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Analysis: TikTok gets controlling stake in Tokopedia
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Indonesia's six unicorns shown on a screen on Aug. 3, 2021. The six are ride-hailing company Gojek, e-wallet OVO, online travel agency Traveloka, logistics company J&T Express and e-commerce platforms Tokopedia and Bukalapak. (JP/Norman Harsono)
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hinese tech firm ByteDance’s social media subsidiary TikTok has bought a controlling stake in Tokopedia, Indonesian tech company GoTo Gojek Tokopedia’s electronic commerce (e-commerce) platform. The corporate action led to the reentry of TikTok’s integrated online shopping service TikTok Shop after it was booted from Indonesia by a ministerial regulation that bans social commerce (s-commerce). The transaction looks set to be a major shift in the Indonesian online retail market, but it also raised concerns about foreign firms’ domination.
The agreement, which was reached on Dec. 10, 2023, requires Tokopedia to spend US$340 million to buy the exclusive rights to own and operate TikTok Shop’s Indonesian business, while TikTok in turn will spend US$840 million to buy 75.01 percent of Tokopedia’s shares and together form a joint venture. TikTok will also invest further in Tokopedia, bringing a total outlay of US$1.5 billion, and give Promissory Note worth US$1 billion to Tokopedia. Stakeholders agreed that GoTo’s stake in Tokopedia will not be diluted and with such sizeable investment, it is expected that GoTo will no longer have to give funding to Tokopedia.
GoTo stated that the transaction process is targeted for completion by the first quarter of 2024. According to Bloomberg Intelligence, TikTok’s gross merchandise value could rise by 15 percent with TikTok Shop’s return to Indonesia. Furthermore, although the deal could mean GoTo is giving away its e-commerce potention, it would also allow GoTo to cope with its high cash burn and shaky liquidity by leveraging TikTok’s 125 million active users to boost its logistics, payments, and banking services.
The s-commerce ban, which led to TikTok Shop’s exit from Indonesia previously, was stipulated in the Previously, Trade Minister Regulation (Permendag) No. 31/2023 on Business Licensing, Advertising, Guidance, and Supervision of Business Actors in Trading Through Electronic Systems bans s-commerce due to increased risk of monopolistic practices and unfair competition from the integration of social media and e-commerce.
With Tokopedia and TikTok joining forces, the joint venture now complies with both the s-commerce ban and Article 17 of Law No. 5/1995 on the Prohibition of Monopolistic Practices and Unfair Business Competition. Before holding hands with Tokopedia, TikTok also explored alternative options, such as BliBli.
TikTok Shop’s market share in Indonesia, which is the service’s second-biggest market after the United States, is projected to triple from 4.4 percent in 2022 to reach 13.2 percent in 2023 according to Singapore-based venture builder firm Momentum Works data in October. Their report also noted that Tokopedia and TikTok would jointly hold a 40 percent share of Indonesia’s e-commerce market after their transaction process is done, in comparison to the 35 percent currently held by Sea Group online shopping unit Shopee.
Indonesian Digital Empowerment Community (IDIEC) chairman M. Tesar Sandikapura viewed TikTok Shop’s return through collaboration with GoTo is something that was planned by GoTo investors as a way for them to exit from the online retail firm. According to him, Indonesia’s ban on s-commerce hampers TikTok Shop’s operation in a way that is difficult for TikTok to resolve with options that did not involve working with GoTo. He claimed the funds needed for the collaboration would then serve as an exit strategy for GoTo investors to exit the firm.
