Per reporter: Wang Ziwei Per editor: Liu Xuemei
TikTok e-commerce Indonesia banned incident made a uproar.
At the end of September, Indonesian President Joko Widodo formally banned direct sales transactions on "TikTok-like" social media platforms at a cabinet meeting, according to public reports, saying that the regulation would be incorporated into the revised Indonesian Ministry of Trade Regulation No. 50/2020.
At present, Indonesia's TikTok Shop (TikTok small store) has officially closed.
Indonesia's TikTok Shop (TikTok small store) has officially closed Image source: Visual China-VCG111416551032
With more than 325 million monthly active users in the Indonesian market, 125 million of which are from Indonesia's TikTok, there is now only one role left in Indonesia: for people to watch short videos. To do e-commerce, or through other programs, independent apps to achieve.
Due to its large population and developed e-commerce, the Indonesian market is a piece of "fat meat" that cross-border e-commerce platforms are focusing on when entering the Southeast Asian market. However, Indonesia's local area is also known for its "strictness" of foreign cross-border e-commerce.
In July 2021, cross-border e-commerce platform SHEIN announced that it would cease its operations in Indonesia. At that time, it was reported that the e-commerce platform with SHEIN PK was ZALORA, a local fashion e-commerce company in Indonesia. Some people in the cross-border e-commerce industry told the "Daily Economic News" reporter that SheIn's withdrawal is related to the local "strong concept of localism".
Feng Huakui, an observer of the e-commerce industry and the founder of naughty e-commerce, told reporters that e-commerce is not just a simple retail, it is actually the prelude to the digitalization of business; Just restricting social platforms to do e-commerce to protect local brick-and-mortar stores is completely useless.
But the TikTok e-commerce incident has had such a deep impact that China's already ambitious cross-border e-commerce practitioners are worried, and they will inevitably worry that other countries in Southeast Asia will follow.
In fact, Malaysia has a new wind. According to public reports, on October 7, Malaysia's Minister of Communications and Digital Fami said that the ministry will summon the management of the platform management to explain in the near future about Indonesia's ban on TikTok e-commerce services and advertising content, in order to formulate measures suitable for Malaysia.
For TikTok, Indonesia is a key place to go to sea. Before choosing Southeast Asia, TikTok encountered setbacks in both the United States and the United Kingdom, and then pinned its hopes on Indonesia. TikTok's blockage this time is a huge challenge for both the company and China's cross-border e-commerce players.
Small stores shut down and TikTok social monetization was frustrated
The closure of TikTok stores in Indonesia has long been noticed.
In early July this year, Teten Masduki, Minister of Cooperatives and SMEs of Indonesia's Ministry of Small and Medium Enterprises, publicly stated on several occasions that TikTok harmed the interests of small and medium-sized enterprises and that it was urgent to revise relevant laws and regulations. At this stage, many Indonesian officials were neutral.
But by September, the wind had changed. Indonesian President Joko Widodo expressed concern about the negative impact of TikTok Shop on small and micro enterprises, stressing that TikTok should uphold its role as a social media platform.
On September 25, Indonesia's trade ministry said that in order to regulate the country's e-commerce market, the ministry is stepping up e-commerce regulatory policies and prohibiting transactions on social media platforms.
On September 27, the Trade Minister Order No. 31 of 2023 (hereinafter referred to as "Regulation No. 31") was released, which clearly restricts social platforms from doing e-commerce. The regulation specifically restricts two points: first, it explicitly prohibits social media platforms from doing e-commerce; Second, limit minimum prices, requiring that only foreign products priced at least $100 be sold through social media platforms and that they meet whitelist requirements.
TikTok responded quickly, saying that it will no longer facilitate e-commerce transactions in TikTok Shop Indonesia from 17:00 local time on October 4, 2023. At this point, TikTok shut down its e-commerce business in Indonesia.
Kang Zeyu, head of TikTok e-commerce, wrote in an internal letter that the incident happened "suddenly, and the reasons behind it are more complicated." The letter mentioned that TikTok Shop Indonesia has served 80 million Indonesian users in the past two years. It is still actively discussing with the relevant authorities to "provide services to the MSME community in Indonesia" in the future.
This is undoubtedly a blow to TikTok's overseas planning of e-commerce. After TikTok suffered setbacks in the United Kingdom and the United States, TikTok targeted Southeast Asia, where TikTok's most important sector is Indonesia.
