Within a bustling shophouse in Northeast Jakarta, a lively scene unfolds as numerous salespeople take turns showcasing cosmetics, contact lenses, and hair accessories. One woman assists a customer in selecting the perfect lipstick shade, while a man enthusiastically announces discounts on vitamin tablets.
This is not your conventional flea market; it is a live-streamed storefront on TikTok, representing a burgeoning opportunity for entrepreneurs eager to capitalize on the platform’s immense popularity. TikTok Shop, a feature that has rapidly gained traction in Southeast Asia, is seen as the company’s fastest-growing offering, despite its primary fame being rooted in viral dance challenges. The app is owned by China’s ByteDance.
The regional success of TikTok Shop is vital as the platform is under scrutiny in the U.S., facing potential bans due to national security concerns. The momentum in Southeast Asia may also provide a strategic blueprint for TikTok to compete with Amazon.com in ways that previous social media platforms have not considered, provided it can continue operations in the United States.
Indonesia was the first country to welcome TikTok Shop, and it remains the largest market for the feature. Young, tech-savvy users in Indonesia have embraced the unique blend of short videos and in-app shopping since its introduction in 2021. By the end of the year, it’s anticipated that TikTok Shop’s gross merchandise value will reach $20 billion (approximately Rs. 1,63,900 crore), which would represent a fourfold increase compared to the previous year.
Should this impressive growth rate be maintained, analysts suggest TikTok could transform its image from merely a video platform to a formidable competitor, luring consumers and advertising dollars away from giants like Meta Platforms and Alphabet’s Google.
Hank Wang, who oversees a team of around 50 livestream hosts operating out of a busy Jakarta shophouse, believes the platform has the potential to revolutionize retail and elevate entrepreneurs, like himself, to the ranks of e-commerce leaders.
“I aspire to be the next Forrest Li,” shared the 33-year-old former venture investor, referring to the founder of Sea, Southeast Asia’s largest internet company. Wang directs his staff to sell products from brands such as L’Oreal, earning a commission while sharing profits with livestream hosts. Having relocated from Shanghai to Jakarta seven months ago, Wang founded Flame Media despite facing language barriers. “TikTok and social commerce will usher in a new wave of tech unicorns in this region,” he stated.
In June, TikTok CEO Shou Zi Chew visited Jakarta, announcing plans to invest billions in Southeast Asia over the coming three to five years. Dressed in a traditional batik shirt, he engaged with Indonesian officials and visited small businesses with active TikTok accounts.
This visit stood in stark contrast to his earlier experience in Washington, D.C., where he faced a contentious five-hour congressional hearing addressing concerns over Chinese influence and the platform’s implications for children’s mental health, amidst fears of a potential ban before the upcoming presidential elections.
The launch of TikTok Shop in Indonesia coincided with ByteDance’s strategy to grow beyond China, where regulatory hurdles and economic challenges persist. Initially dubbed “Magellan XYZ” after the famed 16th-century explorer, the project aimed to introduce e-commerce to a younger crowd in Indonesia. With the help of agents, thousands of livestreamers, often recent graduates, were recruited to promote products like Tupperware and sunscreen via their mobile devices. The timing of the launch during Ramadan and amidst COVID-19 lockdowns contributed to its swift popularity.
Operations have since evolved, with agencies like Wang’s Flame Media enhancing collaboration between brands and livestream hosts, creating dedicated studios. Some businesses are assigned TikTok account managers for content and promotional guidance, while others enlist trained influencers to engage younger customers. Despite this growth, the videos maintain an informal, authentic feel, contrasting with the polished content typically found on Instagram, fostering a stronger connection with shoppers.
Among the notable figures on TikTok Shop is Suanto, known online as Kohcun, who captivates over a million followers with his laid-back style. Previously a gadget reviewer on YouTube, he now livestreams for six hours daily, selling Samsung phones and Louis Vuitton bags. His earnings from commissions and sponsorship deals have tripled compared to his time on YouTube.
“TikTok benefits from its creators, making content more entertaining and natural,” stated David Nugroho, CEO of DCT Agency in Jakarta, which manages about 600 TikTok personalities and is a key partner of TikTok Shop in Indonesia.
Currently, TikTok boasts more than 100 million monthly users in Indonesia, who reportedly spend over 100 minutes on the app daily. This user engagement has contributed to ByteDance’s valuation as the world’s most valuable startup, exceeding $200 billion (approximately Rs. 82,21,700 crore) within just ten years, impacting established social media networks like Meta and Tencent Holdings.
While U.S.-based social networks have tried to imitate similar features, users in the U.S. have not embraced live shopping as fervently as audiences in China and Southeast Asia. For instance, Instagram, under Meta, discontinued its product tagging feature for live streaming in March. YouTube and Amazon have also explored live shopping but with limited success.
In Indonesia, TikTok Shop entered a market where consumers were already comfortable with scrolling through online catalogs, often blending shopping with entertainment on their smartphones. Local e-commerce pioneers like GoTo Group’s Tokopedia and Alibaba Group’s Lazada invested significantly in building delivery infrastructures across the country, allowing TikTok to leverage these developments.
TikTok’s advantage is further strengthened by insights gained from Douyin, ByteDance’s Chinese app, which has transformed into a $200 billion (approximately Rs. 82,21,700 crore) shopping hub by broadening its services to include food delivery and hotel bookings. China’s advancements in live shopping were accelerated by extensive lockdowns during the pandemic, which increased smartphone usage and interaction with platforms like Douyin and Alibaba’s Taobao.
Key leadership for TikTok Shop comes from China, with executives like Bob Kang, who oversees thousands of employees managing both Douyin and TikTok’s e-commerce sectors, frequently traveling across Shanghai, Singapore, and the United States. Meanwhile, Yu Weiqi, a former assistant to TikTok’s co-founder Zhang Yiming, directs operations in Southeast Asia.
Although many entrepreneurs associated with TikTok Shop are local, such as Nugroho and Daniel Tjandra from Pasar Kreatif Digital, others hail from China, bringing experience in live shopping traditions along with financial backing.
Richard Ma, a marketing expert from Beijing, is a seller on TikTok Shop who mentors a team of Indonesian livestreamers marketing products such as $40 (approximately Rs. 3,289) air fryers and $8 (approximately Rs. 657) Bluetooth earbuds. His operations, which involve sourcing goods from Alibaba’s wholesaling platform, 1688.com, and logistics from a warehouse near Jakarta, rely on popular products in Douyin’s e-commerce marketplace.
“We can replicate the China model and adapt it to various markets,” he explained, while acknowledging current losses due to initial investments and lower price points. However, he remains optimistic about achieving profitability as the business expands.
Significant U.S. Market
Even though TikTok’s Indonesian success offers some insulation from the potential impact of a U.S. ban, challenges remain.
Despite a rising middle class in Indonesia, many users earn considerably less than their American counterparts. Research from Cube Asia indicates that customers in Indonesia typically spend about $6 (approximately Rs. 493) to $7 (approximately Rs. 575) on average. This economic disparity underscores TikTok’s need to secure the U.S. market for its e-commerce ambitions.
For the time being, entrepreneurs like Wang anticipate continued growth for TikTok Shop. As his business nears $1 million (approximately Rs. 8,300 crore) in monthly sales, he is preparing to relocate to a newly renovated office in Jakarta’s upscale Menteng district. He aims to recruit 500 livestreamers by the year’s end and considers expansion into additional markets thereafter.
“First, we aim to become number one in Indonesia,” he emphasized. “From there, we can explore other regions and continents. It’s a step-by-step process.”
© 2023 Bloomberg LP
