(TikTok Shop Closed. Source: TikTok)
How is TikTok e-commerce doing in Indonesia?
Looking back at TikTok’s e-commerce journey in Indonesia, it has been a tumultuous chapter in the history of Chinese companies expanding abroad. In 2021, TikTok e-commerce officially entered the Indonesian market and quickly created a buzz with its powerful short-video ecosystem and live-streaming sales model. Statistics show that GMV (Gross Merchandise Volume) for TikTok Shop in Southeast Asia surged over 400% in 2022, reaching an impressive $4.4 billion. For a moment, it seemed TikTok had found the key to unlocking the Southeast Asian market.
However, the good times didn’t last. In November 2023, the Indonesian government suddenly introduced new regulations prohibiting social media platforms from engaging in e-commerce transactions. This policy hit TikTok Shop hard, forcing TikTok to announce the closure of its e-commerce business in Indonesia. The once-flourishing TikTok e-commerce presence came to an abrupt halt.
TikTok e-commerce's business model primarily consists of three major components: live-streaming sales, short video recommendations, and self-operated stores. Live-streaming sales are its most distinctive feature, allowing influencers to showcase and recommend products in real-time, leading to rapid transactions. Short video recommendations leverage TikTok’s vast content ecosystem, seamlessly integrating products into users' feeds. Self-operated stores are more akin to traditional e-commerce, where merchants open shops on the platform, allowing users to browse and purchase products directly.
The new local services trial resembles moving offline merchant services online, using short videos and live streaming for display and sales. This model is similar to those of platforms like Meituan and Ele.me, but TikTok's unique content ecosystem may offer it a differentiated advantage.
TikTok Local Services Enters Internal Testing Phase
It is understood that TikTok's local services are currently in an internal testing phase. Some astute local e-commerce service providers have already begun actively preparing, forming teams, and expanding their influence, aiming to gain a foothold in this emerging market.
In Thailand, some TikTok accounts have issued official calls for merchants to join the new TTLS (TikTok Local Services) platform, branding it as a new stage for merchants.
Job postings reveal TikTok’s ambitious plans for its local services business. The company's official website lists numerous positions closely related to local services, covering core Southeast Asian cities like Singapore, Jakarta, and Bangkok. The positions range from ecosystem governance and strategic analysis to product management and business development. This indicates TikTok is building a comprehensive team and capability for local services.
Notably, the "Business Development Director" position in Jakarta is tasked with building commercial ecosystems from scratch in sectors such as dining and tourism. Candidates are required to have outstanding market expansion skills and the ability to design customized marketing plans. This underscores TikTok's commitment to its local services business.
Industry trends suggest that local services are a high-growth sector globally. According to authoritative forecasts, global delivery market revenue is expected to rise steadily in the coming years, potentially reaching $1.45 trillion by 2027. Southeast Asia, with its dense population and significant youth demographic, represents a promising market for local services.
With its large user base and highly active user ecosystem, TikTok is well-positioned to cultivate new growth areas in this fertile ground. However, opportunities come with challenges. In the Southeast Asian market, TikTok will face intense competition from established local service platforms, delivery platforms, and travel booking services. These competitors have certain advantages in terms of supply chains, service systems, and user bases.
The Local Services Market in Indonesia is Crowded
The local services market in Indonesia is already well-established with numerous players. GoTo Group’s Gojek dominates the food delivery and ride-hailing sectors, while Singapore’s Grab is also actively expanding its presence. Additionally, e-commerce platforms like Tokopedia and Shopee are continuously broadening their local services offerings.
Public data shows that GoTo Group’s total transaction volume (GTV) reached IDR 1.686 trillion (approximately $109 billion) in 2022, marking a 33% year-on-year increase. This figure highlights the immense potential of Indonesia’s local services market. However, such potential also brings intense competition.
In addition to giants like GoTo and Grab, Indonesia hosts several local services platforms focusing on specific niches. For instance, Traveloka excels in travel and hotel bookings, while Halodoc is popular for online medical consultations. Though these niche players are smaller than the giants, they have solid user bases and strong brand recognition within their respective segments.
Challenges for TTLS Implementation:
TikTok faces several challenges in launching its local services business in Indonesia. The primary concern is policy risk and regulatory challenges. The Indonesian government’s stance on foreign enterprises is often fluctuating, creating significant uncertainty for long-term operations. Recently, TikTok's e-commerce business was shut down due to policy reasons, serving as a stark reminder of potential regulatory hurdles. Ensuring compliance with local regulations will be a key issue for TikTok.
Another challenge is the strong competition from local players. Platforms like GoJek and Grab have been deeply entrenched in the Indonesian market for years, boasting large user bases and well-established ecosystems in supply chain, payment, and logistics. These first-mover advantages make it difficult for newcomers to catch up quickly. TikTok will need to leverage its content strengths to stand out in this competitive landscape.
Cultural differences and localization are also significant challenges. Indonesia’s market characteristics mean that TikTok cannot simply replicate its success from China or other markets. With its diverse culture, differing religious practices, customs, and consumption habits, Indonesia presents unique challenges. Accurately understanding local user needs and providing culturally appropriate services will be crucial for TikTok’s success. This requires significant investment in local operations, including building local teams and engaging local influencers.
Infrastructure is another critical issue. Indonesia's relatively underdeveloped internet and logistics infrastructure may impact user experience and service efficiency. TikTok will need to navigate these limitations while addressing supply chain bottlenecks.
Additionally, TikTok must balance short-term gains with long-term development. In a highly competitive market, there might be a temptation to rapidly capture market share through subsidies. However, past experiences with e-commerce have shown that such strategies can lead to regulatory risks. Therefore, TikTok needs to focus on sustainable development and building a healthy business ecosystem.
Notably, compared to the volatility of its e-commerce ventures, TikTok’s local services rollout appears to be progressing more smoothly. The steady progress of internal testing and significant investment in local teams suggest a well-prepared approach. This cautious attitude may reflect lessons learned from previous experiences. TikTok seems to recognize that rushing into the complex Indonesian market could backfire.
Indonesia presents numerous challenges and uncertainties, adding complexity to TikTok’s localization efforts. Whether TikTok can successfully enter this new business domain remains to be seen as it navigates these hurdles.
TikTok Poised to Become a Case Study for Chinese Companies Entering Indonesia
TikTok's efforts reflect a shift in the international strategies of Chinese internet companies. Moving from merely replicating domestic models to deeply integrating into local markets and now cautiously testing new waters, Chinese firms are gaining experience and enhancing their capabilities on the international stage. Overall, EqualOcean hopes TikTok can successfully navigate regulatory challenges, outpace local competitors, and capture market share in Indonesia.
For Indonesian users, TikTok's entry will undoubtedly inject new vitality into the local services market. TikTok’s robust content ecosystem and technological capabilities promise to offer more personalized and diverse service experiences. Increased competition will also drive existing players to continually improve their service quality, ultimately benefiting consumers.
Whether TikTok’s local services business can become a new growth point in the Indonesian market and compensate for setbacks in its e-commerce ventures remains to be seen and will take time to evaluate.