TikTok's Asian e-commerce haul quadrupled in a single year
Rescued its partner in Indonesia as it dodged regulations
Chinese short video platform TikTok is fast becoming an Asian e-commerce giant, according to analysis released by Singapore-based consultancy Momentum Works on Tuesday.
Momentum Works's Ecommerce in Southeast Asia 2024 report listed TikTok Shop's annual gross merchandise value (GMV) as having quadrupled from $4.4 billion in 2022 to $16.3 billion in 2023. GMV is a measure of the value of goods shifted on a marketplace, but not an indicator of revenue won by operator of the marketplace.
That leap placed TikTok Shop in the same league as current e-commerce giants Lazada ($18.8 billion), Indonesia's Tokopedia ($16.3 billion) and Shopee ($55.1 billion).
Both Shopee, which on its own accounted for nearly half of the e-commerce activity across the region, and Alibaba-owned Lazada, are headquartered in Singapore.
"While TikTok Shop has yet to touch Shopee’s core, it has taken a large portion of Shopee’s potential growth," the report states.
Momentum Works ranked Indonesia as Southeast Asia's largest e-commerce market, contributing around 47 percent to the region's GMV and growing modestly at 3.7 percent. That rate is outpaced by the likes of Vietnam and Thailand but is fast enough to keep Indonesia central to TikTok's e-commerce strategy for now.
TikTok nearly found itself locked out of the vital Indonesian market in the final quarter of 2023 when the government announced a ban on apps that blend social media and e- commerce.
The biz found a clever workaround that allowed it to stay in the nation when it invested $1.5 billion and entered a "strategic partnership" with Tokopedia.
Tokopedia is now TikTok’s “Shop” service in all but name and branding, the report suggests, adding that "integration is happening post Indonesian elections with TikTok Shop team replacing systems and processes gradually."
Momentum Works noted that TikTok Shop's ability to find a solution to Indonesia's ban, which it did in the space of a mere two months, happened "remarkably quickly." And in doing so, it "turned stakeholders of Tokopedia's parent GoTo group, including some powerful business interests in Indonesia, from adversaries into allies."
"It shows that TikTok Shop is a very agile company and a faster learner," stated the firm.
The Chinese short video platform turned e-commerce facilitator wasn't the only player seeking a solution through the strategic partnership. Tokopedia was experiencing a decline in GMV and market share, its parcel volume remained stagnant even during the pandemic boom, and its cut of sales made by third parties on the platform was much lower than its peers, thanks in part to sales of less profitable goods and services proliferating on the app.
The report concludes that the merger became a perfect save for Tokopedia shareholders as the business will also gain "more experience executives from TikTok Shop with GoTo shareholders retaining the upsides with their non-dilutive 25 percent shareholding of the combined entity."
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It appears that TikTok continues to lean into inventiveness for survival as it reportedly launched a pilot for local services in Southeast Asia – beginning with Indonesia and Thailand.
The new offering will see select groups of users choose from group-buying packages, starting with dining merchants. TikTok is leveraging its short form video app to recruit both merchants and consumers to participate in the e-commerce offering.
TikTok is reportedly hiring for various roles in multiple countries in the region and also building out infrastructure – tasks that require deeper integration into local communities to address supply chain, regulatory and localization hurdles.
The Chinese platform's efforts to evolve beyond short video come as it faces restrictions beyond Asia, most notably in the USA where a bill has passed requiring the sale of TikTok to a US-approved buyer or face a ban in the country.
TikTok as a whole company posted revenue of over $16 billion in the US for 2023. It was the most downloaded social media app in the US for the year, and its annual users in Asia Pacific region (682 million) far eclipse those in North America (192 million).
However, according to Momentum Works, TikTok Shop is "still squarely focused on the US market" even as it optimizes investments for healthier growth in Southeast Asia.
"Taking some learnings from Indonesia, TikTok now chooses to fight on in the US market amid a bipartisan effort to ban the app," asserted the firm. That strategy includes focusing on TikTok shop's push into the US market, and even delaying in Europe and Brazil to do it.
"Will it pay off?" mused the report.
"Either way, the outcome in the US will significantly impact their leadership attention, and resources allocated to Southeast Asia," wrote the authors. ®