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Jofie Yordan · 14 Nov 2023 · 6 min read

Anatomy of a comeback: Can TikTok resurrect its ecommerce biz in
Indonesia?
Thu Huong Le contributed to this report.

More than a month has passed since TikTok Shop was abruptly banned from Indonesia, but
TikTok CEO Shou Zi Chew still seems oddly quiet about the issue.

Chew, who’s based in Singapore, hasn’t posted anything on social media to date about the
closure of his company’s ecommerce business in Indonesia. The CEO reportedly requested a
meeting with Indonesian President Joko “Jokowi” Widodo earlier this month, but that didn’t
materialize.

Image credit: Timmy Loen

In a last-ditch effort in late September, TikTok sent a team from Singapore to Jakarta. At that
News
point, however, the rescue attempt was too late. CORE

For
P now,
REM I U M questions
V I S U Aaround
LS TikTok’s
VIDEOS ability
P R Eto
S S resurrect
R E L E A S E Sits ecommerce
C A T E G O R Iventure
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M A R K E T S and

its readiness to navigate intricate local regulations to avoid future regulatory missteps continue
to abound.

Where’s the big boss?

TikTok, whose parent firm is Chinese tech titan ByteDance, established its global headquarters
in Singapore in 2020. But despite setting up shop in Southeast Asia, the short-video platform
has not appointed country directors or CEOs for each of its markets in the region.

This approach seemed to work, but that was before TikTok Shop launched in Indonesia in 2021
and other Southeast Asian countries in early 2022.

When Indonesian regulators moved swiftly to ban TikTok’s ecommerce business, the company
scrambled to respond even though warning signs had been brewing since July, as Tech in Asia
previously detailed in this report.

A Financial Times article published in late October suggested that most of TikTok’s ecommerce
decisions are made by executives in China. However, a spokesperson for the company’s
Indonesia unit denied this, telling Tech in Asia that TikTok Shop’s decision-makers are mostly
based in their respective markets.
 News
CORE

PREMIUM VISUALS VIDEOS PRESS RELEASES C AT E G O R I E S MARKETS

TikTok CEO Shou Zi Chew (right) at a Jakarta forum in June / Photo credit: TikTok Indonesia
Yanuar Nugroho, founder of think tank Nalar Institute and former deputy chief of staff to
President Jokowi, believes that it’s insufficient for “someone from abroad” to send a letter to the
president or ministers when problems arise. “In Indonesian culture, such requests won’t be
entertained,” he adds.

Having high-ranking leadership on the ground demonstrates that the company is “genuinely
serious and committed” to doing business in the country, stresses Matheace Ramaputra, a public
policy consultant of think tank Indonesia Law and Development Facility.

See also: Shopee, Lazada may struggle to fill void left by TikTok Shop

It’s not the first time TikTok has faced regulatory scrutiny in Indonesia. In July 2018, the
platform was briefly banned due to concerns over the spread of inappropriate content, including
pornography, obscenity, and material deemed offensive to religious beliefs.

A day after being blocked, then-TikTok CEO Kelly Zhang, along with then-ByteDance senior vice
president Zhen Liu, immediately flew to Jakarta to meet with the Indonesian government.
The 2018 ban was lifted after a week, following TikTok’s commitment to put up a local office and
Newsmoderation by hiring hundreds of local employees. The company quickly
bolster its content CORE
made good on its promise, opening an office in the heart of Jakarta that same year.
PREMIUM VISUALS VIDEOS PRESS RELEASES C AT E G O R I E S MARKETS

This time around, however, ByteDance’s top brass has been conspicuously absent from the
archipelago.

Photo credit: ByteDance

Too powerful to care?
Southeast Asia is such a diverse region that executives need to invest time and effort to
understand the dynamics of each country, says Momentum Works CEO Jianggan Li. Still, he
believes that given how TikTok has only been in the region’s ecommerce scene for about two
years, “it will be hard for TikTok to build trusted local leadership the way Shopee did.”

Josh Gardner, CEO and co-founder of China-based Kung Fu Data, argues that TikTok Shop was
“working too well” in Indonesia and became a “victim of its own success.” Consequently, its
rapid growth triggered a backlash from local players, forcing the government to intervene and
protect their interests.
“Obviously having local leadership could help,” contends Gardner, whose firm specializes in
News marketing. However, shops on TikTok began to affect “mall foot traffic,
Chinese ecommerce CORE
offline retail, consumer pricing and cause other disruptions to the existing ecosystem owned by
local
P R E M players,”
IUM he
V I S explains.
UALS VIDEOS PRESS RELEASES C AT E G O R I E S MARKETS

In previous reports, Tech in Asia documented how TikTok Shop has effectively leveraged
TikTok’s massive user base to position itself as a formidable competitor of ecommerce
heavyweights Shopee and Lazada in Southeast Asia.

Despite the projected loss of 3 million parcels and US$20 million worth of gross merchandise
value (GMV) in Indonesia daily throughout the fourth quarter, Momentum Works estimates that
TikTok Shop’s market share in the region will still reach 13.9% in 2023.

