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TikTok’s retail ambitions hit a snag in Indonesia, which sees the app as a risk to businesses.
By John Yoon and Muktita Suhartono
Indonesia was one of the first countries where TikTok introduced TikTok Shop, betting on the app’s potential as a successful retail platform for the company’s second-largest user base.
Now, the country is the first to block this feature.
TikTok, a hugely popular short-video platform, closed its store in Indonesia on Wednesday after the country banned local business owners from trading on social media platforms, a setback for the app’s new venture into a primary market.
TikTok Shop is one of the social network’s most recent attempts to generate more revenue. Creators and brands can upload a Buy button to their videos and streams, allowing users to purchase products with just a few clicks without leaving the app.
The app itself has not been banned in Indonesia, but other people may no longer buy or sell products through TikTok or other social media platforms after the Commerce Department issued new regulations last week. The rules, which necessarily require the separation of e-commerce and social media, aim to protect local merchants, prevent algorithms from dominating the market and stop the use of non-public knowledge for advertising purposes, the ministry said.
For months, Indonesian officials had feared that TikTok Shop would threaten the country’s small businesses. Last month, the Minister of Cooperatives and Small and Medium-sized Enterprises, Teten Masduki, accused the company of “monopolistic” practices. Zulkifli Hasan, Indonesia’s Minister of Industry, recently said that “predatory pricing” through social media corporations hurts small industries.
The company, which introduced TikTok Shop in Indonesia in 2021, said in a statement this week that “our priority is to continue to comply with local legislation and regulations,” adding that it would “continue to cooperate with the relevant government on the way forward. “
Some Indonesian merchants who relied on TikTok Shop said the new regulations were hurting their business. Dennies Soesanto, who sells handbags and suitcases, said his sales on TikTok Shop were triple those on other e-commerce platforms. Now, he says, that source of income has disappeared.
“Shutting down TikTok Shop doesn’t save small and medium-sized businesses,” he said, “but it does save other e-commerce platforms. “
Indonesia has 125 million users of TikTok. Su e-commerce market is developing rapidly: transactions in the country totaled about $52 billion last year, adding about $2. 5 billion to TikTok, according to Momentum Works, a Singapore-based consulting firm. No other social media platform had a comparable percentage of the country’s e-commerce market.
The crackdown in Indonesia, which is home to six million TikTok distributors, may increase pressure on TikTok Shop in other countries where it operates. TikTok Shop is available in Great Britain, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. according to their website. In the U. S. , where the company claims to have 150 million users, the acquisition feature began rolling out in August and will be available to everyone in early October.
Indonesia’s e-commerce market is governed through Shopee, a Singapore-based website, and Tokopedia, which is run through an Indonesian-generated company, Momentum Works said. Meta, which also runs e-commerce outlets on its social media platforms Facebook and Instagram, did not respond to a request for comment on Indonesia’s new regulations.
The new Indonesian rule is a hindrance to TikTok’s expansion ambitions in Southeast Asia, where it has around 325 million users. During a visit to Jakarta a few months ago, TikTok CEO Shou Zi Chew pledged to invest billions of dollars in the region over the next few years.
The country’s protectionist measures also add to the backlash from governments that TikTok has faced elsewhere. Lawmakers in Australia, Canada, Europe and the United States have limited its use to TikTok, owned by China’s ByteDance, for political and security reasons. India banned the platform in 2020.
After TikTok Shop shut down in Indonesia on Wednesday, the government thanked the company for complying with its regulations, adding that TikTok and other platforms were asked to conduct e-commerce separately from social media.
TikTok is in the early stages of negotiations with the Indonesian government to download a paid license in the country, a corporate spokeswoman said. He added that the company is not aware of any symptoms that any other country can simply limit TikTok Shop in the same way.
John Yoon reports from the Times newsroom in Seoul. In the past he worked for the Coronavirus Tracking Team, which won the Pulitzer Prize for Public Service in 2021. He joined the Times in 2020. Learn more about John Yoon
Muktita Suhartono reports from Indonesia and Tailandia. Se joined The Times in 2018 and is based in Bangkok. Learn more about Muktita Suhartono
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