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TikTok Shop Closed in RI, a Heavy Blow to the Chinese Giant

TikTok Shop has officially closed in Indonesia, effective from October 4 2023 last week. This decision was taken following the enactment of Minister of Trade Regulation 31 of 2023 which prohibits social media platforms from having a dual role as e-commerce.

According to a researcher from Columbia-Harvard China, William Yuen Ye, the departure of TikTok Shop from Indonesia will hamper the ByteDance subsidiary’s ambition to dominate the e-commerce market.

“TikTok’s global revenue target is now on the line,” he said, quoted from Gizmochina , Friday (13/10/2023).

Indonesia is a crucial market for TikTok Shop. TikTok’s user base is the second largest in the world after the United States. The TikTok Shop market in Indonesia is also the largest in Southeast Asia with a revenue contribution of 60% in the region.

Gizmochina reported that the Indonesian government’s firm actions could inspire neighboring countries. Offline sellers in traditional markets in Southeast Asia can also ask local governments to enforce similar regulations.

The Jokowi government’s decision could also be a lesson for e-commerce platforms not to immediately rely on a mass base on social media.

The founder of Beijing-based consultancy firm Dolphin, Li Chengdong, said TikTok’s e-commerce features are not yet big in Western markets. According to him, the regulations in Indonesia are a major blow for the Chinese giant to spread its wings in the e-commerce industry.

The ban in Indonesia has also raised questions about the e-commerce business model which focuses on live broadcasts. This trend was started by China.

Douyin, which is TikTok’s twin in China, has had great success with its live-streaming sales method. Its revenue reached US$ 205 billion last year, according to the firm Cinda Securities.

Apart from that, Gizmochina also said that a valuable lesson from the regulations made by the Indonesian government is not to rely too heavily on one market.

TikTok Shop reportedly earned revenues of US$ 2.5 billion in Indonesia last year. That figure takes up a significant portion of total revenue of US$ 4.4 billion in Southeast Asia, according to a Bloomberg report.

Source : CNBC