With TikTok Shop ruling a substantial regional market in Indonesia, shopkeepers are struggling to get consumers to their traditional stores. And now the Indonesian government is likely to ban the app because of the negative impact on local sellers.
Indonesian President Joko Widodo said e-commerce has adversely affected micro, small and medium enterprises in the country. He believes TikTok should only be a social media platform, and not a medium for conducting business.
Widodo said regulation on social media transactions could come as early as today. Once finalized by the trade ministry, the draft regulation will curb monopolistic practices, and create a level of playing field for local businesses.
Nailul Huda, a researcher at the Institute for Development of Economics and Finance, said social commerce should be regulated on par with e-commerce and traditional offline retailers. “The government should enhance protection for local products by tightening regulations on imported goods and offering disincentives for imports.
Indonesia Sees E-commerce Boom
The e-commerce industry in Indonesia is growing exponentially as more online businesses emerge. This growth is attributed to the smartphone and internet penetration. Moreover, the Indonesian government has been promoting e-commerce development in line with President Widodo’s vision on Indonesia Vision 2045, pushing the digital economy’s transition.
Momentum Works, a Singapore-based consultancy firm, said Indonesia represented 42 percent of TikTok’s $4.4 billion regional gross merchandise value (GMV) in 2022. The platform has pledged to pump billions of dollars into Southeast Asia in the near future. Anggini Setiawan, TikTok Indonesia’s head of communications, said about two million local businesses in Indonesia use TikTok to grow their business through social commerce.
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As such, TikTok has denounced calls to ban the platform as it would significantly harm Indonesia’s businesses and consumers. A spokesman for TikTok Indonesia said social commerce solves real world problems for local traditional small sellers by matching them with local creators who can help drive traffic to their online shops.
TikTok Indonesia hopes regulations take into account the impact on the livelihoods of more than six million sellers and about seven million affiliate creators who use TikTok Shop.
Indonesia Online Business Selling at Extremely Low Prices
Concerns have also been raised about online businesses in Indonesia selling products at unrealistically low prices. Teten Masduki, Indonesian Minister of Cooperatives and Small and Medium Enterprises, highlighted businesses on social media selling imported products at unusually low prices. He said this falls below the production cost of local goods and affects local businesses.
Because online businesses, retailers in Tanah Abang Market have recorded drop in sales, with some saying sales fell more than 50 percent. Some retailers have adopted live-streaming, but complain business isn’t as usual and they are not tech savvy.
