Impact of VAT Increase on Creative Industries: T-Shirt Printing, Convection, Boutiques, Fashion, and Other Sectors
The increase in Value Added Tax (VAT) from 11% to 12% starting January 2025 has become a hot issue in Indonesia. For business actors in the creative industry sector such as t-shirt screen printing, convection, boutiques, and fashion, this increase has a significant impact, both in terms of operational costs and consumer purchasing power. The creative industry, which often relies on innovation and efficiency, must immediately adapt to remain competitive in the market.
Impact of VAT Increase on Creative Industries
1. Increased Production Costs
The increase in VAT increases the price of raw materials such as fabric, screen printing ink, thread, and other accessories. For convection and t-shirt screen printing businesses that require large volumes of raw materials, this additional cost can be a big burden.
Example:
If previously the purchase of raw materials amounting to Rp10,000,000 was subject to 11% VAT (Rp1,100,000), then with 12% VAT, the tax paid becomes Rp1,200,000.
This increase may seem small in percentage terms, but for small businesses that rely on thin margins, the impact is very pronounced.
2. Decrease in Consumer Purchasing Power
Fashion products, custom t-shirts, and boutique items are often considered secondary needs. With the increase in VAT, consumers may be more selective in their purchases. This has the potential to reduce demand in this sector.
3. Challenges in Determining Selling Prices
Businesses face a dilemma: raise prices to cover rising costs or keep prices competitive but with smaller margins. If prices go up without adding value, consumers may switch to cheaper products or services.
4. Impact on the Creative Ecosystem
The increase in VAT does not only affect the main players such as t-shirt manufacturers or boutiques, but also supporting service providers such as graphic designers, photographers, and raw material suppliers. This ecosystem becomes more sensitive to price changes.
Opportunities Amidst VAT Hike
While the challenges faced are real, there are opportunities that creative industry players can take advantage of to survive:
1. Focus on Added Value
Products with added value such as unique design, premium quality, or personalization may be more easily accepted by consumers even though they are priced higher.
2. Product Diversification
Offering a variety of products such as accessories, merchandise, or casual wear can help reach a wider market.
3. Leveraging Digitalization
Marketplace and Social Media : Platforms such as Tokopedia, Shopee, and Instagram can expand market reach without significantly increasing operational costs.
Independent E-commerce : Having your own website allows greater control over branding and pricing strategies.
4. Community Support
Collaborating with local communities or niche markets such as art communities, youth, or social organizations can create customer loyalty.
Digitalization Strategy for Creative Industries
Digitalization is key for the creative industry to remain competitive in an ever-changing era. Here are some relevant digitalization strategies:
1. Social Media Optimization
Use platforms like Instagram, Facebook, and TikTok to promote products visually.
Create engaging content, such as behind-the-scenes videos of product creation, customer stories, or fashion tips.
Take advantage of shoppable posts that allow consumers to buy directly from social media.
2. Use of E-commerce
Register on major marketplaces such as Tokopedia, Shopee, Lazada, or Blibli to reach more consumers.
Build your own e-commerce website to increase control over sales and customer experience.
Ensure integration with online payment systems such as e-wallets or bank transfers.
3. Process Automation
Use stock and inventory management software to monitor stock availability in real-time.
Implementation of design software such as Adobe Illustrator or Canva to speed up the design process.
Marketing automation through email marketing with platforms like Mailchimp to maintain relationships with customers.
4. Personalize Consumer Experience
Use customer data to offer relevant product recommendations.
Provide personalization options on products, such as custom screen printing or embroidering names on clothing.
5. Collaboration with Influencers
Collaborate with local influencers to expand market reach.
Choose influencers who are relevant to your target audience, such as fashion or art influencers.
6. Utilization of Augmented Reality (AR) Technology
Use AR to virtually try on products, such as fitting clothes or choosing a t-shirt design.
Implement this feature on your e-commerce website or app for a more interactive shopping experience.
7. Data Analytics and Monitoring
Use tools like Google Analytics or Facebook Insights to monitor consumer behavior.
Analyze sales data to determine the most popular product trends and effective marketing strategies.
Survival Strategies for Creative Industry Players
1. Production Efficiency
Optimize Raw Materials : Look for local suppliers with more competitive prices.
Reduce Waste : Use technology such as design software to minimize production errors.
2. Price Adjustment with Transparency
Communicate price increases transparently to customers, for example by providing information about the quality of materials or production processes that are maintained.
3. Creative Promotions and Discounts
Offer value packages or discounts for bulk purchases to attract price-sensitive customers.
4. Adopt Technology for Efficiency
Automated Inventory System : Reduce dead stock or unsold items.
Digital Marketing : Use paid advertising with a specific target audience to increase conversions.
5. Partnership with Other Creative Actors
Collaborating with designers, photographers, or influencers can increase the value of the product while expanding the market reach.
Government Support That Can Be Utilized
Creative industry players can take advantage of the following programs to ease the impact of the VAT increase:
People's Business Credit (KUR) to help finance working capital.
The National Movement for Proudly Made in Indonesia (Gernas BBI) to expand market access.
Training and Certification : Training organized by relevant ministries to improve skills and competitiveness.
Halal and SNI certification to reach a wider market and increase customer trust.
Conclusion
The increase in VAT is indeed a challenge for the creative industry, but with the right strategy, business actors can adapt and remain competitive. Focusing on added value, operational efficiency, and taking advantage of digital opportunities are the keys to surviving this change.
Government support and collaboration with other creative ecosystems are also important steps to face this challenge together. With a proactive approach, the creative industry can not only survive but also thrive in this challenging era.