TikTok E-commerce Fails Indonesia, Southeast Asian Cross border E-commerce Faces New Changes

In the past few years, the possibility of leveraging billions of TikTok users worldwide from "brushing" to "buying" has brought enormous commercial value to TikTok. However, with the recent introduction and implementation of Indonesia's Trade Minister Regulation No

In the past few years, the possibility of leveraging billions of TikTok users worldwide from "brushing" to "buying" has brought enormous commercial value to TikTok. However, with the recent introduction and implementation of Indonesia's Trade Minister Regulation No. 31 of 2023 (Reg31/2023) (hereinafter referred to as "Regulation No. 31"), TikTok's blueprint for developing comprehensive platforms in Indonesia has faced unprecedented challenges.

In June of this year, at the first TikTok Southeast Asian Influence Forum held in Jakarta, Indonesia, TikTok CEO Zhou Shouzi expressed his hope that TikTok would develop from an entertainment based short video platform to a comprehensive platform including e-commerce. He revealed that TikTok currently has over 325 million monthly active users in Southeast Asia, covering almost half of the region's population, of which 125 million come from Indonesia, accounting for 45% of the total population. According to data from venture capital firm MomentumWorks, these users brought $2.5 billion in GMV to TikTok Indonesia in 2022, accounting for 57% of TikTok's GMV in Southeast Asia.

But now, a regulation that "e-commerce belongs to e-commerce, and social media belongs to socializing" is in front of many social media platforms such as TikTok. TikTokShop in Indonesia has officially shut down, and TikTok's Southeast Asian e-commerce business has reached a critical moment.

Prohibition raid

The specific content of Regulation No. 31 can be mainly divided into two points: firstly, prohibiting social media platforms from engaging in product sales and trading activities; The second is to require Indonesian e-commerce platforms to set a minimum price of $100 for goods purchased directly from abroad, and imported goods sold in Indonesia must meet the whitelist requirements.

This regulation does not apply to TikTok, and platforms such as Facebook are also bound by it. However, there is no doubt that TikTokShop, which is developing rapidly in Indonesia, will be the biggest bear of its firepower.

At previous parliamentary hearings in Indonesia, Indonesian officials have repeatedly stated that e-commerce sellers using predatory pricing on social media platforms are threatening Indonesia's offline market. In his parliamentary speech, Indonesian Deputy Minister of Trade Jerry Sanbuaga gave an example of TikTok using live streaming to sell goods.

After the introduction of Regulation No. 31, TikTok quickly made adjustments. Starting from 17:00 local time on October 4, 2023, TikTok no longer provides convenience for TikTokShopIndonesia's e-commerce transactions.

While closing TikTokShopIndonesia, TikTok has not yet given up on the possibility of developing e-commerce business in Indonesia. Kang Zeyu, the head of TikTok e-commerce, said in an internal letter, "This incident happened quite suddenly, and the underlying reasons are quite complex. We will work hard to strive for an early recovery

The internal letter also mentioned that TikTokShop Indonesia has served 80 million Indonesian users in the past two years, providing opportunities for millions of sellers and creators, and will continue to be committed to serving the small and micro enterprise community in Indonesia in the future. TikTok is still actively discussing with relevant authorities, striving to develop products and business solutions to find the best way to continuously provide good services to Indonesian enterprises and users.

The game is still ongoing, and there is still uncertainty about whether TikTokShop can return to Indonesia in the future. However, TikTok's painful period in Indonesia has arrived.

Behind the Live Room with Tears on the Anchor: How to Help Yourself

Those who have a strong e-commerce attribute will definitely be affected. Even if they can transfer to platforms such as Shopee and Lazada, it will still be difficult for these platforms to provide the traffic and support that TikTok used to match in the short term. Chinese sellers of Allin TikTok in Indonesia are also very injured, especially since major promotions such as Double 10 and Double 11 have already begun in the second half of the year. Many products shipped through the Chinese supply chain have already been stocked up and shipped to the local area in Indonesia, and the introduction of new regulations is quite significant now Yu suddenly cut off an important sales channel for sellers Molly, founder of TikTube, a local Southeast Asian institution, told First Financial.

Molly's company is TikTok's TSP (TikTokShopPartner)/MCN, with local teams in Indonesia and Malaysia. She has observed some top internet celebrities in the industry who rely heavily on TikTok, and local sellers shedding tears in the live streaming room after the new law is introduced. She has also recently received self-help advice from many Southeast Asian e-commerce practitioners.

While the Indonesian government has issued a ban, Vietnam has determined that TikTok has violated its laws on e-commerce, information security, and child protection. The Malaysian government plans to summon TikTok's management to explain the ban on its e-commerce business in Indonesia, in order to develop measures that are suitable for the country. The news also touches the hearts of TikTok practitioners in Southeast Asia. Molly revealed that Chinese sellers who do have Southeast Asian startups are considering whether to return home, Some people have also begun to turn to the US market, and many are thinking about the next steps.

But at the same time, Molly does not want to over interpret the impact of this regulation. She believes that although TikTokShop has been taken off the shelves, the Indonesian government has not prohibited sellers from using TikTok for advertising and promotion, and completing sales transactions through other means. Although influencers cannot directly bring goods on TikTok, they can still receive advertisements on the platform, and TikTok practitioners still have many opportunities in Southeast Asia.

Molly pointed out that other regulations in the new bill also need to be taken seriously. This also means that in order to succeed in the Indonesian market in the future, it is necessary to localize, develop local supply chains, and pay attention to various compliance issues in the company's business process in order to achieve long-term development. However, some strategies that attempt to attract investment by investing at a low price in the short term will find it difficult to tell a good story in Indonesia and even Southeast Asia.

For e-commerce platforms such as Shopee and Lazada, while taking on the benefits brought by the closure of TikTokShop, such as sellers, influencers, and e-commerce market share, they also face pressure to comply with imported goods.

After the launch of Regulation No. 31, Shopee quickly announced that by December 31, 2023, Shopee Indonesia's overseas and third-party warehouses will be completely closed to cross-border sellers. Lazada also issued a notice stating that it will remove products that conflict with the latest policy requirements, and all platforms will face new challenges in supply chain construction and management.

However, TikTok's Indonesian e-commerce business, which is still seeking a solution, has not completely lost its imagination. Whether TikTok will split TikTokShop into independent platforms, the Indonesian government will improve the e-commerce business regulatory regulations for social platforms in the future, and the possibility of issuing corresponding licenses to qualified platforms have all attracted industry attention.

Li Chengdong, founder of Dolphin Think Tank, analyzed that the main reason for the introduction of Regulation 31 is to protect local retailers in Indonesia, including local e-commerce companies. In his view, this policy will definitely be negative for TikTok e-commerce in the short term, but in the long run, TikTok's financial resources and experience in operating e-commerce will keep it competitive in the Indonesian market.

Column Editor in Chief: Qin Hong Text Editor: Yang Rong Inscription Source: Xinhua News Agency Image Editor: Cao Liyuan

Source: Author: First Financial

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