Since entering Southeast Asia in Q1 2021, TikTok Shop also appears to have flattened the growth
of Shopee’s GMV, according to Momentum Works’ analysis.
 Has TikTok
News Shop stymied Shopee's growth? CORE
After TikTok Shop entered Southeast Asia in Q1 2021
PREMIUM VISUALS VIDEOS PRESS RELEASES C AT E G O R I E S MARKETS
Revenue GMV

“People were freaking out a little bit by how fast TikTok Shop was rolling through the world,”
says Jeffrey Towson of digital strategy firm Techmoat Consulting. “But the bigger question is,
how do you protect local companies from the giants of the region?”

Indonesian regulators seem to share similar concerns, arguing that TikTok’s powerful
algorithms dictating users’ purchasing behaviors and aggressive subsidies are harmful to the
local economy.

This rhetoric of safeguarding the local economy was also reflected in how Indonesia prohibited
the direct sales of imported goods under US$100 on ecommerce platforms, forcing Shopee to
cease its cross-border services in October.

Indonesia comeback via GoTo?

At the moment, TikTok has not decided whether it will build a separate ecommerce app for
News have also required TikTok to apply for an ecommerce license in the
Indonesia. Regulators CORE
country.
PREMIUM VISUALS VIDEOS PRESS RELEASES C AT E G O R I E S MARKETS

Teaming up with local super app GoTo, which owns ecommerce player Tokopedia, has been
reportedly fielded as one TikTok’s options.

If this tie-up pushes through, TikTok could bypass the arduous process of applying for an
ecommerce license and potentially improve its reputation by partnership with a homegrown
champion, analysts told Tech in Asia.

GoTo has several commissioners known to have close ties with the government, such as
Wishnutama Kusubandio (former minister of tourism), Garibaldi Thohir (entrepreneur and
brother of Erick Thohir, who heads the Ministry of State-Owned Enterprises), and Agus
Martowardojo (ex-governor of Bank Indonesia).

Tech in Asia has reached out to GoTo about the potential collaboration, but the company
declined to comment.
 A Gojek rider delivers a package for Tokopedia / Photo credit: GoTo Group
News
“This move will also put pressure on Shopee,” says Nailul Huda, a researcher at Jakarta-based CORE
Center of Economic Law and Studies. “GoTo and TikTok ecosystems will be full-fledged as they
have
P R E M both
IUM ecommerce
V I S U A L S and social
V I D E Omedia.”
S PRESS RELEASES C AT E G O R I E S MARKETS

But Venugopal Garre, managing director at Bernstein Research, thinks that TikTok should
abandon Indonesia’s ecommerce market entirely. Otherwise, returning with a separate
ecommerce app could set a dangerous precedent. “Other countries would say: ‘This is an
amazing arrangement. Why shouldn’t we have the same regulation?’”

The ripple effects could start showing earlier than expected. Most recently, concerns over price
competition for products sold on TikTok Shop have prompted Malaysia to explore regulating the
platform.

Garre suggests that TikTok prioritize the US market, where it can have higher margins and take
rates. TikTok says it has 150 million monthly active users in the US, making it its largest market
worldwide in terms of MAU. Coming in second is Indonesia, where MAU is at 125 million,
according to the company.
 Third-party estimates of TikTok's MAU in selected markets (as of
October News
2023) CORE
TikTok, however, says it hit 150 million MAU in the US and 125 million
in Indonesia.
PREMIUM VISUALS VIDEOS PRESS RELEASES C AT E G O R I E S MARKETS

US
Indonesia
Brazil
Mexico
Vietnam
Russia
Pakistan
Philippines
Thailand
Turkey
0

20

40

60

80

0
10

12

14

16
in millions

Source: Statista

Another factor that may further complicate the picture for TikTok is the political dynamics of
Indonesia’s 2024 elections.

Of the three president and vice president tandems running for office, only Anies Baswedan and
Cak Imin have opposed the closure of TikTok Shop.

Gibran Rakabuming Raka, the son of President Jokowi who also serves as mayor of Solo City,
previously agreed with the ban, citing how TikTok Shop the platform sells imported products
from China. But TikTok denies this, saying it only facilitates sales for local merchants.

Raka is running for vice president as well. The political party chaired by Minister of Trade
Zulkifli Hasan, who signed off on the regulation that swiftly banned TikTok Shop in Indonesia, is
supporting Raka’s candidacy.
TikTok’s parent firm ByteDance is known for its aggressive, data-driven strategy, which
propelled it News
to become the world’s most valuable startup. However, its experiences in Indonesia
CORE
indicate that this approach may have its limits.
PREMIUM VISUALS VIDEOS PRESS RELEASES C AT E G O R I E S MARKETS

“The expansion team must be humble, respectful, and open-minded,” says Kung Fu Data’s
Gardner. “In my experience, this leads to much higher success rates and tolerance.”

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Editing by Thu Huong Le and Eileen C. Ang

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Jofie Yordan
Gamer and concertgoer.

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