Receive free TikTok Inc updates
we will send you myFT Daily Digest Email summary of latest news Douyin Company There is news every morning.
TikTok’s e-commerce ambitions took a major blow after Indonesia, one of its largest and most promising markets, banned transactions on the social media platform.
Indonesian Trade Minister Zulkifli Hassan said on Wednesday that the rules apply to all social networks and are intended to ensure “fair and equitable” competition and protect user data in Southeast Asia’s largest economy as well as offline small and medium-sized suppliers.
TikTok’s app has not been banned, but a ban on sales on the social media platform means the Chinese group can no longer promote deals on its platform.
The rules, which take effect immediately, leave the short-video app owned by ByteDance facing another country where political backlash could hamper its future growth.
Indonesia is the first and largest market for TikTok Shop, an e-commerce marketplace launching in 2021. Chief Executive Shou Zi Chew visited the country in June and pledged to spend $10 billion over the next five years. Brands and influencers can live stream and sell products through live streaming or store pages on viral video platforms.
TikTok said it was “deeply concerned about today’s announcement, particularly how it will impact the livelihoods of Indonesia’s 6 million sellers and nearly 7 million affiliated creators using TikTok Shop.”
“We respect local laws and regulations and will seek a constructive path forward,” it added.
Indonesia is the fourth most populous country in the world, with a young and highly mobile population. It has always been one of TikTok’s most promising markets.
The app has 325 million users in Southeast Asia, more than a third of whom are from Indonesia. The company is plowing resources into developing economies as it faces political boycotts in other markets such as the United States, India and the United Kingdom. TikTok says more than 15 million businesses in Southeast Asia use the platform.
Simon Torring, co-founder of Cube Asia, a Southeast Asian online retail market insights company, said the regulations were a “major setback” that could inspire other Southeast Asian governments to take similar action.
“Indonesia is known for having particularly strict enforcement, especially when local sellers or consumer groups in the country are threatened,” he said.
However, he added that TikTok’s content app will likely “remain strong and the company will be able to monetize it through advertising rather than comprehensive e-commerce.”
TikTok Shop has been slow to attract consumers in Western markets, but it has gained significant traction in Southeast Asia, especially Indonesia and Vietnam where social shopping habits are more developed.
Singapore-based consultancy Momentum Works estimates that the feature generated most of its revenue last year from Southeast Asia, with gross merchandise value (a measure of sales) at $4.4 billion. The consultancy’s report said TikTok aims to increase that goal to $15 billion this year.
TikTok’s main revenue driver is advertising, but e-commerce is a focus for its future growth based on the success of its Chinese sister app Douyin.
The Financial Times reported this month that Indonesia threatened to curb TikTok’s shopping platform.
Svlook
