The political environment of the host country can affect the business operation of multinational enterprises dramatically.
Influenced by the Indonesian government's ban, TikTok closed its TikTok Shop business in Indonesia on October 4th. Kang Zeyu, who is in charge of TikTok's e-commerce, expressed that the shutdown happened unexpectedly owing to complicated reasons; however, Tiktok will strive to recover as soon as possible.
On September 27, Indonesia's Ministry of Trade held a press conference announcing that social platforms such as TikTok are prohibited from making merchandise transactions within their platforms or using user data for e-commerce purposes. According to the new regulation, social media platforms are not allowed to conduct direct merchandising transactions and can only provide promotional advertisements for goods and services. The Indonesian officials inculcated repeatedly that social e-commerce is most likely to threaten local small and medium-sized enterprises. In Jakarta's Tanah Abang Market, the largest wholesale center for textile and garment wholesale center in Southeast Asia, numerous merchants put up protest posters in front of their stalls. They decried the detrimental impact of TikTok Shop, urging the government to shut down TikTok Shop which has not only forced them to shutter their businesses but also compelled them to lay off employees.
Kang Zeyu acknowledges the imperative to reorient their products and business operations to align with regulatory compliance. As a consequence, a temporary shutdown of services is inevitable. "We will communicate with users, merchants, logistics providers, payment servicers and other related partners later today, and the team will make every effort to handle the follow-up work to ensure the fulfillment of orders that have occurred and after-sale customer service work, and maintain communication with seller-darlings," stated Kang Zeyu. "Meanwhile, TikTok is actively engaged in discussions with local government and relevant authorities to complete the product and business transformation. The ultimate goal is to swiftly resume operations as soon as possible and explore innovative avenues that will enable TikTok to effectively serve Indonesian businesses and users."
Actually, Indonesia is one of the most thriving hubs for TikTok's e-commerce endeavours. Data from FastData illustrates that in the first half of 2023, Indonesia stood out as the nation boasting the highest number of small businesses with more than 10,000 sales via TikTok Shops. In an even more remarkable feat, two of the top 3 small businesses, ranked by global sales, hailed from Indonesia. According to Kang Zeyu, TikTok's e-commerce has served 80 million Indonesian users in the past two years, providing millions of sellers and content creators with the opportunity to grow. Therefore, the Indonesian government's ban poses a dramatic impact on TikTok e-commerce's GMV (Gross merchandise volume) and revenue.
Nevertheless, Southeast Asian countries such as Malaysia and Vietnam are also evaluating whether to introduce similar bans on social e-commerce, arising potential crises for TikTok's e-commerce.