Impact Of New Policies: Indonesia’s TikTok Shop Business Announced To Be Closed!

According to disclosures from multiple information sources, it is obvious that the Indonesian government’s new regulations will have a major impact on the TikTok Shop business in Indonesia, causing the business to officially cease operations on October 4. Affected by this, Indonesian TikTok Shop sellers may face challenges. They need to choose to transfer traffic to their own stores, or establish an independent Indonesian station as soon as possible, attract traffic through TikTok advertising, and achieve a semi-closed-loop business.

01

Official announcement: Indonesia TikTok Shop business will be stopped soon

The latest news shows that TikTok Indonesia officially issued a statement: In order to comply with Indonesia’s newly revised regulations, starting from 5 pm on October 4 (GMT+7), TikTok Shop’s e-commerce transaction services will no longer be provided in Indonesia. Indonesia's "Product Sales" advertising plan will also be automatically suspended by the system, and new Shop Ads advertising plans will no longer be accepted.

According to techwireasia foreign media reports, this regulatory change was issued by the Indonesian authorities and mainly targets the sales of goods on social media in the country. “Social media and social commerce cannot be used together,” Indonesia’s Deputy Trade Minister Jerry Sambuaga said earlier this month, adding that the mix would be banned. New trade rules for Indonesia ban the sale of goods on social media, aiming to eliminate threats to physical markets in Southeast Asia's largest economy.

New Indonesian government regulations prohibit social platforms from trading goods or using user data for e-commerce. The regulations also require Indonesian e-commerce platforms to set a minimum price of $100 for goods purchased directly from abroad, and require all products to comply with local standards, government regulatory documents show. This is to prevent an influx of cheap foreign goods and protect Indonesia’s small and medium-sized businesses. Indonesian Trade Minister Zulkifli said the new regulations are aimed at ensuring "fair and equitable" business competition and protecting user data.

Although TikTok has encountered some setbacks in its development in the United States and the United Kingdom in the past few years, TikTok Shop has quickly emerged in Indonesia and become the second largest market after the United States.

TikTok claims that Indonesia now has approximately 125 million users, including 2 million small businesses on TikTok Shop. According to data from Singapore-based venture capital firm Momentum Works, TikTok Shop has become the fifth largest e-commerce platform in Indonesia by the end of 2022.

However, some analysts pointed out that "banning TikTok Shop may cause some confusion. Regardless of how the ban is implemented, TikTok's huge consumer traffic will be absorbed in other ways and applied to e-commerce."

At present, the main solution is to attract traffic through TikTok advertisements. For example, if you are already a Shopee seller, you can direct traffic to your own store; or you can establish an independent Indonesian station as soon as possible and also attract traffic through TikTok advertisements. Achieve semi-closed loop.

02

Seller Observation: Independent platforms will have stronger vitality

Some experienced sellers say this could be a positive thing in the long run. Regardless of the policy interests behind it, this incident will help make more Indonesian users aware of the e-commerce services provided by TikTok, which may significantly increase the penetration rate of TikTok e-commerce. In fact, although domestic discussions on Indonesian TikTok e-commerce are very popular, most local TikTok users in Indonesia cannot even see the mall and small yellow cars, and commercial behavior is strictly controlled.

On the other hand, it is entirely possible that the official will launch an independent TikTok Shop application to cooperate with a large number of new users to attract new activities and discount coupons, attract new and old users to repurchase, and cultivate their habit of placing orders in TikTok Shop. It is expected that this issue will have a phased result in the near future, but there is still great uncertainty about the specific results and subsequent implementation plans.

Some sellers said that making TikTok Shop an independent APP is not something that can be completed in the short term. He suggested that sellers clear their inventory as soon as possible.

Industry experts pointed out that Indonesia prohibits TikTok Shop from conducting e-commerce sales, and Indonesian small store operators need to seize the time to clear inventory. On the other hand, single pages or independent websites have great vitality in Southeast Asia, the Middle East and other regions.

Compared with other channels, independent sellers have less pressure on revenue and profit growth due to relatively stable policies. Research on 395 independent website sellers shows that compared with the same period in 2021, 54% of independent website sellers said that their revenue will increase year-on-year in 2022. Among them, 19% of sellers have a growth rate of more than 50%, and only 35% of sellers said revenue was lower than the same period last year. At the same time, in terms of profits, 47% of independent website sellers said that profits increased year-on-year in 2022, and 13% of sellers said they were the same as the same period last year. In addition, a survey of 764 sellers showed that 37% of sellers said they were already operating independent website projects, and another 35% expressed the intention to build independent websites.