Tik Tok To Tokopedia

A year ago, TikTok’s ecommerce business in Indonesia was thriving. With its viral videos, TikTok had become a worldwide phenomenon, and it was translating its influence into a powerful new revenue stream by letting users buy and sell things while its videos played.

Indonesia was a critical market and the first place where TikTok rolled out this feature. The app, owned by the Chinese tech giant ByteDance, had about 130 million users, nearly as many as it had in the United States. Since its launch here in 2021, TikTok Shop had become one of the most popular places for Indonesians to buy things online.

Regulatory Guideline Change - Then one day, TikTok said it was removing Shop from its app in Indonesia. The government declared that social media platforms would no longer be allowed to process online payments. TikTok was forced to abruptly halt its ecommerce operations.

Some Indonesian officials argued that TikTok was so popular it threatened to monopolise online shopping, while others said it didn’t have the right license. TikTok’s defenders in the industry said the government was acting on behalf of TikTok’s competitors in Indonesia.

The government’s edict did not name TikTok. It didn’t need to. No other app blended social media and ecommerce the way TikTok did.

India Payback - Dealing with official scrutiny is familiar terrain for TikTok. The government in India, once home to the app’s largest audience, banned TikTok in 2020 as payback for a violent border dispute with China. In the United States, TikTok is facing a possible ban that could begin as soon as January after spending years fielding concerns about its influence and security.

But the threat in Indonesia had the potential to deal an especially devastating blow to ByteDance’s ambitions to make a lot of money with ecommerce. ByteDance wanted TikTok to repeat the success of its sister app, Douyin, whose live video shopping business in China topped US$200bil in transaction value in 2022.

Old Wine New Bottle - TikTok executives scrambled for a way to continue to offer ecommerce. Word spread through the Indonesian tech community that TikTok was looking for a local company to team up with. And within weeks, it was ready to buy a stake in Tokopedia, a former startup that had become one of Indonesia’s main ecommerce platforms.

That date had been one of the biggest days for deals on ecommerce platforms in China for years, and the trend had caught on in Indonesia. In recent years, the government promoted it as a day for buying from small businesses.

TikTok Shop restarted as a pilot program under government supervision on Dec 11. As it had before, Shop appeared as a tab within the TikTok app. But now it was decked out with Tokopedia’s logo and signature green branding.

The deeper change was on the back end. When a shopper clicked “Buy”, the checkout process ran on Tokopedia’s system. TikTok Shop was still part of a social media platform. But to satisfy the government, the transaction took place on infrastructure built by an Indonesian ecommerce company.

Tokopedia - was a key player in Indonesia, one half of the Indonesian tech conglomerate GoTo. The companies behind GoTo spent years developing payment and delivery technology that made it possible, in a country of 270 million people and 17,000 islands, to buy things online and receive them in a day or two. The deal integrated these systems with TikTok Shop.

TikTok received majority ownership of Tokopedia, which paid TikTok for the right to operate TikTok Shop in Indonesia. GoTo kept just under a quarter of Tokopedia’s shares, and was promised a cut of profits from future TikTok Shop sales. TikTok paid US$840mil and said it would invest further, up to a total of US$1.5bil, in the combined entity.

Worldwide - where TikTok Shop held nearly 20% of the ecommerce market last year, officials say they are mulling rules for the platform. And the Indonesian government isn’t done regulating the ecommerce industry. This month, Indonesian officials said they had asked Apple and Google to block the Chinese fast-fashion platforms Temu and Shein from app stores in the country.

TikTok Shop is available in eight countries, including the United States and Britain. But the rest are in Southeast Asia, where its transaction value topped US$16bil last year. If the app is banned in the United States, TikTok will depend even more on Southeast Asia to keep its ecommerce ambitions alive.