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TikTok takes over Indonesia’s Tokopedia in bid to overcome ecommerce rules

December 11, 2023
in Finance
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TikTok takes over Indonesia’s Tokopedia in bid to overcome ecommerce rules
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ByteDance-owned TikTok has agreed to invest $1.5bn in a unit of Indonesia’s GoTo in a deal designed to rescue its shopping business in the country two months after the introduction of regulation threatening its ecommerce app.

TikTok will take a controlling 75.01 per cent stake in Tokopedia, an ecommerce unit of GoTo, the Jakarta-listed technology group told investors on Monday in a letter seen by the Financial Times. As part of the transaction, Tokopedia will acquire TikTok Shop’s Indonesia business for $340mn, enlarging its ecommerce platform.

Shares in GoTo fell more than 12 per cent on Monday following news of the TikTok takeover.

The deal comes after Indonesia banned transactions on social media in September, dealing a blow to TikTok’s ecommerce ambitions in one of its largest and most promising markets. TikTok suspended its shopping unit in the country following introduction of the rules.

Analysts said TikTok’s takeover of a local company could provide a template for overcoming regulatory setbacks in other markets, including south-east Asia, Europe and the US. Malaysia and Vietnam have also threatened to impose rules to curb the app.

“For ByteDance and TikTok it provides a plug-and-play solution to their Indonesia problems,” said Simon Torring, co-founder of Cube Asia, an ecommerce research platform.

“Not only does Tokopedia have a large local merchant base and strong logistics and payments assets that TikTok can leverage . . . the company also has deep ties to Indonesia’s regulators and broader government stakeholders, something TikTok has been lacking in the country,” he said.

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Indonesia, the world’s fourth-most populous country, with a young, mobile population, was TikTok Shop’s largest market. Chief executive Shou Zi Chew travelled to the country in June, pledging to spend billions of dollars over the next five years.

While not an outright ban on TikTok Shop, the September rules meant companies would have to separate ecommerce transactions from social media content.

Indonesian trade minister Zulkifli Hasan said in September that the regulations aimed to ensure “fair and just” competition and protect user data as well as small and medium-sized bricks-and-mortar vendors in south-east Asia’s biggest economy.

Roshan Raj, head of consultancy Redseer, said the move was a “significant shift” for TikTok Shop after nearly losing access to its most important market.

“Holding a majority stake in the new entity allows TikTok to lead the ecommerce business with little to no interference from its local shareholder,” he said.

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