On Wednesday, Indonesian digital ecosystem giant GoTo Group announced the completion of its merger with TikTok Indonesia, the e-commerce arm of the global entertainment platform TikTok. As part of the deal, TikTok will invest over US$1.5 billion in the enlarged entity over time to provide future funding the business requires without additional dilution to GoTo.
This was the latest update on the problem that TikTok has been facing in Indonesia since October last year, when the government abruptly banned online sales through social media channels, including TikTok Shop. The ban was made to protect small- and medium-sized businesses in the country, which is said to be threatened by the influx of cheap products from China.
While the more nationalistic amongst us might welcome this with excitement, some of us might wonder about many things.
There are indeed several things to worry about.
In an opinion piece, TEMPO points out the familial relations between GoTo shareholder Garibaldi Thohir and State-Owned Enterprises Minister Erick Thohir.
Apart from that, there is also a concern about consumer data protection.
“In addition to the matter of protection of small and medium enterprises not yet being clear, TikTok Shop’s transactions with Tokopedia could lead to a problem with consumer data protection. The government must consider the warning signs from several European nations that previously banned TikTok Shop from operating because of doubts about its data security system,” TEMPO writes.
“There must be clear regulations concerning this because there have been many leaks of personal data using various fraudulent methods. The ease of social media transactions must not be allowed to cause problems for people.”
All of these are certainly worrying enough. But personally, I would like to get back to the basics: What does this mean for the Indonesian e-commerce landscape in general?
Who is the last one standing?
The easiest answer to that question would be TikTok, GoTo, and all of its shareholders. As elaborated by The LowDown, the deal is a masterstroke on ByteDance’s part.
“By taking over Tokopedia at no cost (to the contrary, GoTo pays TikTok US$340 million), TikTok Shop will gain full operational control, legitimacy of operating e-commerce and some useful local allies,” it wrote.
Also Read: Merchants selling via TikTok could be harming Indonesian economy: AC Ventures
As for Tokopedia, “This deal will save the company from the seemingly irreversible decline until now … Tokopedia will remain a going concern, and probably will thrive with TikTok now as the biggest shareholder.”
We are clear about TikTok and Tokopedia. But what about their main competition in Indonesia, Shopee?
This deal is certainly a major blow for the company, and it would be interesting to see what strategy it is going to come up next. There is no sign of any upcoming merger or acquisition on the horizon for Shopee; on the other hand, we also do not see them returning to the old days of burning cash to acquire customers.
Indonesian customers are also expecting different things from the existing e-commerce players today. Back in the day, it was all about accessibility. Can I pay using cash? How soon can this be delivered? But as Indonesians grow more accustomed to digital payments, they begin to expect something different.
If anything, Shoppe (and SEA in general) need to work from the different lines of business that they have in order to win Indonesia.
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Image Credit: Achmad Al Fadhli on Unsplash
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