27th September, 2023
Agency report
Indonesia bans e-commerce transactions conducted on social media platforms, citing concerns about predatory pricing and its impact on offline merchants and marketplaces.
This move poses challenges for TikTok’s ambitious plans to expand its e-commerce presence in Southeast Asia’s largest economy. Just three months ago, TikTok announced a significant investment in Indonesia to boost its TikTok Shop e-commerce platform.
TikTok, owned by China’s ByteDance, boasts 125 million active monthly users in Indonesia, making it a lucrative market for e-commerce expansion. However, this recent regulation presents a setback for the platform’s e-commerce aspirations.
Trade Minister Zulkifli Hasan emphasized the need for fair competition and data protection, cautioning against social media platforms becoming all-encompassing e-commerce, shopping, and banking platforms.
Under the new regulation, e-commerce platforms in Indonesia must establish a minimum price of $100 for specific items directly imported from abroad and ensure that all products adhere to local standards.
TikTok has been given a one-week deadline to comply with these rules, with the risk of closure if they fail to do so.
Despite the ban, research firm BMI suggests that TikTok will be the primary business affected, and the overall growth of the digital marketplace industry in Indonesia is unlikely to be severely impacted.
The e-commerce market in Indonesia is currently dominated by companies like GoTo’s Tokopedia, Sea’s Shopee, and Alibaba’s Lazada. In 2022, e-commerce transactions in Indonesia totaled nearly $52 billion, with TikTok accounting for 5% of that figure, according to Momentum Works consultancy.
While reactions from retailers vary, the ban highlights the Indonesian government’s efforts to regulate and protect its e-commerce market and the interests of local businesses.
Reuters/NAN