After being targeted in the United States, TikTok is also encountering considerable trouble in Indonesia, another important market. Recently, Indonesian President Joko Widodo formally banned direct sales transactions on social media platforms like TikTok at a cabinet meeting, saying that the regulation will be included in the revised Indonesian Ministry of Trade Regulation No. 50/2020. To put it simply, if this regulation officially takes effect, Indonesians can continue to watch short videos on TikTok, but they cannot directly shop on TikTok. TikTok can only advertise and promote products, and the commodity trading function may be split into other apps to carry it.
- The Indonesian government bans TikTok and other social media platforms from direct sales transactions, which may split the commodity trading function
- TikTok ranks second in the Indonesian market in terms of monthly active users and contributes 57% of the Southeast Asian market GMV
- Merchants in TikTok’s Indonesian marketplace are facing transition issues, with some converting themselves into local brands
It is rumoured that TikTok CEO Zhou Shouzi also arrived in Indonesia a few days ago, wanting to actively communicate with the Indonesian government. After all, the Indonesian market is too important for TikTok’s business development.
Data shows that Indonesia is the second largest market for TikTok’s monthly active users, second only to the United States, and the best performer among all of TikTok Shop’s current sites.In 2022, TikTok shop’s GMV in Indonesia reached $2.5 billion, contributing to 57% of the GMV of the entire Southeast Asian market. In the first half of this year, according to FastData’s “TikTok Eco-Development Whitepaper for the First Half of 2023”, Indonesia has the highest number of TikTok stores with sales greater than 10,000, and also has the highest total TikTok bandwagon live streaming time and total viewership.
Now, this ripe fruit is faltering on the branches of TikTok. what is the fate of TikTok in Indonesia, and what is the way out for the 6 million local sellers and nearly 7 million affiliated creators? These are the questions that keep repeating in the minds of many people.
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Challenges in Indonesia
Why is TikTok’s situation in Indonesia like this? It is important to realize that the Indonesian market has always been a very bright spot in TikTok’s business landscape.
The factors are nothing but local politics and economy.
Politically, Indonesia is approaching a general election, and a ban on TikTok could allow some people to accumulate political capital, for whom opposing TikTok would be tantamount to supporting local offline businesses in Indonesia.
Economically, it is due to the growth of TikTok shops in Indonesia, which has impacted its offline economy.
Teten, Indonesia’s Minister of Cooperatives and Micro, Small and Medium Enterprises (MSME), reportedly inspected the Dana Abang market, Southeast Asia’s largest wholesale center, some time ago, stating that the inspection revealed that local brick-and-mortar sellers were losing more than 50 percent of their profits because they were unable to compete with inexpensive imported products. Some local Indonesian offline merchants also said they could not make money only to switch to online, but lacked the experience to compete with established online marketing teams.
“Indonesia is not as centralized as China’s industrial belt, and the time and cost for its physical merchants to buy goods is sometimes higher than supplying from China.” Uten partner Sam Huang told HuffPost. Their local production and supply capacity is quite a bit less than that of the country, basically the cost of goods sourced locally is higher than at home, and if Chinese merchants are sourcing locally very much it is also for the sake of compliance, as well as to make the transition before the Chinese goods arrive in the warehouse.
“Indonesian consumers are also more price-sensitive, cheap products come in, Indonesia offline chain brands and other physical stores are really hit by the impact of e-commerce.” Huang Sen added.
Political and economic factors add up to make TikTok’s situation in Indonesia more and more delicate. The Indonesian government’s attitude toward TikTok in recent months has also gone back and forth toward hardening.
As early as July, when it was rumored that TikTok’s “Project S” might be introduced to Indonesia, some Indonesian politicians began to express their concern about it, and there were more and more calls for the government to strengthen the regulation of TikTok. Project S is similar to Temu’s fully hosted model, and the product will be priced more competitively.
Soon after, on July 27, Indonesia’s trade ministry announced that it was revising regulations related to online trade, with one rule restricting the minimum price of imported goods on the country’s e-commerce platforms to no less than 1.5 million rupiah (about $100). Meanwhile, Indonesian media said the country’s government is planning to take on social media platforms such as TikTok into
