TikTok, the popular social media app, has announced the suspension of its online shopping service in Indonesia in order to comply with new regulations imposed by the country’s government. This move, which took effect on a specific date and time, is aimed at protecting local physical and online retailers. Indonesia was the first country to pilot TikTok’s e-commerce service in 2021, and it quickly became one of the app’s biggest markets for TikTok Shop.
The Indonesian government recently introduced regulations requiring TikTok to separate its shopping feature from its video sharing service within the country. Trade Minister Zulkifli Hasan emphasized the need for e-commerce and social media to be distinct entities, stating that “e-commerce cannot become social media. It is separated.” Social media platforms were given a one-week deadline to comply with the new rules or risk losing their operating licenses in the country.
TikTok stated in a Tuesday statement that its priority is to remain compliant with local laws and regulations, hence its decision to end e-commerce transactions in TikTok Shop Indonesia. Online retail sales in Indonesia have been growing rapidly, with projections indicating a sixfold increase between 2018 and next year, reaching 689 trillion Indonesian rupiah ($44 billion).
TikTok Shop had successfully carved out a significant market share in Indonesia’s online shopping sector, competing with platforms like Tokopedia, Shopee, and Lazada. Indonesia, a country with over 278 million people, boasts 125 million TikTok users, including 6 million sellers and numerous creators who leverage TikTok Shop to promote their goods.
The announcement of TikTok’s suspension of its online shopping service is a setback for the company, which has been under scrutiny in several countries, including the US, European Union, and the UK, where the app has been banned from government networks due to security concerns. TikTok has also faced setbacks in Indonesia, as one TikToker was recently jailed over a controversial video involving pork, and the app is currently testing out an advert-free monthly subscription option.
The growth of online retailers has significantly affected the owners of physical shops, such as Sukmamalingga, who has been operating a store at Tanah Abang Market in Jakarta for nearly a decade. Many customers from different regions in Indonesia have stopped shopping at physical stores, even with the seller’s efforts to showcase new clothing models through photos.
These new regulations additionally impact the vast number of micro, small, and medium enterprises (MSMEs) in Indonesia, which constitute almost two-thirds of the country’s economy. With over 64 million small businesses in existence, these regulations will have far-reaching consequences for the business landscape.
In conclusion, TikTok’s decision to halt its online shopping service in Indonesia has been prompted by new regulations designed to separate e-commerce from social media. The move aims to protect local retailers and comply with Indonesian laws. The online retail sector in Indonesia has been rapidly growing, and TikTok Shop had established a notable presence in the market. However, this decision poses challenges for the app and its users, especially sellers and creators who relied on TikTok Shop to promote their goods. Additionally, it represents yet another setback for TikTok, which has faced scrutiny and bans in various countries. The impact of these developments extends beyond TikTok, affecting physical store owners and the vast number of MSMEs in Indonesia. As the country continues to navigate the evolving digital landscape, it remains essential for all stakeholders to stay informed about regulatory changes and adapt their strategies accordingly.