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High-flying TikTok Shop rattles e-commerce
TikTok Shop has sparked a backlash with a strategy of detecting trending products and then selling its own versions of those products to tap into viral demand.
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A smartphone with a displayed TikTok logo is placed on a computer motherboard in this illustration photo taken on Feb. 23, 2023. (Reuters/DADO RUVIC)
T
he popularity of TikTok Shop, which combines social media and shopping, is bugging established e-commerce players in Indonesia. Those firms have tried to respond by creating similar features, but only on a minuscule scale so far.
The government, for its part, has been triggered by the revelation of a cross-border initiative called Project S, which allows TikTok Shop to detect trending products and sell its own versions of them. While the service is only being tested in other countries, like the United Kingdom, one government minister has insisted that stricter rules for social commerce platforms are urgently needed.
TikTok Shop was launched in Indonesia just over two years ago, and by the end of last year, it had become the fifth-largest e-commerce platform in Indonesia, according to data from Singapore-based venture outfit Momentum Works.
TikTok has a 5 percent market share in the country’s e-commerce business, which is dominated by Shopee and Tokopedia, which hold 36 percent and 35 percent, respectively, while Bukalapak and Lazada have 10 percent each. Djarum Group-backed Blibli has 3 percent.
TikTok Shop’s competitors have abundant experience in the e-commerce industry, as almost all of them have existed for more than a decade. However, Center of Economic and Law Studies (CELIOS) executive director Bhima Yudhistira said those e-commerce players were rattled by the fledgling competitor.
"The players most disturbed [by TikTok Shop] are those which focus on transaction ticket sizes below Rp 1 million [US$66.82], such as fashion and accessories. TikTok Shop is targeting that market niche," Bhima told The Jakarta Post on Friday.
Weihan Chen, insights lead at Momentum Works, stated that TikTok Shop was an opponent that other e-commerce firms could not ignore, as it had demonstrated impressive sales growth over the past two years, around half of it coming from Indonesia alone.
