TikTok Shop Closes in Indonesia; Here's its Southeast Asia Transaction Value Since 2021

TikTok Shop officially closes in Indonesia starting Thursday, October 4, 2023, at 5:00 PM WIB. This closure is to comply with new Indonesian government regulations prohibiting the integration of social media with e-commerce transaction services.

This is stipulated in Minister of Trade Regulation Number 31 of 2023 concerning Business Licensing, Advertising, Guidance, and Supervision of Business Actors in Electronic System Trade, a revision of Minister of Trade Regulation Number 50 of 2020.

Trade Minister Zulkifli Hasan (Zulhas) stated that the new regulation is designed to create a more organized environment for social media and e-commerce, preventing disruption to other businesses.

“Like in China, e-commerce doesn't kill other businesses, but thrives alongside them. Previously offline businesses can also develop; they don't eliminate each other, that's why it's regulated," said Zulhas, as reported by Detik.com on Wednesday, October 4, 2023.

According to Zulhas, if TikTok wants to open an e-commerce platform, the government is ready to assist. However, their online sales platform must be separate from their social media.

On another occasion, the Minister of Cooperatives and SMEs, Teten Masduki, stated that even though TikTok Shop is closed, sellers and affiliates can still promote products on TikTok. Only the transaction service is being shut down.

Sellers and affiliates can still sell their products on other e-commerce applications.

"Therefore, the businesses run by sellers and affiliates will not be disrupted and can continue to operate," said Teten, as reported by Katadata.co.id on Wednesday, October 4, 2023.

According to Teten, Minister of Trade Regulation Number 31 of 2023 is the government's effort to create a sustainable business ecosystem, both in e-commerce and offline. This new regulation also aims to protect MSMEs and domestic products.

In response, TikTok Shop Indonesia stated that it will assist its partner sellers in completing order fulfillment, both those already in progress and those currently being processed. Customer service will also remain available.

"Our commitment to Indonesia remains strong, and we continue to adapt our products to find innovative ways to support the long-term growth of the Indonesian SME community," said TikTok Shop Indonesia management in an email to sellers, as reported by the @ceritaombotak account on Tuesday, October 3, 2023.

TikTok Shop Transaction Value in Southeast Asia

To date, TikTok Shop has not released data on the number of users and transaction value in Indonesia.

However, according to a Momentum Works report, the gross merchandise value (GMV) of TikTok Shop in Southeast Asia has continued to increase since its launch in 2021.

In 2021, based on Momentum Works data, Indonesia was the only Southeast Asian country that served as a TikTok Shop market, with a GMV reaching US$600 million. This accounted for 66.66% of the total global TikTok Shop GMV at that time, which was US$900 million.

Then in 2022, the GMV of TikTok Shop in Southeast Asia increased significantly to US$4.4 billion, with markets including Indonesia, the Philippines, Singapore, Malaysia, Thailand, and Vietnam.

“Southeast Asia contributes significantly to the (global TikTok Shop) GMV. TikTok Shop aims to double its Southeast Asian GMV to US$15 billion in 2023,” said Momentum Works in its report.

Despite its significant value, the GMV of TikTok Shop in Southeast Asia in 2022 still lagged far behind Shopee's GMV, which reached US$47.9 billion. Shopee is also recorded as the e-commerce company with the largest GMV in the region.

Below Shopee are Lazada, Tokopedia, and Bukalapak. Meanwhile, TikTok Shop occupied the fifth position among e-commerce companies with the largest GMV in Southeast Asia in 2022.