TikTok holds controlling stake in Tokopedia: Indonesia restarts live streaming sales

Do you know about Indonesia's National Online Shopping Day? On December 11, TikTok regained the initiative in the e-commerce business. What does his return mean? How will the market structure of Southeast Asian e-commerce change? Let's read the article together and see the author's interpretation!

On December 11, TikTok and Indonesia's GoTo Group reached an e-commerce strategic partnership and announced that TikTok's e-commerce will return to Indonesia on this year's "Double 12" (today). Less than two and a half months after TikTok Shop was officially shut down in Indonesia on October 4 this year, TikTok's e-commerce business has turned the tide and "killed" back into the Indonesian market.

As early as when TikTok Shop was just blocked in Indonesia, there were many rumors that TikTok Shop would prepare to "return to Indonesia", and one of the rumors was trying to cooperate with local Indonesian e-commerce. Now the shoe has finally landed, but according to Bloomberg, unexpectedly, TikTok will acquire 75.01% of the shares of Tokopedia, the e-commerce business platform of Southeast Asian Internet giant GoTo, in the newly announced agreement.

This also means that TikTok has achieved a controlling stake in local e-commerce Tokopedia, which means that TikTok actually has the initiative in its return. What happened behind TikTok's return? What changes will it bring to the Southeast Asian e-commerce market? This is what people are eager to know.

Joint statement from TikTok e-commerce and Tokopedia

1. TikTok e-commerce returns to Indonesia and takes back the initiative

December 12th is Indonesia’s National Online Shopping Day (Harbolnas).

This day is also an important day when the previously banned TikTok e-commerce came back online and promoted its first return event "Beli Lokal (Buy Local Goods)" in Indonesia.

In terms of consumer experience, the use and purchase process of TikTok Shop after it is relaunched is not significantly different from before. According to the official agreement announced by both parties, after TikTok and Indonesia's GoTo Group reached an e-commerce strategic cooperation, TikTok's Indonesian e-commerce business will be merged with the group's e-commerce platform Tokopedia. The specific implementation method is to integrate the original Tokopedia and the original TikTok Shop Indonesian business into the new "PT Tokopedia" entity.

In addition to taking 75.01% of the shares in one fell swoop, TikTok also promised to invest more than US$1.5 billion in the future to provide financial support for future business development. In the new e-commerce partnership, TikTok, which was previously "expelled", has become a major player, successfully holding the controlling stake and leading the subsequent e-commerce operations and maintenance, as well as local Indonesian products and merchant services. The cooperation with GoTo is also an opportunity for TikTok's Indonesian e-commerce to achieve deep localization.

Considering that Tokopedia has been deeply involved in the Indonesian local market for a long time, it ranks second in the Indonesian e-commerce market share and has raised more than US$2.3 billion in total. Its parent company GoTo is the largest Internet technology listed company in Indonesia. In addition to the e-commerce platform, it also owns the well-known travel service platform Gojek, and has a strong background in Indonesia.

In fact, this strategic cooperation is undoubtedly a "win-win" for both TikTok e-commerce and Indonesia's local e-commerce platform Tokopedia. Especially when TikTok eventually holds a controlling stake in Tokopedia, TikTok obviously has more say and is also "turning from passive to active" in the Indonesian e-commerce market.

TikTok e-commerce logo appears on Tokopedia platform

When TikTok Shop was banned in Indonesia in October this year, the entire Southeast Asian e-commerce market was in turmoil. Officials in Southeast Asian countries including Malaysia and Vietnam were also considering whether to follow Indonesia's example and impose restrictions on the newly emerging live streaming sales. The Indonesian official's recognition of TikTok's return to e-commerce will undoubtedly affect other Southeast Asian countries' judgment and future attitude towards China's live streaming e-commerce.

2. Officials change their tune: Let social e-commerce become a supporter of small and medium-sized enterprises

The TikTok Indonesia incident once led to widespread talk of e-commerce impacting the real economy.

The Tanah Abang Market in Jakarta, Indonesia, is the largest textile wholesale market in Southeast Asia. Many small vendors in the market have insisted that it is the emergence of online shopping and e-commerce that has caused the once bustling Tanah Abang Market to become sluggish and no longer prosperous.

Some vendors had hoped that their glory would return after TikTok Shop was banned in Indonesia. But the fact is, according to Al Jazeera, about a month after TikTok Shop was banned in Indonesia, the Tanah Abang Market did not see a prosperous scene of a flood of people. On the contrary, the customer flow was half of the previous one.

Has TikTok really harmed the interests of local small and medium-sized businesses? What has the live streaming sales model it introduced brought to Indonesia, the most populous country in Southeast Asia?

Richard Lee, an Indonesian beauty blogger, is an Indonesian "Internet celebrity" with 4.7 million followers on TikTok. While teaching people how to put on makeup on TikTok, he also did live broadcasts to sell goods before the TikTok Shop was offline. His live broadcast team and staff consisted of dozens of people to support his highest single-day order amount of 40.3 billion Indonesian rupiah (about 19 million yuan).

He once said in an interview that his biggest worry after TikTok Shop was offline was that "I would have to lay off a lot of people."

