TikTok to revive its e-commerce in Indonesia with Tokopedia takeover

• TikTok is investing US$1.5 billion in a 75% stake in the top e-commerce platform in Indonesia, Tokopedia. 
• The move comes after the Indonesian government’s mandate for TikTok to close its e-commerce features.
• The expanded entity merges Tokopedia and TikTok Shop Indonesia, running shopping features within the TikTok app in Indonesia.

In a sudden twist of events roughly two months ago, TikTok, the widely embraced social media platform from China’s ByteDance, temporarily suspended its e-commerce services in Indonesia. The decision was prompted by regulatory mandates instituted by the Indonesian government to protect local merchants’ interests.

Fast forward to this week, and TikTok has orchestrated a remarkable strategy in the archipelago, unveiling plans to invest over US$1.5 billion and secure a 75% stake in Tokopedia, the nation’s largest e-commerce platform. 

TikTok’s decision to temporarily shut down its e-commerce services in Indonesia reflects the complex interplay between regulatory compliance, market dynamics, and strategic investments. But the social media giant did say it would recalibrate its approach to navigate the evolving regulatory landscape.

That said, the strategic move to collaborate with Tokopedia underscores TikTok’s commitment to the Indonesian market. It allows the company to continue its ‘Shop’ operations, showcasing the platform’s resilience in navigating regulatory challenges.

The Indonesian government mandated TikTok to halt its e-commerce services temporarily in October this year; the move was solely to ensure a level playing field for local merchants and protect their interests within the fiercely competitive e-commerce sector.

For TikTok, it was a detrimental move, especially for TikTok Shop, considering Southeast Asia is the app’s biggest market in terms of users, and Indonesia, the region’s biggest economy and most populous nation, is the most significant market for the platform. 

In fact, Indonesia was so critical to TikTok’s plans that it was the first nation to pilot the app’s e-commerce arm, TikTok Shop. The country of 278 million people was supposed to be a template for a global expansion from the US to Europe. When talks on the new ruling were making waves, TikTok argued that separating social media and e-commerce would hamper innovation and hurt millions of merchants and consumers. 

According to the country’s Director General of Public Information and Communications of the Ministry of Communications and Informatics, Usman Kansong, Tiktok Indonesia has two permits from his ministry. “There are two permits: social media and e-commerce. But with Minister of Trade Regulation No. 31 of 2023, Tiktok must separate social media from e-commerce,” he added.

TikTok has a new strategy in Indonesia

When the ByteDance-owned TikTok unveiled its strategic move on Monday, it said the plan was to invest US$1.5 billion in a unit of Indonesia’s GoTo, aiming to salvage its shopping business following regulatory challenges in the country. In a letter to investors, GoTo said TikTok will secure a controlling 75.01% stake in Tokopedia, an e-commerce unit within the GoTo umbrella. 

As a part of this transaction, Tokopedia is set to acquire TikTok Shop’s Indonesia business for US$340 million, expanding its footprint in the dynamic Indonesian e-commerce landscape. “As part of the agreement, Tokopedia and TikTok Shop Indonesia’s businesses will be combined under the existing PT Tokopedia entity in which TikTok will take a controlling stake. The shopping features within the TikTok app in Indonesia will be operated and maintained by the enlarged entity,” GoTo’s statement reads.

The arrangement will allow TikTok and GoTo to serve Indonesian consumers and MSMEs comprehensively. “GoTo will benefit from the growth of the enlarged entity and will remain an ecosystem partner to Tokopedia through its digital financial services via GoTo Financial and on-demand services via Gojek. GoTo will also receive an ongoing revenue stream from Tokopedia commensurate with its scale and growth,” GoTo noted.

What will unfold next?

According to both companies, the strategic partnership will kick off with an initial pilot period conducted in close collaboration with and under the supervision of relevant regulators. The Beli Lokal initiative’s inaugural campaign is scheduled to launch on December 12, aligning with Indonesia’s National Online Shopping Day (Harbolnas) — a government initiative to foster the country’s digital economy by bolstering local MSMEs. 

“This campaign, accessible on both TikTok and Tokopedia, will spotlight a diverse array of merchants, placing a significant emphasis on Indonesian products. Going forward, TikTok, Tokopedia, and GoTo will transform Indonesia’s e-commerce sector, creating millions of new job opportunities over the next five years,” GoTo added. The transaction is expected to close in the first quarter of 2024.

The coming months will unveil how TikTok’s bold moves will shape the narrative of e-commerce partnerships and regulatory compliance in this dynamic market.

---

---

---

---