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 prohibits direct sales transactions on social media platforms such as TikTok and may split the commodity trading function
•TikTok ranks second in monthly active users in the Indonesian market, contributing 57% of GMV in the Southeast Asian market
•TikTok merchants in the Indonesian market are facing transformation problems, and some merchants are transforming themselves into local brands
It is rumored that TikTok CEO Zhou Shouzi also arrived in Indonesia a few days ago and wants to actively communicate with the Indonesian government. After all, the Indonesian market is too important to TikTok’s business development.
According to data, Indonesia is the market with the second largest monthly active users of TikTok, second only to the United States, and is also the best performing among all TikTok Shop sites. In 2022, TikTokshop's GMV in Indonesia reached US$2.5 billion, contributing 57% of the GMV in the entire Southeast Asian market. In the first half of this year, according to the "TikTok Ecological Development White Paper for the First Half of 2023" released by FastData, Indonesia is the country with the largest number of TikTok stores with sales of more than 10,000. It is also the country with the highest total duration and total number of viewers of TikTok live broadcasts.
Today, this mature fruit is teetering on the branches of TikTok. What is the fate of TikTok in Indonesia? Where will the 6 million local sellers and nearly 7 million affiliated creators find their way out? This is a question that many people keep repeating.
01
Challenges posed by Indonesia
Why is TikTok’s situation in Indonesia like this? You know, the Indonesian market has always been a very bright spot in TikTok’s business landscape.
Factors include nothing more than local politics and economics.
In terms of politics, the general election is coming soon in Indonesia. The ban on TikTok can allow some people to accumulate political capital. For them, opposing TikTok is equivalent to supporting local offline businesses in Indonesia.
In terms of economy, the development of TikTokshop in Indonesia has had an impact on its offline economy.
It is said that Teten, the Indonesian Minister of Cooperatives and Micro, Small and Medium Enterprises, inspected the Tanah Abang Market, the largest wholesale center in Southeast Asia, some time ago. He said that during the inspection, he learned that the profit losses of local physical store sellers exceeded 50% because they were unable to compete with low-priced imported products. Some local Indonesian offline merchants also said that they had to turn online because they could not make money, but they lacked experience and could not compete with mature online marketing teams.
"Indonesia is not as concentrated as China's industrial belt, and the purchase time and cost of its physical merchants are sometimes higher than supplying from China." Uten partner Huang Sen told Huxiu. Their local production and supply capacity is much worse than that in China. Basically, the cost of purchasing goods locally is higher than that in China. If Chinese merchants purchase locally, most of them are for compliance and to make a transition before Chinese goods arrive at the warehouse.
"Indonesian consumers are also highly price sensitive. After cheap products came in, Indonesian offline chain brands and other physical stores were really impacted by e-commerce." Huang Sen added.
The addition of political and economic factors has made TikTok’s situation in Indonesia increasingly delicate. The Indonesian government’s attitude toward TikTok has repeatedly become tougher in recent months.
As early as July, when there were rumors that TikTok's "Project S" might be introduced to Indonesia, some Indonesian politicians began to express concerns about this, and there were increasing calls for the government to strengthen TikTok supervision. ProjectS is similar to Temu's fully managed model, and the price of the product will be more competitive.
Soon, on July 27, the Indonesian Ministry of Trade announced that it was revising relevant regulations on online trade. One of the rules restricted the minimum price of imported goods on the country’s e-commerce platform to no less than 1.5 million Indonesian rupiah (approximately US$100). At the same time, Indonesian media said that the country’s government is planning to impose a shopping tax on social media platforms such as TikTok.
Since then, although the Indonesian government's attitude has changed somewhat, the overall trend is not conducive to TikTok.
Although TikTok has not yet officially responded to this ban, TikTok actually showed some attitudes as early as June this year. At that time, Zhou Shouzi announced that he would invest US$10 billion in Indonesia in the next five years. This may be a signal of relaxation. However, judging from the results, this US$10 billion investment commitment has not "saved" the Indonesian government's heart, so that the conflict is now intensifying.
02
Where are Indonesian businesses transforming?
The TikTok Indonesian market is carrying the fate of 6 million sellers, and they are all planning their future.
The TikTok Indonesian market is already the most mature market in Southeast Asia, and even local Indonesian brands have a high proportion of live broadcasts. In just a few years, a large number of businesses, including Chinese businesses, have made wealth through this.
"Previously, most products with high customer unit prices could not be broadcast in Indonesia. This depended on the development stage of the Indonesian market and the ability of the local live broadcast team." Huang Sen told Huxiu.
He gave Huxiu an example: Vietnamese anchors can relatively broadcast products with high customer unit prices (such as small household appliances, etc.) because Vietnam is deeply influenced by social media such as Instagram. On these platforms, exquisite lifestyles and relatively good-quality products are mainstream, and local anchors are also familiar with the marketing methods of such products.
In Indonesia, there are relatively few local anchors with this kind of content expression. And due to differences in cultural values, it is difficult even for Chinese operators to train local employees.
"Mature Douyin teams poached from China are often annoyed after staying in Indonesia for a period of time because matters related to SOP and target management often cannot be advanced." Huang Sen said, and many local anchors in Indonesia have relatively low contract performance efficiency.
Under such circumstances, it is unrealistic to broadcast products with high customer unit prices in the TikTok Indonesian market.
However, with the development of the Indonesian market, some changes are also taking place.
The strategy of making the first pot of gold by selling low-priced products has become increasingly unworkable in TikTok Indonesia.
For example, the relatively low-priced Muslim clothing category opened to the Indonesian market early because through data analysis at that time, there were not many online platforms for this category. However, as the online competition in this category has become increasingly fierce since then, coupled with the local supply chain and the lower prices of local merchants, TikTok merchants who have entered the market can only fall into price competition, and their profits have become increasingly thin.
In addition, the window period left for white cards is running out.According to Huang Sen's judgment, TikTok will help a large number of brands develop on the platform before Ramadhan next year, and the traffic and market share of white brands will be further eroded by then. Transforming from a white label to a brand is a key link for businesses to stay in the Indonesian market.
Another trend is that many businesses in Indonesia areIt is transforming itself into a local brand, which may avoid some risks. After all, as a local brand, it can make more contributions to Indonesia's local economy and employment.
"Cross-border e-commerce is not only about business, but also cannot avoid politics. When we export a large amount of supply chains, we must consider bringing benefits to the local area." A senior cross-border e-commerce insider said. If products on TikTok continue to be sold at low prices in various countries, new troubles may still arise after the United States and Indonesia.