Your favorite influencer just bought a vivid new shade of lipstick, and it suits her perfectly. You’re admiring the product on TikTok, and with only a few taps, without stopping the stream, you can buy the exact same shade too. As TikTok intermingles social media and e-commerce, it is betting that this vision of shopping will knock aside rivals in the Southeast Asia market.
The short-form video streaming giant, which is owned by China’s ByteDance, is in a race to dominate e-commerce in the region. Facing growing regulatory scrutiny in the U.S. — the biggest market for the app with 116 million users — TikTok is increasingly investing in its second biggest market: Indonesia, which had 113 million app users as of April, according to Statista. Outside Indonesia, it’s ramping up its focus on Thailand and Malaysia too.
In June, TikTok Chief Executive Shou Zi Chew said the company planned to invest “billions of dollars” in Southeast Asia, with Indonesia playing a critical part in the strategy.
“We see our growth opportunity here to be very immense, and we look forward to investing more in this country, and of course in the region,” Chew said, noting that the company had close to 2,000 employees in Indonesia.
Current job advertisements for the company include hundreds of roles related to e-commerce based across the Southeast Asia region.
With increased internet accessibility, online marketplaces have grown across Southeast Asia, with the current penetration rate (excluding food and beverage) being 20% — in contrast to China’s 47% — according to McKinsey, which projects the market will grow to reach $230 billion (¥32.5 trillion) in gross merchandise volume by 2026.
TikTok’s regional competitors include Lazada and Shoppee, which emerged to fill an Amazon-sized gap in the market. Lazada has livestreaming capabilities through its LazLive offering and has sought to position itself as “shoppertainment” in recent years, while mobile-centric Shopee has branched into food delivery.
TikTok’s regional charm offensive could not come at a worse time for these competitors, said Simon Torring, co-founder of Cube Asia, an e-commerce research platform focused on Southeast Asia, with Shopee and Alibaba’s Lazada facing pressure to deliver revenue targets and cut costs. In January, Chinese e-commerce company JD.com confirmed that it was shutting its services in Indonesia and Thailand after it struggled to gain a foothold in the market.
Competitors are “super anxious” about TikTok’s e-commerce push, said Torring, who noted that social e-commerce is a trend that has been anticipated by market watchers and analysts for some time.
“The question was always, will it be a commerce player moving into content, or will it be a content player moving into commerce,” he said.
“It turned out to be a content player, TikTok moving into commerce,” Torring said. “(It) has really shaken things up.”
But Torring noted that the picture is not yet clear cut. While TikTok may benefit from an inbuilt audience which can easily be marketed to and a straightforward interface and shopping experience, expanding from fashion and beauty to all product categories will pose the next big hurdle.
“TikTok shop is so far only really making a dent in two categories: beauty and fashion,” he said, noting that market competitors are likely “holding their breath” at present while they wait to see if TikTok can compete across a broader range of product categories. If the app can, that would signal a “very big problem” for competitors in the market.
TikTok did not comment on the app’s regional expansion or Asia market strategy.
While there appear to be few hurdles in the company’s way in Southeast Asia — at least compared with the questions over data handling that TikTok is facing in other markets including Australia and the U.S. — there is nonetheless rising wariness in Asia about the spread of misinformation across social media. In June, Malaysia took legal action against Facebook-owner Meta for failing “to take sufficient action to address the issue of undesirable content on its platform,” while Vietnam is set to require YouTube, TikTok and Facebook users to verify their accounts.
In response to questions on such scrutiny, a TikTok spokesperson said the app was proactive in combating the issue.
“We do not allow activities that undermine the integrity of our platform, and we take action against inauthentic or misleading content,” the spokesperson said. “TikTok works with experts in academia, civil society, public health, our Safety Advisory Council to develop our policies and enforcement strategies and stay ahead of evolving content and trends.”
The battle for e-commerce dominance comes at a time when companies across the board are looking at Southeast Asia more closely, both as a potential growth market and through the prism of heightened geopolitical tensions and a global push toward supply chain diversification.
The ASEAN Investment Report 2022 showed the region had attracted near pre-pandemic levels of that foreign direct investment — $174 billion in 2021 — with ASEAN the second largest FDI destination in the developing world, after China. Startups were notable beneficiaries of this trend, according to the report.
Orissa International, a market entry and expansion consultancy focused on the region, has observed growing interest, particularly from overseas tech startups, including those with government backing from countries including Britain and Brazil.
Startups in sectors such as e-commerce, financial technology and health tech have attracted “significant funding and expanding their operations across the region,” managing director Sarath Menon said, noting these companies had “recognized the region’s tremendous growth potential.”
“The interest we are witnessing extends beyond Singapore … and also encompasses markets like Malaysia, Thailand and Vietnam,” Menon said.
But with e-commerce, Torring said, there is one market that will be watched particularly closely.
“In Southeast Asia, Indonesia is the test market,” he said, noting that this is typically where features are launched. “It’s still the crystal ball to see what will happen in the other markets.”
Source : Japantimes