Zhang Yiming and TikTok's dangerous moment

Indonesia is off to a start, and more Southeast Asian countries are also considering restricting TikTok's e-commerce activities.

Source of header image | Visual China

Yan Junwen, reporter of "China Entrepreneur"

Editor|Li Wei

Under official pressure, on October 4, TikTok officially shut down its TikTok Shop function in Indonesia, just two years after it started its e-commerce business in Indonesia.

Earlier, Indonesia's trade ministry announced at the end of September that it would ban social platforms such as TikTok from trading goods within the platform or using user data for e-commerce purposes, citing the fact that TikTok Shop and others are threatening the interests of local small and medium-sized enterprises.

In 2020, Zhang Yiming, founder of ByteDance, listed cross-border e-commerce as one of the company's three key new business directions, after which TikTok began to initially test e-commerce. Indonesia is the first stop for TikTok's e-commerce business attempt, and the closure of TikTok Shop is seen as a major setback for TikTok's e-commerce business.

According to FastData, Indonesia has the second largest number of TikTok active users in the world, after the United States, with 125 million monthly active users. In the strong traffic pool, e-commerce has become an impulse for TikTok monetization. According to public data, TikTok's Southeast Asian e-commerce GMV in 2022 will be $4.4 billion, of which Indonesia will be $2.5 billion, accounting for nearly 60%.

As soon as the TikTok Shop ban came out, cross-border e-commerce players from China were also affected.

On October 4, TikTok quickly took off the small yellow car and shop tab (shopping tag), there was no push in the live broadcast room, and there was no e-commerce content in the main search. "The feed streaming e-commerce content will be cleared on October 9th." Ishikawa, a cross-border live streaming e-commerce practitioner, told China Entrepreneur.

"If there is no feed stream, no natural stream in the live room, then the top layer of the funnel is gone, is there still fantasy?" Ishikawa said. He began selling goods on TikTok to the UK and Indonesia in 2020 and has millions of followers. But now, everything has stopped, and he describes the feeling as being dumped by his first love girlfriend.

According to Ishikawa, some TikTok broadcasters (TSPs) have laid off thousands of employees, and according to TikTok officials, TikTok Shop has more than 6 million local sellers in Indonesia, as well as about 7 million live streaming practitioners and short video creators. Most practitioners have to stop and start over. Troubled anchors like Ishikawa and TikTok.

TikTok CEO Zhou Shou is probably ByteDance's busiest executive this year. In April, he was questioned by the U.S. Congress over TikTok data security and teenage issues. Now, he has to deal with the problems caused by the shutdown of TikTok Shop's business in Indonesia. Immediately after the new decree was issued, Zhou Shouzi rushed to Jakarta to meet with Indonesia's Coordinating Minister for Maritime Affairs and Investment. But this did not change the official attitude.

Source: Visual China

Because of its geographical proximity and cultural commonality, Southeast Asia is known as the "Promised Land of Milk and Honey" for Chinese Internet companies, but now it seems that this Promised Land is full of variables and everyone has to be cautious.

Crisis comes

All indications are that the new decree is quite sudden.

In August, TikTok announced that it was in early talks with Bank Indonesia to seek a payment license in the country, saying that the license "will benefit local creators and sellers on the TikTok platform." Earlier, in June, Zhou said TikTok would invest billions of dollars in Indonesia and Southeast Asia in the coming years.

On September 26, Indonesia's Ministry of Commerce abruptly announced the signing of a new decree prohibiting social platforms from conducting business transactions and only promoting goods or services. The new regulations are implemented a week later without any buffer time.

But before the ban came into effect, TikTok officials and merchants still felt that there was room for maneuver, and some practitioners in Jakarta, Indonesia, still had fantasies, such as setting a transition period or launching other products on TikTok. Some entrepreneurs firmly believe that TikTok Shop can officially solve the problem, and he even plans to take over the merchants he wants to run.

Illusions were quickly shattered. At present, Ishikawa is already looking for new diversion tools, similar to those of domestic Weimob, such as Indonesia's linktree or WhatsApp private domain.

However, businesses and institutions of different sizes are affected differently. For large sellers, in addition to TikTok, their layout also has multiple channels such as INS, Shopee, and Amazon, which are not greatly affected. For live streaming (agent) agencies and small and medium-sized businesses, especially (Chinese) cross-border sellers without localized teams, they have a single channel, and it takes a lot of time and energy to open new channels.

To this end, Ishikawa has also established a document called "TikTok Shop ID Post-Disaster Reconstruction Guide" to provide job opportunities and sales channels for streamers, operators, and merchants. TikTok Shop's Southeast Asian cross-border and Vietnamese official teams have also stepped in to try to take over some of Indonesia's workers and get them to move west to Vietnam.

But Vietnam's population and spending power are not enough to take on TikTok's main players in Indonesia. Indonesia accounts for 200 million of Southeast Asia's population of 440 million. Jakarta's turbulent air was immediately transmitted to Hanoi in Vietnam and Kuala Lumpur in Malaysia.

"Will Vietnam close?"

