Social commerce is reshaping Indonesia’s retail landscape

The success of TikTok Shop in Indonesia is helping to reshape the local retail landscape while also acting as a “pilot” for the platform’s wider expansion plans.

What’s happened 

• Online selling became a necessity during Covid-19 lockdowns and many stores have found it more profitable to take advantage of the numerous online sales options available rather than revert to depending on offline sales. When TikTok Shop launched in 2021, social commerce gave an additional boost to this trend.
• TikTok Shop is growing fast, while existing online retail platforms like Shopee and Lazada appear to have plateaued, and these are now adopting some of TikTok’s formats including short videos and livestreaming. 
• Meanwhile, occupancy rates in Jakarta’s shopping malls have not recovered to pre-pandemic levels and some have effectively become storage spaces from which goods sold online via social commerce are dispatched.
• CNA reports that while shopping malls catering to premium and luxury brands are 84.5% occupied, those serving the opposite end of the market are at just 47%.

Why it matters

TikTok claims to have more than 100 million users in Indonesia and five million Indonesian businesses on the platform – most of these small and medium enterprises. It is a significant player and one that is investing heavily, with aggressive marketing and subsidies for influencers, as it looks to quadruple gross merchandise value (GMV) this year to $20bn. (Indonesia is the most populous country in Southeast Asia and accounted for over half the region’s $100bn e-commerce GMV in 2022.)

Bloomberg has described this as a “pilot” for the platform’s global e-commerce push. Its social commerce play in Indonesia is proving successful but the average customer spend – at $6-$7 – is low. The prize remains the US, where it already has 150 million users and could develop into a rival to Amazon and other Chinese apps like Shein and Temu if it can overcome the threat of a ban on security grounds, while also attracting more advertisers.

Sourced from Bloomberg, CNA

[Image: TikTok Shop]