TikTok's e-commerce ventures in Southeast Asia may be facing a crisis. On October 11th, international media reported that the Malaysian government is contemplating a policy similar to Indonesia's, considering a ban on e-commerce transactions on the social media platform TikTok. This move comes in response to consumer concerns over competitive pricing and data privacy issues on TikTok Shop.
Reports citing an interview with Malaysia's Communications and Multimedia Minister, Fahmi Fadzil, suggest that several major retailers have raised complaints about product pricing on TikTok. Mainstream retailers have also expressed concerns about the pricing competition for products sold on the platform.
The Malaysian government has sought clarification from TikTok on the matter. Fahmi Fadzil mentioned that TikTok should come forward and clarify, especially since one of the reasons for TikTok Shop's ban in Indonesia was concerns over predatory pricing threatening local entrepreneurs. Fahmi also emphasized that TikTok should provide explanations regarding personal data protection, a significant concern for users shopping on the platform.
This indicates that Malaysia is contemplating following in Indonesia's footsteps by imposing a ban on TikTok's e-commerce operations.
Previously, on September 27th, Indonesia's Trade Ministry held a press conference demanding that social media platforms, such as TikTok, Facebook, and Instagram, separate e-commerce transactions from their main apps, suggesting that TikTok Shop should become an independent app within a week or face shutdown.
The new regulations also required Indonesian e-commerce platforms to set a minimum price of $100 for products purchased directly from abroad, ensuring all products meet local standards. This move aims to prevent an influx of cheap foreign products and protect Indonesia's micro and small enterprises. Affected by the new rules, TikTok announced the closure of TikTok Shop's Indonesian site on October 4th.
Indonesian regulators have long been investigating TikTok, fearing that TikTok Shop might monopolize the market. Several government officials, including President Joko Widodo, have publicly stated that platforms like TikTok Shop have led to a decline in sales for small and medium-sized businesses and traditional markets.
Southeast Asia is a significant market for TikTok's e-commerce expansion. A senior executive from a leading live-streaming company once told The Paper reporters that TikTok e-commerce began testing in Indonesia in 2021 due to its high e-commerce penetration rate, rapid growth, large population, and young purchasing power.
On June 15th, TikTok CEO Zhou Shouzi publicly stated that TikTok would reinvest in the Southeast Asian market, planning to invest over $12 million in the region over the next three years to support more than 120,000 local merchants and businesses. He revealed that TikTok now employs about 8,000 staff in Southeast Asia, a significant increase from around 100 when they first entered the market six years ago.
Third-party data indicates that TikTok's GMV (Gross Merchandise Volume) in Southeast Asia grew from $600 million in 2021 to $44 billion in 2022.
Indonesia's recent ban on social e-commerce is seen as a significant challenge for TikTok in the Southeast Asian market.
Interestingly, following Indonesia, several Southeast Asian countries are now investigating TikTok. International media reports suggest that Vietnam has concluded a nearly five-month-long investigation into TikTok. According to findings released by Vietnam's Ministry of Information and Communications (MIC), TikTok violated several regulations related to content distribution network information storage in Vietnam.
The investigation revealed that TikTok's local content evaluation process was inadequate, leading to the spread of prohibited content through algorithms. The company also failed to adequately protect children's privacy and take action against harmful content targeting children.
The Vietnamese government has demanded that TikTok remove all content violating Vietnamese laws, prevent its reposting, add compliance with local laws to its community guidelines, and provide information to address violations on the platform.
Public data shows that about 77.5% of online users aged 16 to 64 in Vietnam use TikTok. In the third quarter of last year, TikTok ranked third among the most popular social media platforms in Vietnam.
Third-party data reveals that Shopee dominates the Southeast Asian market with a GMV of approximately $47.9 billion last year, accounting for 48% of the region's total GMV. Alibaba's Lazada ranks second with a GMV of around $20.1 billion. Although TikTok's e-commerce volume is smaller than the top two, its rapid growth rate has positioned it as a strong contender.
Bain & Company predicts that by 2025, the e-commerce market size in Southeast Asia will reach $234 billion, making it a coveted destination for major domestic internet giants. The recent e-commerce policy considerations by several Southeast Asian countries may reshape the local cross-border e-commerce competitive landscape.