In a group called "Vietnam TTS Support Group", some merchants asked this. Vietnam's TikTok industry junior replied that we need to remain calm and patient, at this stage, Vietnam TTS (TikTok Shop) is operating smoothly, please rest assured.

But this still does not calm the restless hearts of sellers and institutions such as MCN, some people said, "Indonesian junior two said the same last month (September). ”

A chain reaction has already occurred, with media reports suggesting that countries such as Malaysia and Vietnam are evaluating similar policies.

Malaysia is following up on Indonesia's latest e-commerce ban, and local government officials said, "TikTok needs to come forward and explain because one of the reasons TikTok Shop is banned in Indonesia is predatory pricing issues, which threaten local Indonesian entrepreneurs." ”

Recently, Vietnam released the results of a survey against TikTok, accusing it of violating the regulations on the storage of information by Vietnamese content distribution networks, including false information, incitement to infringement, and harmful content to children. In addition, relevant Vietnamese government sources also believe that TikTok's e-commerce business in Vietnam did not comply with local regulations such as publishing applicants' information and storing all sellers' information at the time of registration.

A senior executive of Kuaishou once positioned Southeast Asia in China Entrepreneur in 2022: "In the future, the short video business will develop to a certain stage, and it must expand its product form, including the introduction of some new models of cross-border e-commerce." From a certain point of view, Southeast Asia is both a test field and a harvest field. ”

But judging from Indonesia's latest operation, including TikTok, Chinese Internet companies will not be very peaceful in the Southeast Asian market.

TikTok falls, who eats enough

Alibaba's Lazada and Tencent's Sea-owned Shopee are considered potential beneficiaries after the TikTok Shop's setback.

More sellers, MCNs and affiliates are flocking to Shopee and Lazada.

James Chang, CEO of Lazada Indonesia, said at the staff meeting that they are preparing to attract "sellers affected by Indonesia's latest e-commerce regulations." Lazada exempts Indonesian sellers from live streaming sales on the platform. In addition, there is a preferential policy of "zero commission for 3 months, free shipping for 2 months, and IDR 300,000" worth of attractive sellers.

Shopee started grabbing mode. Shopee itself also has a live content section, and some sellers and agency agencies have settled in. For example, Ishikawa opened an account live broadcast in Shopee, and he found that consumers came into Shopee to see familiar scenes, familiar anchor faces, and most importantly, familiar brands, and brand merchants were less affected by this storm.

Ishikawa concluded that the TikTok turmoil has sounded the alarm for cross-border merchants. He divided the overseas expansion of Chinese companies into four types: sales going overseas, such as online and offline channels; Brands go overseas, where brands cannot be separated from channels, they cannot be called brands, and brand merchants who previously relied solely on TikTok will have difficulties in turning to new platforms; Production goes to sea, and factories are transferred to local production; Finally, there are local companies, from personnel, production, branding, sales to legal affairs, tax compliance, etc., all localized, from China to Indonesia to sea.

An investor who pays attention to going overseas also told "Chinese Entrepreneur" that Chinese Internet companies used to have a thinking that going overseas is to serve the domestic market, first do a good job in the domestic market, and then do the global market, but the new generation of entrepreneurs has gone to the goal of becoming a global Internet enterprise from the first day of entrepreneurship.

Ishikawa said that each has its own way out, and it is not that everyone cannot survive in a low-price cycle.

Source: Medium Attempt Library

In addition to TikTok, in Vietnam, some Michelle Ice City franchisees protested the new local franchise policy, reducing the sales price of products by 25%, while reducing the price of raw materials by 8%~10%, which was considered to squeeze the benefits of franchise.

Low prices were once the core competitiveness of Chinese commercial companies in cross-border trade, but they are also prone to a backlash from local businesses and governments, because it may affect the local real economy and employment, which is a top priority for foreign governments.

However, the gains and losses of one city and one pool have not dampened the pace of TikTok's e-commerce.

"China Entrepreneur" observed that TikTok is promoting the "Black Friday" marketing campaign as planned, they will start the "Prepare for Black Friday" investment promotion campaign on October 10, and the "Black Friday" promotion will be launched on October 27, covering the UK, the United States, Saudi Arabia market, and will last until the end of December.

While Indonesia is closing TikTok's e-commerce business, TikTok announced that TikTok's U.S. stores are open to Chinese merchants, inviting domestic merchants with Amazon operation experience and annual sales of at least $2 million to settle in.

In addition, as early as September 21, AliExpress, a subsidiary of Alibaba, has launched the "Double 11" and "Black Friday" investment warm-up; On September 19, SHEIN held the platform investment strategy conference and launched the national 500 city industrial belt plan to help more high-quality manufacturing and brands go global, and drive more industrial upgrading; Together with Pinduoduo Temu, starting from "Black Friday", Chinese cross-border e-commerce teams will compete together in the vast international market.

Their leaders Zhou Shouzi, Jiang Fan, Xu Yangtian and Chen Lei will stage a "four-country melee", which will be a showdown of representatives of the new generation of the Internet.

(At the request of interviewee, Ishikawa is a pseudonym)