Indonesian e-commerce is changing, what’s the next step for MCNs and brands going overseas?

How can domestic MCNs and e-commerce agents gain a foothold in the localization process when they cross the ocean to Indonesia?

"It is supposed to be the safest market, but now it is in a dangerous situation."

Since last year, due to the popularity of e-commerce platforms such as TikTok (hereinafter referred to as "TT"), Shopee, and Lazada, a number of domestic MCNs and e-commerce operators have taken going overseas as a new direction for business development.

Indonesia, as the most populous country in Southeast Asia, has become a major player in the overseas expansion of domestic MCNs in Southeast Asia. TikTok Shop, as a dark horse in "social e-commerce", has seen its GMV increase 7-8 times from $600 million in the first year in less than three years since its launch in Indonesia.

On September 28, the Indonesian government announced new rules prohibiting social media companies from conducting e-commerce transactions on their platforms.

On October 4, TikTok officially shut down the TikTok Shop function in Indonesia. Some TT sellers returned home, while others prepared to move to the markets in the Philippines and Vietnam .

In contrast, other merchants who have already taken root in Indonesia and engaged in multi-platform cross-border e-commerce have remained unusually calm.

"Why panic? Tokopedia (Indonesian local e-commerce platform), Shopee and Lazada are all still selling. At worst, we can go back to the time before TT stopped doing Shop."
While they are not surprised, they are also watching the market, waiting for TT merchants to exit in a panic or be eliminated so that they can share the unfilled market demand.

In fact, as early as the end of 2021 , there was a major reshuffle of shelf e-commerce in Indonesia. Cross-border stores were not allowed, and only local stores were allowed. The voices of pessimism about cross-border e-commerce were much higher than they are now.

What changes will the sudden policy changes in Indonesian e-commerce bring to the emerging MCN overseas expansion?

1. "Changing warehouses overnight" while "robbing people and goods"

It is learned that there are more than 100 TT service providers in the Indonesian market , including many domestic MCN agencies’ overseas business. For example, BINGTANG, Tikoner, onelink, and Seahub Media are all MCNs with Chinese backgrounds.

At present, the first to be affected are the various anchors, operators, video creators and other staff in MCN's self-broadcasting. Wang Huan, founder of MCN agency CC Partner, said, "Now some people have completely left this industry, some continue to wait for TTS to return, and some have moved to other platforms for live broadcasting."

When a large number of Indonesian anchors and influencers tried to switch to other platforms, the owner of an MCN agency told Doujiao, "Although Shopee's live streaming is developing rapidly now, influencers have fewer opportunities to switch there and do not have strong bargaining power over products ."

The second to be affected are TSP service providers. Baitu Video, a well-known domestic MCN agency, has suspended its TSP business in Indonesia . It revealed to Doujiao that its overseas business is shifting to other countries.

TTS Indonesia 99 Big Promotion TSP Agency Ranking

Merchants who need to go through the pain for a longer period of time are those who are ALL IN TT.

UTen, which develops TikTok's SAAS tools and overseas data, immediately established an MCN after its overseas team arrived in Southeast Asia, and later transformed itself into self-operated sellers and brand sellers .

Last year, when TT Indonesia launched the yellow car, UTen partner Huang Sen took only 4 months to make his clothing live broadcast room the top of TT. Now, due to "strict customs inspections during the red light period + policy changes in the election", "Customs is checking smuggling, the tax bureau is checking tax evasion, the immigration bureau is checking visas, and the labor bureau is checking employment."

He has suspended his Indonesian clothing live broadcast business and is preparing to switch to Vietnam or Malaysia. "Before, the customs clearance policy was not strict, and it was possible to get by with domestic imports. But now imported goods are subject to stricter customs inspections, causing some ordinary goods to become sensitive goods (now requiring qualification certification and higher-risk goods), and sensitive goods have become even more sensitive."

Some merchants have turned to Shopee, Lazada and Indonesian local platforms such as Tokopedia and Bukalapak, but the experience is relatively difficult.

"The product selection for each group of people is different. If we make an analogy with the domestic market, Shopee is like Taobao, with more female users, while Tokopedia is similar to JD.com. The order volume is higher than that of TT, and there are more male users." A clothing merchant told Doujiao that the operating logic is also different. TT still follows the logic of making hot products, while shelf e-commerce requires enough SKUs and a stronger supply chain.

"Many merchants are preparing day and night for Double 9, Double 10, Double 11 and Double 12. Many products shipped by sea through the Chinese supply chain have been stocked in Indonesia. Recently, they have been changing warehouses overnight."