In February 2021, TikTok first launched the small yellow car in Indonesia, and then started live streaming goods.
In February 2021, TikTok Shop was launched in Indonesia, opening the first stop into Southeast Asian e-commerce. In less than three years, TikTok Shop has made rapid progress, covering six major countries in Southeast Asia, and has become a rival for experienced major e-commerce platforms such as Lazada and Tokopedia in the region.
According to Singapore-based consulting firm Momentum Works, Indonesian e-commerce transactions will be about $52 billion in 2022, of which about $2.5 billion will come from TikTok, accounting for 57% of TikTok's GMV in Southeast Asia. According to the latest report of Moten Venture Capital "The TikTok Shop Playbook", in 2023, the market share of TikTok Shop is expected to reach 13.2%.
TikTok was once full of expectations and ambitions for Indonesia. In June this year, TikTok held the first TikTok Southeast Asia Influence Forum in Jakarta, Indonesia. At the meeting, TikTok CEO Zhou Shouzi said that he will reinvest in the Southeast Asian market: investing more than 12 million US dollars in the Southeast Asian market in the next three years to support more than 120,000 local merchants and enterprises. According to Zhou Shouzi, TikTok now has about 8,000 employees in Southeast Asia and more than 325 million monthly active users, covering nearly half of the population in Southeast Asia, of which 125 million are from Indonesia.
Where will the 6 million small and medium-sized businesses go?
Shutting down a platform affects an ecosystem.
Some industry insiders told the "Daily Economic News" reporter that Indonesia's management of cross-border e-commerce is relatively strict. For example, in 2021, SHEIN, which has been in the Indonesian market for more than two years, announced its withdrawal from the country.
At that time, the media believed that there were two reasons for SHEIN's withdrawal, one was that SHEIN could not match the local visits of Indonesian local fashion e-commerce ZALORA; Another reason is that Indonesia introduced a new policy, requiring that from August 1 of that year, all inbound e-commerce packages must contain the recipient's personal or business identity authentication information.
In a contribution to Moten Ventures, a veteran of Southeast Asian e-commerce logistics, Aaron Michael, a veteran of Southeast Asian e-commerce logistics, believes that this policy cannot be enforced and does not guarantee the integrity of data: "As part of the initiative to protect the local market and economy from imported products, the government is raising the threshold for B2C products to enter Indonesia and the cost of B2B imports for large wholesalers. It is hoped that this measure will promote the boom of Indonesian-made products and regain market share. ”
This time, Regulation No. 31 is almost a "sword seal" for TikTok shop. Looking at the platforms for developing social e-commerce in Indonesia, TikTok is the most mature; This time, the Indonesian e-commerce platform set a minimum price of $100 for goods purchased directly from abroad, and stipulated the certification requirements for imported goods, which also stuck TikTok's neck:
The prices of goods on the TikTok platform are generally low, and they quickly penetrate the market. A report by CITIC Securities shows that the unit price of customers on TikTok is only 2~5 US dollars.
Feng Huakui, an observer of the e-commerce industry, told the Daily Economic News, "If it is really (for) protect local entities, it should be to raise tariffs." Now it is just restricting social platforms to do e-commerce, which is completely useless. E-commerce is not just a simple retail, but a prelude to the digitalization of business, which can effectively promote the digitalization of the commodity economy, so as to improve efficiency and further promote the development of the national economy. ”
Specifically, one of the reasons for the ban is "the fear of a certain blow to local small and medium-sized enterprises", in fact, there are millions of small and medium-sized Indonesian sellers on TikTok.
The ban has also caused dissatisfaction among local small and medium-sized sellers in Indonesia. According to Guangming Network, for Indonesia's new regulations, TikTok Indonesia spokesperson publicly responded that social e-commerce was born to solve the practical problems of local traditional small sellers. While respecting local laws and regulations, the company also hopes that these regulations will take into account its impact on the livelihoods of TikTok Shop's more than 6 million sellers and nearly 7 million associated creators.
Veronica, director of the China Department of the Indonesian Center for Strategic and International Studies, said in an interview with Guangming Network that the market has its own laws. Since the new crown epidemic, the rapid development of Indonesian e-commerce platforms and the shift of consumers' shopping habits to online have boosted the development of Indonesia's economy to some extent. The current ban is not very friendly to some small and medium-sized enterprises that rely on or rely on e-commerce. For TikTok, it is also necessary to adapt to policy changes and find compromises.
