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It sounds so trivial: a consumer scrolls on a social media app and taps to buy a product featured in a video. But this is becoming a very big business. The trend is so disruptive that the Indonesian government has banned online shopping on social media platforms to protect smaller merchants. TikTok may have found a way around that prohibition.
The Chinese-owned short video app will spend $1.5bn to become the controlling shareholder of GoTo’s Tokopedia. TikTok will buy 75 per cent of the unit, Indonesia’s biggest ecommerce platform, for $840mn. It will invest the rest of the money in the future of the business.
TikTok Shop, an in-app ecommerce platform, has been growing swiftly. Users quickly get hooked on buying items directly in the app. This pushed TikTok Shop’s estimated Southeast Asian gross merchandise value to $4.4bn last year. Its growth rate has outpaced regional rivals for two years.
TikTok will now be able to inject its local business into Tokopedia.
Shares in Tokopedia parent GoTo fell 20 per cent on Monday. This may reflect the view that TikTok has snagged a bargain at a time when GoTo’s net loss is narrowing. GoTo has a market value of $6.6bn. The ecommerce business accounts for 38 per cent of group gross revenue. GoTo’s $599mn loss in the first nine months this year was a big improvement on 2022.
For TikTok, the ecommerce market in Indonesia is alluring. The country’s gross domestic product per capita of about $4,800 is low. But it has a large, young population that is active on social media. This has helped Indonesia to become TikTok’s largest market outside the US, with 125mn users.
TikTok is driving global trends in ecommerce. Viral marketing via the website has sparked unprecedented sales growth at shopping platforms such as Temu and Shein.
Bringing more of that traffic in-house would be transformative. It would certainly boost the private valuation of TikTok’s parent ByteDance, currently some $220bn.
The question with the Tokopedia deal is whether TikTok can integrate social media and ecommerce without angering the Indonesian authorities.
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