TikTok, the popular Chinese social media platform, is set to invest US$1.5 billion in an e-commerce branch of Indonesia's GoTo Gojek Tokopedia. This strategic move aims to reinvigorate TikTok's online shopping operations in Indonesia, suspended due to regulatory constraints.
Reviving online shopping amid regulatory challenges
In October, Indonesia banned online shopping on social media platforms to protect smaller merchants and user data. This regulation forced TikTok to suspend its e-commerce service, TikTok Shop, in a market that was crucial for its business expansion. Earlier this year, TikTok launched TikTok Shop in a few select markets, intending to capitalise on its large user base and contend with fast-growing online sellers like Shein and PDD Holdings' Temu.
Investment specifics and market reaction
Under the terms of the agreement, TikTok will acquire a 75.01% share in GoTo's Tokopedia, Indonesia's largest e-commerce platform, for US$840 million. Additionally, TikTok Shop's business in Indonesia will be integrated into the expanded Tokopedia entity. This strategic partnership will commence with a pilot phase overseen by relevant regulatory bodies.
Following the announcement, shares in GoTo, which offers a range of services including ride-hailing, delivery, and financial solutions, fell by 8.3%. This decline is attributed to some investors cashing in on the stock's recent gains, which were fuelled by expectations of a partnership with TikTok.
Anticipating the future of e-commerce in Indonesia
This collaboration between TikTok and Tokopedia marks a significant development in Indonesia's e-commerce sector. With a population of over 270 million and a substantial number of people active on social media, Indonesia has immense potential for e-commerce growth. TikTok, boasting 124 million users nationwide, aims to convert this large user base into a major e-commerce revenue stream.
The deal, expected to be finalised by early 2024, includes TikTok providing Tokopedia with a US$1 billion promissory note to support its working capital requirements. TikTok has committed to a long-term investment of over US$1.5 billion in the enlarged entity, ensuring necessary funding without further dilution to GoTo.
The expanding Indonesian e-commerce landscape
Indonesia's e-commerce market is on an upward trajectory and is projected to increase from US$62 billion this year to approximately US$160 billion by 2030. With TikTok's backing, Tokopedia is well-positioned to compete against other key players like Shopee and Lazada in this burgeoning market.