Borei, key account manager of Shipper China, an Indonesian overseas warehouse service provider, told Doujiao that the utilization rate of their company's 300 warehouses in Indonesia is relatively high, especially the warehouses in Jakarta, which are basically saturated. They will also help merchants to dispose of inventory and recover funds as soon as possible through platforms such as Shopee.

For sellers, overseas warehouses are particularly important. Due to Indonesia's regulatory policies, most goods cannot be shipped directly from China, but need to be exported to Indonesia first, enter the local overseas warehouse, and then be sold online and delivered offline. The current regulatory policies are more stringent, and it is necessary to check import qualifications, and Chinese warehouses are prioritized. Many sellers can only seek local warehouses where there are a large number of Indonesians selling goods.

Platforms such as Shopee and Lazada have started to "grab people" and "grab goods" modes.

Take Lazada as an example. It has waived fees for sellers in Indonesia who conduct live streaming sales on the platform. At the same time, it also has preferential policies to attract sellers, such as "3 months of zero commission, 2 months of free shipping, and a value of 300,000 Indonesian rupiah."

2. Who is making a fortune from this? Multi-platform and localization

"We will mark the same items as TT. Previously, users saw them in short videos and bought them directly in the live broadcast room. Now they will come to Shopee to search for the same items." A merchant in the fake hair business on Shopee said that they have been flooded with orders recently and are worried about running out of stock, so they are looking for inventory pallets from TT sellers.

When one shopping channel disappears, users will seek another one. Their needs are met by sellers on local e-commerce platforms such as Tokopedia and Shopee.

This means that the underlying logic of cross-border e-commerce, if you want to minimize losses, is to deploy on multiple platforms and not put all your eggs in one basket.

"Indonesia's policy changes are very frequent. This time it is not sudden. Those who are familiar with it will find it nothing strange. When cross-border stores were not allowed in 2021, many merchants who left regretted it. However, sellers who switched from cross-border stores to local stores followed the policy changes and are now making a lot of money."

Borei recalled that in the 1.0 stage of cross-border e-commerce, merchants all wanted to adopt a no-source model , that is, they only wanted to ship goods, sell them, and then return the money to their own accounts, or in order to reduce costs, they placed forward warehouses in bonded areas in Batam Island and other places.

At the beginning of 2020, Indonesian Customs adjusted the tax standards. The tax threshold for cross-border goods was reduced from US$100 to US$75 and then quickly reduced to US$3, which undoubtedly added more tariff costs to cross-border e-commerce companies in order to protect local Indonesian sellers .

This brings Indonesia's cross-border e-commerce into the 2.0 stage.

Under the aforementioned tax policy, many businesses began to use local identity information to open stores and ship goods through Indonesian overseas warehouses. This means that the goods need to be exported to Indonesia first, enter the local overseas warehouse, and then use the name of the local company for online sales and offline delivery.

Since 2021, e-commerce platforms such as Shopee and Lazada have stopped recruiting cross-border sellers and only allow local sellers to enter . TikTok Shop, which entered Indonesia that year, has also only been open to local sellers.

At this stage, businesses began to treat themselves as local companies, having licenses and permits, paying taxes normally, and selling certified products. This has already met the expectations of the Indonesian government and has also eliminated a number of businesses that lack strength and compete on low prices.

Starting from August this year, policies have been further tightened.

Indonesia first issued a new policy to " prohibit online platforms from selling imported goods below US$100 (1.5 million rupiah) ". The Indonesian Ministry of Trade also announced that imported goods must be imported into the Indonesian market before being sold, and e-commerce platforms cannot sell their own brand products. The closure of TikTok Shop is just an extension of the previous restrictions on cross-border e-commerce categories and the protection of local market products.

From this, it can be inferred that Indonesia's cross-border e-commerce is about to enter the 3.0 stage - the Indonesian government hopes that platforms and cross-border merchants will help the development of the real economy of small and medium-sized enterprises in the local country, such as cooperating with local factories or even setting up factories locally.

Becoming a local brand, or even producing locally, will not be subject to government influence. But this also means that this business is no longer suitable for small and medium-sized businesses that do not have localized pallets, local teams and local store models.

In Huang Sen's view, being forced into the localization process brings opportunities. On the one hand, it increases the threshold for competing merchants to enter Indonesian e-commerce and gets rid of the consumption of simple internal competition and price wars. On the other hand, compared with domestic new Internet brands that die after reaping the benefits of two or three years, spending time on local supply chain and brand building will have a longer dividend period.

