It’s official, the Indonesian government has banned TikTok Shop from operating in Indonesia since Wednesday, 4th October 2023. This decision was taken after TikTok Indonesia agreed to comply with the government's new regulations regarding electronic commerce. TikTok users in Indonesia, particularly TikTok store owners, offline merchants, and other companies, had mixed reactions toward this action, and many of them expressed their pros and cons by flooding the internet. The Malaysian government is also considering and examining the decisive measures implemented by the Indonesian government in prohibiting e-commerce transactions on the TikTok social media platform.
As we all know, TikTok’s popularity flourished even more when the initial video-sharing social media app transformed into so much more. Since 2022, TikTok is known as social commerce since they added its revolutionary shopping platform called “TikTok Shop”. The term social commerce itself refers to social media that facilitate in-app transactions of goods or services. This feature gave brands, sellers, and creators the ability to sell products directly through short videos, LIVE streams and contents in one app.
Monica Ervina is one of them, she is a young entrepreneur and content-creator who sold local and imported clothes in TikTok Shop. Since she started doing live selling and content-creating, her sales have increased dramatically from TikTok Shop. However, following the prohibition, she was forced to adapt in order to keep her business operating. “I will have to change my plans, because we already have endorsement collaborations with several affiliates on TikTok, and unfortunately we will be forced to cut them off,” she said, after learning that TikTok Shop was closing.
Since TikTok launched their e-commerce feature, Indonesian top government officials have repeatedly warned of the harm TikTok could cause to offline stores in Indonesia. They have been accusing TikTok of exploitative pricing and monopolistic practices, however, no clear rules and regulations have been created until September 2023. Indonesian President Joko Widodo stated that the government was launching a new regulation that bans trading inside social media, which means social media will only facilitate promotion of goods or services and must be separated from e-commerce. In his public appearance, President Jokowi said “we must ensure that small businesses is protected from this surge of the digital world. This is what the government is doing.” Some people saw this step taken by the government as a drawback, while others saw this as the right move in keeping offline & traditional stores alive in Indonesia. Following the measures taken in Indonesia, Malaysia's Communications and Digital Minister, Fahmi Fadzil, stated that the Malaysian government is monitoring the situation. He acknowledged the significant number of Malaysians utilizing the TikTok Shop platform for selling various goods.
But why was TikTok Shop accused of being harmful towards small businesses when we can see there were so many small businesses that flourished on this platform?
Nicola Gibran Aljaya, an Economic & E-Commerce Expert explained that the presence of TikTok Shop has had both positive and negative impacts. With the number of TikTok users in Indonesia approaching close to 100 million, the positive effect can be felt by the small business whose income has expanded quickly. This TikTok phenomenon also had an impact on the emergence of affiliates who actively create content in order to get commission from each product sold. Due to the extensive marketing run by TikTok affiliates, the growth of TikTok shop affiliates is consistent with the rise in sales of TikTok merchants. The TikTok shop's existence has enabled 6 million shops to make money online.
However, TikTok Shop also had its huge negative effects, particularly on offline sellers or traditional stores. For example, traders in Tanah Abang–a giant wholesale district in Jakarta–complained that the emergence of the Tiktok Shop had reduced their income and caused a major slowdown in their sales. This is caused by a phenomena called “Predatory Pricing” that happens in TikTok Shop, which led consumers to become more impulsive and consumptive because of the very low product prices that TikTok Shop offers. Due to this unfair pricing competition, traditional offline retailers who charge higher prices for their products were at a disadvantage and could not compete. As a result, they had to deal with smaller profits and a decline in market share.
According to a recent interview with Kanaya Feyanka, a TikTok Shop regular consumer, the short video format on TikTok definitely influenced consumers’ shopping decisions. “It allows me to quickly grasp the features of a product and see how it works in real life. I've discovered several niche brands and unique products that might not have crossed my radar on traditional e-commerce sites. The authenticity of user-generated content on TikTok also builds trust, making me more willing to try out new products.” said Kanaya. Her insights proved how contents in TikTok could substantially affect the sales of certain products.
Other than the possible predatory pricing and algorithm manipulation, the Indonesian government also suspected the practice of "Political Dumping" which refers to the surge of imported goods that are being sold with an extremely low price through TikTok. “There is Predatory Pricing, burning money to control data, controlling our consumer behavior. Don't let ourselves be complacent, without realizing that suddenly we have been colonized economically," said President Jokowi while giving a briefing at the State Palace, Jakarta, on 4th October 2023. According to the President's data on Indonesian consumer behavior, 90% of the products sold through TikTok, are in fact imported goods. President Jokowi also claimed that some clothings could be purchased online for as low as 5,000 rupiah which equals to 0.32 USD.
On 26th September 2023, the prohibition of social commerce was officially implemented through Indonesia's Minister of Trade Regulation Number 31 of 2023. In the midst of this social commerce ban, the Indonesian government’s determination of protecting small and traditional businesses are truly evident. While this decision has sparked both concerns and support, this situation has brought in a new age of communication between the government and digital platforms as Indonesia negotiates the shifting boundaries of e-commerce and social commerce. In the end, the goal is to achieve a healthy balance between economic growth and defending the interests of small businesses.
Do you think Malaysia should follow Indonesia's step with the new regulation on social commerce? Which one do you believe shall be the main focus: protecting traditional business, expanding online shops or protection of consumer rights? After all, wouldn’t it be nice if Malaysia's economy flourished?
Audrey Gracia is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!
The User Content (as defined on Newswav Terms of Use) above including the views expressed and media (pictures, videos, citations etc) were submitted & posted by the author. Newswav is solely an aggregation platform that hosts the User Content. If you have any questions about the content, copyright or other issues of the work, please contact Newswav.
