Indonesia's TikTok E-commerce Ban Shakes Up Market
Updated: Jan 9
Indonesia has dealt a major blow to TikTok by banning e-commerce transactions on social media platforms, according to the country's trade minister.
The move, which takes effect immediately, aims to protect offline merchants and marketplaces from predatory pricing on social media platforms, which threatens small and medium-sized enterprises.
TikTok, owned by China's ByteDance, has been investing heavily in Southeast Asia, particularly in Indonesia, to boost its e-commerce business. The short video app has 125 million active monthly users in Indonesia and has been looking to leverage this large user base to generate significant e-commerce revenue.
However, the Indonesian government's decision to ban e-commerce transactions on social media platforms poses a significant challenge to TikTok's plans. A spokesperson for TikTok Indonesia expressed concern about the impact on the livelihoods of the 6 million local sellers active on TikTok Shop and stated that the company would pursue a constructive path forward.
The trade minister, Zulkifli Hasan, explained that the regulation is intended to ensure fair and just business competition and to protect the data of users. He warned against letting social media platforms become e-commerce platforms, shops and banks all at the same time.
Under the new regulation, e-commerce platforms in Indonesia are required to set a minimum price of $100 for certain items purchased directly from abroad. Additionally, all products offered on these platforms must meet local standards.
TikTok has been given one week to comply with the regulation or face the threat of closure. However, research firm BMI believes that TikTok will be the only business affected by the transaction ban and that it is unlikely to harm the overall growth of the digital marketplace industry in Indonesia.
Indonesia's e-commerce market, which amounted to nearly $52 billion last year, is dominated by homegrown tech firm GoTo's Tokopedia, Sea's Shopee and Chinese e-commerce giant Alibaba's Lazada. TikTok's active monthly user base in Indonesia, which stands at 125 million, is almost on par with its user figures in Europe and behind the United States.
Reactions from retailers have been mixed. While some vendors see TikTok as a way to recover from the impact of the COVID-19 pandemic, others agree with the regulation and believe that there should be limits on items sold online.
Indonesia has banned e-commerce transactions on social media platforms, dealing a blow to TikTok's e-commerce ambitions.
The move aims to protect offline merchants and marketplaces from predatory pricing on social media platforms.
TikTok, with 125 million active monthly users in Indonesia, has been investing heavily in the country to boost its e-commerce business.