In the heart of Northeast Jakarta, a shophouse buzzes with activity as salespeople showcase an array of products, ranging from cosmetics to hair accessories. But this is no ordinary flea market. It’s a livestreamed marketplace within TikTok, the world’s most popular short-video app, and it’s becoming a gold rush for entrepreneurs seeking fortunes in Southeast Asia. For TikTok, owned by China’s ByteDance Ltd., TikTok Shop is its fastest-growing feature, with a rapidly expanding fan base in the region. This success is vital for the company as it faces potential bans in the US due to national security concerns and presents an opportunity to take on e-commerce giant Amazon in a way that no social media company has attempted before.
Indonesia, where TikTok Shop was first launched and remains its largest market, has played a crucial role in its growth. The country’s young, mobile-savvy population has enthusiastically embraced the combination of short videos and in-app shopping since the platform’s launch in 2021. TikTok Shop is projected to reach a gross merchandise value of $20 billion by the end of this year, quadrupling from the previous year. Analysts believe that if TikTok can sustain this momentum, it has the potential to revolutionize the company, which already attracts consumers and advertisers away from industry leaders like Meta Platforms Inc. and Alphabet Inc.’s Google.
Entrepreneurs like Hank Wang, who manages a team of livestreaming hosts at a bustling shophouse in Jakarta, believe that TikTok Shop has the power to transform the retail industry and turn them into the next e-commerce barons. Wang’s company, Flame Media, sells products on behalf of cosmetics and consumer goods manufacturers, earning a cut and sharing profits with the livestreaming hosts. Wang moved from Shanghai to Jakarta and started his company, despite not speaking the local language, as he recognizes the immense potential of TikTok and social commerce in the region.
TikTok’s CEO, Shou Zi Chew, visited Jakarta in June and made significant investment promises in Southeast Asia for the next three to five years. This visit demonstrated TikTok’s commitment to the region and its recognition of the growth opportunities available in Southeast Asia. In contrast, TikTok has faced challenges in the US, including a hostile five-hour hearing in Congress earlier this year, raising concerns about Chinese influence and the impact of its videos on children’s mental health.
TikTok Shop’s debut in Indonesia coincided with ByteDance’s expansion plans beyond China, where it faces regulatory and economic obstacles. Initially presented as an underground feature for younger, in-the-know consumers, TikTok Shop quickly gained popularity among Indonesian users. Livestreamers recorded themselves with their own mobile phones to sell products like Tupperware and sunscreen, capitalizing on the increased time spent on smartphones during the month of Ramadan and the ongoing pandemic.
The operations of TikTok Shop have become more sophisticated over time, with agencies like Flame Media connecting brands with livestreaming hosts and establishing studios. TikTok account managers offer advice on content and promotions, while trained influencers help brands reach millennials and Gen Z-ers. The authenticity and improvised nature of TikTok Shop videos compared to carefully staged accounts on platforms like Instagram have contributed to its popularity, fostering a closer connection between shoppers and sellers.
Prominent Indonesian influencers like Suanto, known as Kohcun online, have found success on TikTok Shop, attracting over a million followers. Suanto’s casual and improvised style has resonated with users, and he now livestreams on TikTok Shop for six hours each day, selling products like Samsung phones and Louis Vuitton bags. The income generated from commissions and brand deals on TikTok Shop is around three times higher than what Suanto earned through YouTube.
David Nugroho, CEO of Jakarta-based DCT Agency, which manages 600 TikTok personalities and is one of the biggest TikTok Shop partners in the country, highlights the advantages of TikTok’s creators: “TikTok has the big advantage using their creators because it’s more entertaining, it’s more natural.” The platform has attracted over 100 million monthly users in Indonesia, with users spending an average of more than 100 minutes on the app each day.
TikTok’s success in China with its sibling app Douyin, a video platform that has evolved into a $200 billion shopping destination, has provided valuable expertise for TikTok Shop. Chinese executives, including Bob Kang and Yu Weiqi, oversee the operations of TikTok Shop, leveraging their experience and knowledge from Douyin. Additionally, Chinese entrepreneurs like Richard Ma are actively involved in coaching Indonesian livestreamers and replicating the success of the Chinese model in different markets.
While TikTok’s success in Indonesia shields it from the potential impact of a US ban, uncertainties remain. Despite Indonesia’s growing middle class, the average spending of TikTok’s Indonesian customers is lower than that of US consumers. To tap into the US market, TikTok launched an in-app shopping feature with mini-stores linked to influencers and creators’ profiles. The company plans to roll out a more comprehensive marketplace, enabling users to search, compare, and purchase products all in one place. TikTok is actively courting Chinese manufacturers and exporters, offering free listings, shipping, and zero commissions to eventually sell into the US market. This strategy sets TikTok apart from US-based social platforms like Instagram and YouTube, as it directly competes with Amazon on its home turf.
TikTok’s foray into the US retail market, along with its hiring of former fashion and lifestyle brand employees to oversee retail categories, highlights its commitment to e-commerce. The company aims to make the livestream purchasing process frictionless for users, brands, and creators in the US, potentially redirecting substantial advertising budgets toward live commerce. Jianggan Li, founder and CEO of Momentum Works, emphasizes that TikTok’s e-commerce expansion in the US market not only captures consumers with greater spending power but also provides significant advantages in negotiating supply chain and fulfillment systems.
However, challenges lie ahead for TikTok.There are concerns about whether TikTok can sustain its growth in Southeast Asia once it scales back its aggressive marketing and subsidies for influencers. Some brands have noticed that users who add products to their carts on TikTok Shop don’t always follow through with the purchase, leading to cautious spending by companies like Samsung Electronics Co.
Regulatory oversight is another potential obstacle. Indonesia’s government recently issued a censure over “online begging” on TikTok, raising questions about the social impact of impulse purchases and the app’s influence. In Vietnam, the government has expressed concerns about TikTok’s potential threat to youth and culture, while India banned the app in 2020 due to national security concerns.
Despite these challenges, entrepreneurs like Hank Wang remain optimistic about TikTok Shop’s future. Wang plans to move his company into a new office building and hire more livestreamers to support the growing demand. He sees Indonesia as just the beginning and envisions expanding into other regions and continents in the future.
TikTok Shop’s success in Southeast Asia and its ambitions in the US market have the potential to reshape the e-commerce industry and challenge established players like Amazon. With its unique combination of short videos, livestreaming, and in-app shopping, TikTok is revolutionizing social commerce and creating opportunities for entrepreneurs and consumers alike. Whether it can overcome the challenges and sustain its momentum remains to be seen, but for now, TikTok Shop is riding the wave of success in Southeast Asia and captivating users with its innovative approach to online shopping.