Saturday, 17-10-26
Indonesian households are adjusting their lifestyle spending as rising essential expenses, heavier financial commitments, and changing priorities push some consumers to choose function and affordability over status.
The shift can be seen in decisions such as replacing cars with cheaper vehicles, reducing restaurant visits and holidays, and keeping usable products longer instead of buying newer models.
For businesses, the change points to a consumer who may still want the same function but is becoming more selective about how much they are willing to pay.
Consumers Are Trading Down, But Their Needs Remain
The shift is not always caused by an inability to meet daily needs. Some households are reducing discretionary spending to maintain financial stability while prioritizing education, healthcare, housing, transportation, and other regular expenses.
Sociologist Sigit Rochadi of Universitas Nasional described lifestyle downgrading as an adjustment strategy for the middle class. Consumers can maintain their social status while lowering the quality or price level of the goods and activities they consume.
That can mean choosing a simpler vehicle, eating at restaurants less often, or selecting more affordable recreation.
The behavior does not necessarily mean that consumers have stopped wanting products or experiences. According to Sigit, the desire may instead be postponed or replaced with a more affordable alternative.
This distinction is important for businesses because a consumer who chooses a cheaper product may still be looking for the same basic function.
Tartika, a 31-year-old insurance agent in East Jakarta, illustrates this change. With a monthly income of around Rp6.7 million and a husband earning around Rp7.2 million, the family replaced its Honda car with a Honda Beat Street.
The family has two children, aged 11 and seven. Tartika said school and household needs had increased, while a motorcycle was sufficient when she travelled alone.
The family also reduced restaurant visits, non-essential shopping, and weekend trips. Monthly spending on food and daily necessities is around Rp4 million to Rp5 million, while eating out and snacks account for around Rp500,000 to Rp1 million.
A similar adjustment was made by Wulan, 29, a freelance live host in Bogor. Her household income declined after her husband's work incentives fell and her work-from-home income weakened.
The family replaced its three-year-old Honda HR-V with a Daihatsu Ayla while prioritizing its mortgage and the needs of three children.
The HR-V required an instalment of around Rp6.5 million per month and annual tax of about Rp5.9 million. The Ayla costs around Rp3 million per month in instalments, with annual tax of about Rp2.5 million.
Wulan also reduced trips to shopping malls, eating out, and out-of-town travel during the New Year period. Her Threads post about the decision received around 1.25 million views, with other users sharing similar experiences.
Rising Essential Costs Are Changing What Consumers Prioritize
Economist Adrian Nalendra Perwira of the GREAT Institute said income is not the only factor affecting household spending.
Households also have fixed and semi-fixed expenses such as housing, transportation, education, healthcare, electricity, internet, instalments, insurance, and routine bills.
When these expenses take up more of household income, there is less room for restaurants, holidays, shopping, and entertainment.
Spending can also increase as households move through different life stages, including marriage, having children, buying a home, or helping parents.
BPS DKI Jakarta's March 2025 Susenas data shows the scale of household expenditure. Average monthly per-capita spending in Jakarta reached Rp2,962,412 in 2025, up from Rp2,794,485 in 2024.
Food accounted for Rp1,153,404 per person per month, while non-food spending reached Rp1,809,008.
Among food expenses, prepared food and beverages were the largest category at Rp503,469 per capita per month. Cigarettes accounted for Rp88,208, fish Rp85,029, vegetables Rp82,972, and grains Rp82,352.
For non-food spending, housing and household facilities were the largest category at Rp956,351 per capita per month. Miscellaneous goods and services reached Rp514,718, while taxes, levies and insurance accounted for Rp145,390.
Spending on durable goods stood at Rp94,975 per capita per month.
The data does not mean that all Jakarta residents are downgrading their lifestyles. It shows how household expenditure is distributed and the expenses that can compete with discretionary spending.
The Middle-Class Shift Adds Pressure on Consumer Spending
The change in consumer behavior also comes as Indonesia's middle-class population shifts.
GoodStats, citing BPS data processed by the Mandiri Institute, reported that Indonesia's middle class declined from 47.9 million people in 2024 to 46.7 million in 2025.
At the same time, the aspiring middle class increased from 137.5 million to 142 million, or around 4.5 million people.
The groups are classified according to per-capita consumption relative to the poverty line. The aspiring middle class falls between 1.5 and 3.5 times the poverty line, while the middle class is between 3.5 and 17 times.
The change is not uniform across regions. West Java recorded an increase of around 358,000 people in the middle-class category, followed by East Java with around 152,000 and Yogyakarta with around 63,000.
South Sumatra, Banten, and Central Java, meanwhile, recorded declines.
Bank Mandiri chief economist Andry Asmoro said the pressure was asymmetric across regions and therefore requires different policy responses.
UGM economist Dr Wisnu Setiadi Nugroho said the middle class generally has enough financial capacity to save and plan for the future. Its decline can affect household consumption, the tax base, social stability, and aspirations for Indonesia to become a developed country.
He also pointed to survival-based employment, gig and informal work, low-productivity jobs, and limited stable income, social security, and career paths as factors behind the pressure.
Businesses Need to Rethink Value, Not Just Price
The consumer shift creates a different challenge for retailers and brands: offering affordability without simply entering a race to the bottom on price.
An analysis of consumption downgrading in the retail market identifies several areas businesses may need to adjust, including product strategy, service quality, sales channels, supply-chain efficiency, and brand marketing.
Products that emphasize practicality, function, and durability can address consumers who are looking for more cost-effective choices.
Retailers can also use supplier relationships and more efficient supply chains and logistics to support their operations.
Customer retention strategies such as membership programs and points can also be used, alongside advertising, public relations, content marketing, social media, short-form videos, and promotional events.
The analysis also identifies new retail models and the use of big data and artificial intelligence for personalized recommendations and marketing as potential areas for retail businesses to develop.
However, competing primarily through lower prices can create pressure on profitability and may affect product quality, service, and brand image.
The broader Southeast Asian retail landscape shows that downgrading is one of several consumer patterns businesses are responding to. Consumers may move toward premium products, look for more affordable alternatives, or seek products that address needs not adequately served by existing offerings.
For the downgrading segment, the focus is on affordability and reliability without giving up the quality consumers consider important.
The Southeast Asian retail analysis also points to strategies such as discounts, loyalty programs, value-focused messaging, mass-market influencers, e-commerce, deals, and convenience.
If Trading Down Continues, What Changes for Businesses?
The current shift suggests that businesses need to pay closer attention to what consumers consider worth paying for.
If households continue choosing cheaper alternatives while retaining their need for the same basic functions, products that offer practicality.
This article is a summary of two original articles. The full versions can be read at the following links:
https://goodstats.id/article/jumlah-penduduk-kelas-menengah-indonesia-turun-pada-2025-iZPou
https://drpress.org/ojs/index.php/fbem/article/view/22285/21962
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This article was created with AI assistance.
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