However, there are also challenges, namely, greater cost investment. The advantages of the local supply chain can shorten the inventory preparation cycle, but it is not possible to grow rapidly in the short term , and it is not as simple as simply building a factory. Indonesia's manufacturing industry has not yet been completely updated and upgraded, and its production capacity and fabrics are limited. Sometimes the cost of purchasing locally is higher than that of purchasing from the Chinese supply chain. Imported fabrics must apply for quotas from the Indonesian government. "Within two or three years, the local factory cannot be implemented."

As the tide recedes, localization becomes the new screening qualification for who can take root in the Indonesian market.

3. Treat TIKTOK as Xiaohongshu?

Back to TT itself, in the experience of Doujiao, all merchants are extremely recognized for the huge traffic brought by the TT social network. " TT consumers are young enough, the traffic is large enough, and there is still a lot of room for future development, but it is just returning to the era of external links ." "Now TikTok is similar to the domestic Xiaohongshu, like a brand promotion and traffic diversion tool, and the cost is lower than before. Do you want to do it?"

In the view of Gu Jun, founder of the overseas e-commerce brand Newme, after the withdrawal of the e-commerce business, TT's traffic logic in Indonesia has changed. Teams that are good at creating content have a better chance of obtaining the platform's traffic at the lowest cost .

He suggested that businesses find ways to find live broadcast rooms of entertainment experts, such as those for live PK, dancing, or card opening.

Take card unpacking as an example. It is very popular in TT European and American live broadcasts, similar to the beautiful girl shopping live broadcast room in China. "Pay attention to the three core entertainment broadcast indicators of residence time, interaction rate and fan conversion rate, and forget about the conversion side indicators. The advantage is that the tolerance of governance, timeliness and store (independent station) security will be greatly improved. The disadvantage is that the challenges faced in collecting payments and fulfilling contracts are greater."

Although the clothing live broadcast room has been stopped, John’s new beauty business is still continuing. "Some sub-categories still have dividends. We can use TT as a grass-planting platform to drive searches on other e-commerce platforms."

TikTok data platform "UTen" shows that in the personal care and beauty track, Indonesia's deodorants, massagers, moisturizers and other segmented products are growing rapidly in the Indonesian market.

Image source: Uten

For merchants who only want to enter the TT market, Indonesia is not the only "battlefield".

Currently, TikTok is advancing its "Black Friday" marketing activities as planned. The "Black Friday" promotion will be launched on October 27 , covering the UK, US, and Saudi markets, and will last until the end of December.

NEWME's 100% revenue comes from TikTok channels, mainly in the United States , with accounts in various categories for vertical sales. "In the first year, we did short video advertising. Based on TikTok's powerful short video function, the home furnishing category works well in short videos, so we sold it in the short video field. In the second year, we did live streaming. The beauty and crystal categories sold well, so we sold beauty and crystal categories."

In Gu Jun's opinion, when it comes to product selection, product testing, content production, paid traffic, supply chain integration, and global fulfillment, one must understand which links represent one's own advantages before deciding which market to enter. If Southeast Asia isn't an option, then why not go to Brazil, Mexico, or Spain, which is about to open.

According to Gu Jun's observation, Thai people are good at making commercials, which means they are good at creating content. If the brand is highly developed, white-label products will have great opportunities. Malaysia has a population of only 30 million and a small market, but the average monthly income per capita is almost close to that of China, so native brands will have a better chance of having pricing power. In the Philippines, where the per capita GDP is only US$3,000 , people have very American consumption habits and pursue the pleasure brought by material consumption, so native brands will have more new opportunities.

The United States, where TTS was launched in the first half of the year, is a country that advocates sports and loves health. Yoga pants are standard equipment. IP-related stationery and toys are very popular in Hawaii , which is particularly influenced by Japanese culture. Sanrio's products sell the best. " The proportion of our orders coming from major cities on the East and West Coasts does not exceed 20%, but most of the U.S. population is concentrated on the East and West Coasts, and many orders come from the sinking market in the central region ."

Although it has failed in Indonesia at this stage, TikTok, as the pioneer of overseas content e-commerce, still has unlimited appeal to merchants. Whether turning to other shelf e-commerce platforms or turning to TikTok e-commerce in other countries, merchants will usher in new value creation and compete in a broader international market.

Author: 24

Source: Spicy