventory for frequently bought goods. It applies a traditional marketplace model for goods that are less frequently purchased. Meanwhile, MamaEarth is India’s first Ayurvedic, safe-for-skin baby and maternity personal care brand, priced comparably to global brands.
In Indonesia, popular business models follow a similar pattern but with localized differences. All-encompassing parenting apps are more common than purely vertical commerce platforms like Sociolla’s Lilla and Sirclo’s Orami.
These vertical platforms first acquire users by offering free tools (think child growth trackers, menstrual cycle monitors, etc), educational parenting content, and even text-based teleconsultations with pediatricians and obstetricians.
Meanwhile, the more all-encompassing players first aim to build communities of highly-engaged, digital-savvy moms. This then increases platform stickiness and retention. After gaining consumers’ trust as their go-to platform for all things parenting, these apps then monetize through vertical commerce. They tend to focus on things like consumables and personal care, but also longer-term items like strollers, soft linens, equipment, or even services.
If we look at the current playing field, prominent startups like Tentang Anak, RuangMom, and Kita App offer a wide range of products, while players like PrimaKu partner with hospitals and clinics to sell pre- and post-partum services and immunizations.
More D2C startups are also emerging. Mooimom, for example, has hundreds of products with offline and omnichannel distribution. Little Joy makes instant porridge. Grouu makes packaged, ready-to-eat food, while Alamii Food makes healthy baby snacks.
Beyond e-commerce and D2C, other major players have had their own forms of success. Klinik Kecil‘s Ibu Kece (Cute Mom) Club has over 120,000 parents and Fammi‘s educational programs are used by over 50 academic institutions in Indonesia.
Entrepreneurs must hyperlocalize
Southeast Asia’s largest parenting media company, TheAsianparent, has 35 million monthly active users across 11 markets and a D2C subsidiary brand, Mama’s Choice.
We have also seen the quick rise of Supermom, a research and marketing company that profiles Southeast Asian families. It publishes proprietary insights and user-generated content using first-party data from millions of parents. It serves over 300 enterprise clients with “key opinion mom” influencers.
Indonesia’s fragmented digital baby and maternity sector is still nascent, so the ‘content, community, and commerce’ play is defensible but uncertain for scale.
For these reasons and more, entrepreneurs must prioritize two things:
Hyperlocalization first. Vertical commerce must balance the reliability of owning inventory to speed up and streamline delivery times. This also includes bearing costs associated with the flexibility of a traditional marketplace model to gain customer preference data. D2C needs a clear product roadmap with key propositions like mass-produced products.
Second, in applying the content, community, and commerce strategy, the most important metric is conversion. Entrepreneurs must determine if an active base of engaged users, such as parents, reduces the cost of converting them to paying users.