The focus is: What's next for TikTok? To put it simply, TikTok can do live broadcasts, short videos, or another company to do e-commerce, but the two cannot be combined. It is worth noting that Indonesia does not prohibit personal live streaming of goods, but does not want the format of social e-commerce to appear.
At present, the mainstream e-commerce platforms operated in Indonesia include Shopee, local e-commerce platform Tokopedia and Lazada, etc., and the "Daily Economic News" reporter learned that these three platforms are actively wooing small and medium-sized sellers who left from TikTok.
Is Southeast Asia still an ideal place to cross borders?
A cross-border e-commerce practitioner told the "Daily Economic News" reporter that cross-border e-commerce practitioners in Southeast Asia have "exploded" in the past two days, and everyone is generally concerned about whether Southeast Asian countries such as Myanmar and Malaysia will follow Indonesia's practices.
After Indonesia, several Southeast Asian countries are also following up on the investigation of TikTok, according to reference news reports. According to foreign media reports, Vietnam has completed a nearly five-month investigation of TikTok, and the results of the investigation show that TikTok violated a number of regulations involving e-commerce, and Vietnam required TikTok to complete rectification within 30 days.
There are also slightly entangled ones. On October 7, Malaysia's Minister of Communications and Digital Fami said that the Malaysian government will simultaneously investigate the Indonesian government's plan to ban the social media platform TikTok from promoting e-commerce business; However, the reference news network quoted foreign media reports on October 12 that on October 11, Janesh Kumar Banga, chairman of the Malaysian e-commerce committee, said that the ban on TikTok e-commerce will cause serious damage to small and medium-sized enterprises, short video creators and e-commerce practitioners.
An industry insider told reporters that the entanglement of Southeast Asian countries is that they do not want to affect local investment attraction, and at the same time want to protect local small and medium-sized enterprises.
Take Indonesia, for example. According to Beijing Business Daily, data show that there are more than 64 million micro, small and medium-sized enterprises in Indonesia, accounting for 99.9% of the total number of Indonesian enterprises, contributing 60.3% to the country's GDP, and absorbing 97% of the labor force, accounting for 99% of the total employed population.
In 2020, Indonesia's local attraction for foreign investment has been further strengthened. According to the "Indonesia Economic and Trade Development Overview and Market Prospect Guide - CCPIT 2023 Overseas (Border) Exhibition Feasibility Study Report" issued by the China Council for the Promotion of International Trade, in March 2021, Indonesia launched the "New Investment List" supporting the Investment Law, listing "priority development industries", replacing the original negative list of investment, and canceling or relaxing foreign investment restrictions such as equity ratio in key investment areas.
In the second quarter of 2022, Indonesia attracted foreign direct investment (FDI) to IDR 163.2 trillion (approximately USD 10.89 billion), an increase of 39.7% year-on-year, the highest growth rate in the past decade. Among them, Singapore, China and Japan are the largest sources of Indonesian outbound investment.
With the support of these policies, domestic e-commerce platforms and overseas sellers have been deploying the Southeast Asian market for many years, and the e-commerce in Southeast Asia has also grown rapidly in the past two years.
According to the eMarketer report, Southeast Asian e-commerce sales in 2021 will be 74.36 billion US dollars, and it is expected that by 2023, Southeast Asian e-commerce sales will exceed the 100 billion US dollar mark; according to the "2022 Southeast Asia Digital Economy Report", the total e-commerce revenue in Southeast Asia in 2022 is 131 billion US dollars, and it is expected that the revenue will reach 211 billion US dollars by 2025.
TikTok, which started with short videos, has its own traffic layout in Southeast Asia and has the innate advantage of doing e-commerce, and it will expand TikTok Shop to 6 Southeast Asian countries in 2022 - Singapore, Malaysia, Indonesia, the Philippines, Vietnam and Thailand. Domestic live streaming e-commerce players have also entered the Southeast Asian market on a large scale in the past two years. An industry insider engaged in cross-border e-commerce told the "Daily Economic News" reporter that after the domestic supply chain is mature, the competitive advantages of products are very obvious.
But the ambiguous attitude in Southeast Asia and the recent tension have made sellers nervous. Can the business model of "short video e-commerce" work in Southeast Asia? Will TikTok shop turn around in Indonesia? Can the development of e-commerce in Southeast Asia continue to grow rapidly? Should Chinese and local sellers still have hope? A series of life and death questions, but no one answers at the moment.
Daily economic news