TikTok, which has just started to go all-in on global e-commerce, has encountered a hurdle.
On October 4th, TikTok officially shut down its e-commerce business TikTok Shop in Indonesia. The platform no longer provides transaction services, and shopping needs to be redirected to external links.
The reason for the shutdown is related to Indonesian policies. On September 27th, Indonesia issued Ministerial Regulation No. 31 of 2023, which stipulates that social commerce can only be used to promote goods or services and prohibits payment transactions. Therefore, social media platforms must separate themselves from e-commerce businesses.
Indonesia, with 125 million monthly active users, is TikTok's largest market outside of the United States. The shutdown of the e-commerce business directly affects platform sellers and influencers. TikTok officials stated that the policy will impact the daily livelihoods of over 6 million sellers and approximately 7 million live streamers and video creators on the platform.
Zhang Zhouping, Director of the B2B and Cross-border E-commerce Department at the Net Economy Society E-commerce Research Center and Senior Analyst, stated that Indonesia is a market where TikTok has been vigorously cultivating. The shutdown means losing market opportunities and reducing incremental space in the Southeast Asian market.
This is a setback for TikTok's e-commerce strategy. Over the past five years, e-commerce in Southeast Asia has been thriving, with a compound annual growth rate of up to 64% in GMV. Indonesia was one of the first countries where TikTok's e-commerce was launched. According to The Information, TikTok's Southeast Asian e-commerce GMV reached $4.4 billion in 2022, with Indonesia accounting for $2.5 billion, nearly 60% of the total.
In June, Zhang Zhouping also announced that TikTok would invest billions of dollars in Indonesia and Southeast Asia in the coming years. However, the Indonesian government's new policy has interrupted TikTok's momentum.
Regarding the next solution, TikTok stated that it is working hard to ensure compliance with local regulations and will continue to cooperate with relevant authorities to seek a constructive path forward.
One possibility is to separate TikTok Shop as an independent app product from TikTok's media attributes. Wall Street News sought confirmation from TikTok headquarters on this matter, but they declined to respond.
Wall Street News learned that TikTok CEO Zhang Zhouping has flown to the Indonesian capital, Jakarta, to handle this matter. However, industry insiders predict that there is limited room for short-term mediation, and it will be difficult to restore the e-commerce business.
While there is a certain solution to the Indonesian incident, TikTok's immediate priority is to retain the Southeast Asian market, especially to quickly make up for the e-commerce scale gap caused by Indonesian policies.
But this road is not easy, as Southeast Asia has become a fiercely contested battleground. At the end of August, Pinduoduo's cross-border e-commerce platform, Temu, officially launched its Philippines site, marking its entry into the Southeast Asian market for the first time. So far, Shopee, Lazada, Tokopedia, Temu, and others are all vying for market share, and the market competition is intensifying.
This setback occurred at a stage when TikTok was fully promoting its e-commerce business, which is regrettable. However, as a global company, it is inevitable to face various risks in the process of globalization, and TikTok's experience in Indonesia is not an isolated case.
In the past, Chinese companies going global have faced many risks, including localization policies. This is an inevitable issue for enterprises going overseas.
Take Huawei as an example. Starting from African countries and expanding to Europe and the United States, it followed the strategy of surrounding cities with rural areas. From the initial challenges of localization policies to later sanctions, it has been continuously upgrading and overcoming obstacles. Huawei's solution is deep localization, continuously optimizing its business strategy through communication with local governments, enterprises, and consumers, and making concessions when necessary, even in terms of pricing.
Not only Huawei, but companies like Haier and Hisense that have gone global have also encountered various obstacles. Recently, CATL, in cooperation with Ford to build a battery factory in the United States, has also experienced ups and downs. These are common problems that companies often encounter. For companies going global, solving the problem of localization is essential.
&#34;The biggest challenge for cross-border e-commerce is the changes in local policies.&#34; said Sullivan's Greater China Executive Director, Zhang Xiaojing. Companies need to keep up with policy changes to ensure legal operations and timely adjust their business models.
In addition, attracting traffic can also bring about concerns. In Zhang Zhouping's view, TikTok, as a social platform, has advantages in e-commerce traffic. The risk lies in the fact that once the e-commerce scale grows, various types of data accumulate on the platform, which can easily arouse the vigilance of local governments.
The closure of e-commerce in Indonesia seems to be a reminder. If you want to wear the crown, you must bear its weight. TikTok faces more obstacles than imagined.
Indonesia is not the first country to introduce policies to control the development of social media and e-commerce, and it is destined not to be the last. The latest news shows that Vietnam, Malaysia, and other countries are also examining the compliance issues of TikTok.
For TikTok, being blocked in Indonesia is just a wave in the process of globalization, or simply a hurdle. Just like a person encountering problems in their growth, the development of a company cannot be smooth sailing. TikTok must overcome these hurdles in order to gradually grow into a truly global company.
So far, TikTok is the most successful case of globalization for Chinese companies. Such achievements are not easy to come by, but going global is not an overnight success. TikTok has just begun, and its path to growth is still long.

TikTok's e-commerce ambitions fail in Indonesia