Fintech & Ecommerce

TikTok Invests $1.5 Billion to Get Back Into Online Shopping in Indonesia

TikTok, which is part of the ByteDance ownership structure, is investing $1.5 billion to become the controlling shareholder of the e-commerce unit of Indonesia’s GoTo Gojek Tokopedia.

TikTok Invests $1.5 Billion to Get Back Into Online Shopping in Indonesia

The mentioned social network, which is a virtual platform for creating and watching short videos and conducting live broadcasts, is currently making efforts to resume its online shopping business in Indonesia, suspended by local regulators. In this case, TikTok’s aspiration is logical, expedient, and justified, since the economic system of the specified country is one of the largest in Southeast Asia.

In October, authorities in Indonesia decided to ban virtual sales on social media platforms. This decision was explained by the intention to protect the interests of small sellers and users’ data. Against the background of the ban, TikTok had to close its TikTok Shop e-commerce service in Indonesia. This country was one of the few markets where the social media giant launched the specified commercial platform.

A TikTok Indonesia spokesperson at that time said that the company would follow a constructive path forward and expressed concern about the ban, in this context drawing attention to the prospects for the financial results of sellers interacting with the virtual store of the firm. Indonesia Trade Minister Zulkifli Hasan stated that the measure introduced by the authorities will promote fair business competition.

TikTok reasonably considered Indonesia as a space where it is possible to gain a large user base and challenge online sellers, including Shein and PDD Holdings (PDD) Temu. It is worth noting that the mentioned brands have moved to a phase of rapid growth as a result of an accelerated marketing campaign on the virtual platform of the social media giant.

The share price of GoTo, which operates in spheres of ride-hailing, delivery, and financial services, fell by 8.3% after the publication of information that some investors made profits as a result of rising securities prices due to the expectation of a deal with TikTok. Maximilianus Nico Demus from Pilarmas Investindo Sekuritas said that this company will have to find out what kind of shocks will occur in the market after the beginning of partnering with the social media giant.

TikTok will buy 75.01% of Tokopedia GoTo, Indonesia’s largest e-commerce platform. The value of this deal will be $840 million. The Indonesian TikTok Shop business will be joined to the expanded Tokopedia structure. In a statement issued by the two companies on Monday, December 11, it is noted that the process of strategic partnership will begin with a pilot period in which activities will be coordinated following the recommendations of regulators and under their supervision.

As of 2021, Indonesia had a population of 273.8 million people, many of whom are social media users. Against this background, commercial projects on virtual platforms of the appropriate functional purpose are obviously profitable businesses.

The number of TikTok users in Indonesia is 124 million. The company aims to turn this consumer base into the main source of income from activities in the sphere of e-commerce. The social media giant’s deal with GoTo will be completed by the first quarter of next year. Tokopedia will receive a $1 billion promissory note from TikTok. This promissory note can be used to finance working capital needs.

TikTok has committed to invest over $1.5 billion in the expanded company over time as part of this partnership. The relevant information is contained in the joint statement of the companies. The investment funds will provide the financing needed by the business, without additional dilution to GoTo.

Tokopedia currently competes in the Indonesian e-commerce market with Shopee with Singapore-headquartered Sea and Lazada, part of the ownership structure Alibaba (BABA).

A report by Google, Singapore state investor Temasek Holdings, and consultancy Bain & Co., predicts that Indonesia’s e-commerce industry will grow to $160 billion by the end of this decade. Currently, the financial volume of this business space is $62 billion.

TikTok Shop nowadays is only available in a few countries, including the USA, UK, and Singapore.

As we have reported earlier, Judge Blocks TikTok Ban in Montana.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.