China's TikTok agreed on Monday to buy a majority stake in Indonesian tech conglomerate GoTo's e-commerce unit Tokopedia for $840 million and revive its e-commerce unit TikTok Shop, a deal that looks set to allow TikTok to restart its online shopping business in Southeast Asia's largest economy.
TikTok shops in Indonesia were shut down after President Joko Widodo called for tougher social media regulation after an influx of cheap imports from China slashed sales for domestic businesses. The Chinese-owned app was given a week to comply, before trading on the app in Indonesia was suspended on October 4.
Before the ban, TikTok Shop had 6 million sellers and 7 million creator affiliates.
Under the terms of Monday's agreement, Indonesia's Tokopedia business and TikTok Shop will be combined under Tokopedia, while TikTok, owned by China's ByteDance, will take control by buying 75.01 percent of Tokopedia.
In a joint statement, the two companies said Tokopedia, Indonesia's largest e-commerce platform, will operate a shopping feature within the TikTok Shop app.
The agreement also includes TikTok investing an additional $1.5 billion in Tokopedia.
Indonesian regulators will oversee the strategic partnership on a trial basis on Tuesday, which coincides with Indonesia's National Online Shopping Day, a government program aimed at growing Indonesia's digital economy by supporting micro, small and medium-sized enterprises (MSMEs). The campaign, titled “Beli Lokal” (Buy Local), will promote a wide range of Indonesian merchants and will be available on both TikTok and Tokopedia.
“Both companies are committed to supporting the growth of small and medium-sized enterprises in both countries and promoting Indonesian-made products,” GoTo CEO Patrick Warjo said in a joint statement.
More than 90% of companies registered with the integrated business app are small and medium-sized enterprises.
The two companies will implement a series of joint initiatives to support small and medium-sized enterprises, such as promoting Indonesian products on the Tokopedia and TikTok platforms, providing training to Indonesian sellers to promote their brands in international markets, and building a tech center to develop local tech talent.
TikTok Indonesia's e-commerce head Stephanie Susilo said the partnership with GoTo will enable the company to “help domestic businesses expand and prosper”.
Many of Indonesia's population of more than 270 million are active social media users, and TikTok is aiming to tap into e-commerce revenue from its user base of 125 million.
Wennie Wijaya, a creator affiliate on TikTok Shop, who sells smartphones and accessories for a number of merchants on her TikTok Shop and has 239,000 followers online, lost about $700 in monthly income when TikTok was banned in October.
After TikTok Shop was banned, creator affiliates like her could only promote their products on TikTok, with the transactions completed on online marketplaces like Shopee, Tokopedia and Lazada.
“We are pleased to see the TikTok Shop back up and running and to launch a joint program to further enhance, promote and develop local products,” Weny said. “This will certainly create more jobs for Indonesians.”
“The rise of TikTok shops has had a ripple effect and hindered my business. My customers are mainly retailers who own offline or online shops on e-commerce platforms, but they no longer buy my products as much as before as many consumers flocked to TikTok shops in 2021,” said Rudy Shalfi, a wholesaler of Islamic men's clothing at Tanah Abang Market, Jakarta's largest wholesale market.
Rudy added that offline sellers are aware that they will have to adapt to the changes brought about by e-commerce, but he expects the government to collect the necessary taxes on all imported goods to ensure local products remain competitive.
“Tokopedia will likely conduct cross-border business transactions such as: [Singapore e-commerce] It's Shopee, so it will be a battle between the two giants.”
Some information in this report was provided by Reuters.