Richard Lee's TikTok account

There are many live-streaming sales bloggers like Richard Lee. In fact, many local small and medium-sized business owners in Indonesia have become live-streaming sales merchants on the TikTok platform. They rely on content platforms to gain exposure and traffic, and achieve business growth, but they also lost these wealth due to the temporary offline of TikTok Shop.

Behind TikTok's return to Indonesia, many local officials and local e-commerce platforms have actually realized the two-sided nature of live streaming sales on local economic development.

According to the Jakarta Globe, Indonesian Trade Minister Zulkifli Hasan had already softened his stance on social e-commerce a week before the official strategic cooperation announcement. Zulkifli Hasan said, "The essence of this arrangement is to allow social e-commerce to support Indonesia's economic growth, so that it can become a supporter of small and medium-sized enterprises and Indonesia's industry-led markets."

Fithra Faisal Hastiadi, a former spokesperson for the Indonesian Ministry of Trade and an economist, has long said that "banning TikTok e-commerce is a mistake." He even severely criticized the official claim that "cheap Chinese goods are impacting Indonesia's traditional market, which is a hypocritical rhetoric."

Edy Misero, secretary general of the Small and Medium Enterprises Association, said about the cooperation between TikTok and Tokopedia: "Tokopedia only operates in the domestic market, which means that this market only accepts sellers from Indonesia, and TikTok can help local small and medium-sized enterprises expand into a broader market."

GoTo also said on Monday that the arrangement will enable TikTok and GoTo to more comprehensively serve Indonesian consumers and small and medium-sized enterprises, and more than 90% of the merchants after the merger are small and medium-sized enterprises. More and more local voices in Indonesia are beginning to realize that local small and medium-sized enterprises not only need "protection" but also need to "look outward." Another way to protect the local manufacturing industry is to take advantage of the wave of globalization and promote local products to enter the global market.

3. Live streaming e-commerce, rebuilding confidence in Southeast Asian e-commerce

TikTok e-commerce's return to Indonesia during the "Double 12" period will create opportunities for Indonesia's future e-commerce development model.

When TikTok Shop was taken offline in Indonesia, some media said that the reason was that the low-priced goods sold by TikTok Shop were flooding, posing a threat to local businesses and "hindering local economic development." Indonesian Minister of Small and Medium Enterprises Teten Masduki has also repeatedly accused Chinese goods of being cheap, making it "impossible for local businesses to compete with them."

The return of TikTok's e-commerce business this time proves that the reasons why TikTok Shop was banned in Indonesia were complex and varied. One theory is that the core reason was that it sold a large number of Chinese products.

However, the trend of digital e-commerce is unstoppable. Nailul Huda, a researcher at the Indonesian Institute for Economic and Financial Development, also believes that "banning TikTokShop will undermine the digitalization of small and medium-sized enterprises and is a step backward. The government should replace the ban with regulation."

TikTok Shop's entry into Indonesia has essentially accelerated the development of local social e-commerce and changed the model of traditional shelf e-commerce. Especially when the overall growth rate of traditional e-commerce in Southeast Asia has slowed down, live streaming e-commerce dominated by content traffic has gained momentum in Southeast Asia.

On November 23, not long ago, Rizal Edy Halim, a professor at the Faculty of Economics and Business at the University of Indonesia, said when talking about the ban on TikTok Shop, "Why is TikTok Shop more popular than other e-commerce platforms? People need social interaction when shopping, which is why social shopping is growing."

A Southeast Asian e-commerce practitioner also told Xiaguangshe, "TikTok Shop's rapid growth in Southeast Asia is essentially determined by the number of orders and sales figures." Content e-commerce just meets the needs of human nature, empowering online shopping with the traffic of social media and content platforms, and ultimately achieving "explosive orders" for sellers. Subsequently, more and more Southeast Asian e-commerce practitioners have entered the live broadcast e-commerce track, which has become a trend of change in Southeast Asian e-commerce.

Prior to this, in addition to the dark horse TikTok, Shopee, Lazada, and Indonesia's local e-commerce platform Tokopedia have all entered the live streaming sales track. According to Omise data, the annual growth rate of Southeast Asian live streaming e-commerce GMV in 2021 reached 306%, and the market size of Southeast Asian live streaming e-commerce is expected to reach US$19 billion in 2023. In the future, as the supply chain of live streaming e-commerce improves, its growth will become more prominent.

With TikTok e-commerce confirmed to return to Indonesia, the direction of the competition among Southeast Asian e-commerce giants has also changed.

According to Momentum Work data, in the market share ranking of Southeast Asian e-commerce platforms in 2023, Shopee ranked first with 45.9%, and Lazanda ranked second with 17.5%. Tokopedia and TikTok Shop, which announced a strategic partnership this time, ranked third and fourth with 14.2% and 13.9% respectively.

Now, the third and fourth place have merged into one, and they are likely to surpass Lazanda and approach Shopee. At the same time, TikTok's rapid return to Indonesia has also given the entire Southeast Asian e-commerce overseas market a dose of confidence.

TikTok's return to Indonesia by eventually acquiring a controlling stake in Tokopedia has provided more new ideas for Chinese e-commerce to go global and localize. At the same time, it also proves that live streaming e-commerce still has broad room for growth in Southeast Asia.

Author: Guo Zhaochuan, Editor: Liu Jingfeng

Source: Public Account: Xiaguangshe (ID: Globalinsights); see the brilliant rays of light of the new economy.