TikTok, the popular short-video app, is in talks to invest in a subsidiary of GoTo, Indonesia’s biggest tech group, to revive its e-commerce business in the country. The two companies could finalize the deal in the coming weeks, and it would be in the form of a joint venture rather than a direct investment, according to Bloomberg.
The joint venture would involve building a new e-commerce platform that would allow TikTok to resume online shopping services in Indonesia, Southeast Asia’s largest retail market. TikTok has more than 100 million users in Indonesia, and it was previously offering direct payments for online purchases through its app.
New Regulations Hamper TikTok’s E-commerce Ambitions
However, in September, the Indonesian government announced new measures to regulate the use of e-commerce via social media. The rules bar social media platforms from handling direct payments for online purchases, a distinction that really only applies to TikTok. That means the company could advertise products to its users, but those customers would need to jump to a different site or app to make purchases.
The new regulations have a chilling effect on the long-term growth outlook for the e-commerce market, according to Simon Torring, co-founder of e-commerce research firm Cube Asia. He said that TikTok Shop brought real innovations to Indonesia’s e-commerce market, and that the new rules could discourage other social media platforms from entering the space.
TikTok’s Billion-Dollar Plan for Southeast Asia
TikTok’s CEO, Shou Zi Chew, had said earlier this year that it planned to invest “billions of dollars” in Indonesia and Southeast Asia in the next few years as it tries to expand its e-commerce sales from $4.4 billion in gross merchandise value to $20 billion. The company sees Southeast Asia as a key market for its global expansion, as it faces regulatory challenges and competition in other regions.
The company’s partnership with GoTo, assuming it takes off, is happening at a time when social media has become an important tool for consumers to discover new products. Platforms like TikTok, Instagram, and YouTube have transformed the way people shop, with each channel catering to different consumer interests. The influence of these platforms is evident in the billions of views and viral purchases associated with hashtags like #TikTokMadeMeBuyIt, for example.
GoTo’s Dominance in Indonesia’s Tech Scene
GoTo is the result of a merger between two of Indonesia’s most valuable startups, ride-hailing and payments giant Gojek and e-commerce leader Tokopedia. The merged entity is valued at about $40 billion, and it offers a range of services, from food delivery and digital banking to online shopping and travel booking.
GoTo’s online retail subsidiary, Tokopedia, is one of the largest e-commerce platforms in Indonesia, with more than 100 million monthly active users and 11 million merchants. The company competes with regional rivals like Shopee and Lazada, as well as local players like Bukalapak and Blibli.
By partnering with TikTok, GoTo could leverage the app’s massive user base and content creation capabilities to boost its e-commerce sales and reach new customers. The joint venture could also help GoTo fend off the threat of new entrants like Sea Group and Alibaba, which have been investing heavily in Indonesia’s e-commerce market.
