TikTok Shop officially closes in Indonesia due to social commerce ban

“At 17:00 local time on 4 October, TikTok Shop officially shut down in Indonesia, with merchants unable to continue to sell their goods in a closed-loop manner within the platform. Losing the largest and most active Indonesian e-commerce market in Southeast Asia, how should TikTok and merchants respond?

TikTok’s e-commerce business has seen a big change in the Indonesian market.

In the latest email notification sent to sellers in Indonesia, the TikTok Shop was officially closed on 4 October at 17:00 GMT. After that, TikTok will no longer be an “e-commerce” platform for short-form content in Indonesia. This means that sellers can continue to create and share content on TikTok to promote their products, but will not be able to sell them directly on the platform.

In an email, TikTok Shop noted that it is “always in compliance with local laws and regulations” and will continue to work with the authorities to adapt the product to best serve SMEs in the Indonesian market.

The general content of the email sent by TikTok Shop to Indonesian sellers:

  • Dear TikTok Shop sellers, we understand your concerns and thank you very much for your patience and support over the past few days.

  • Our priority is to always comply with applicable laws and regulations. Therefore, starting from 4 October 2023 at 17:00 WIB (Western Indonesia Time), we will no longer facilitate e-commerce transactions for TikTok Shop Indonesia. We will continue to work with the government to find the best way to serve you again in the future.

  • Our team is committed to providing order fulfilment services as well as customer service. We will be there for TikTok Shop Indonesia sellers through this difficult time.

  • Our commitment to Indonesia remains strong and we continue to work on adapting our products to find innovative ways to support the long-term growth of Indonesian SMEs in the community.

  • Thank you very much for your understanding and support and we look forward to working with you in TikTok Shop.

Indonesia is TikTok’s largest site in Southeast Asia. Third-party data shows that as of today, TikTok has 125 million monthly active users in Indonesia, second only to the United States. Meanwhile, Indonesia is also one of the earliest sites in the world where TikTok’s e-commerce business (i.e. TikTok Shop) was launched and developed fast. It has been said that the GMV of TikTok Shop Southeast Asia in 2022 will be $4.4 billion, of which $2.5 billion, or nearly 60 per cent, will be accounted for by the Indonesian site.

According to industry speculation, TikTok Indonesia station after the closure of the e-commerce function, or face two situations: one is TikTok temporarily back to the era of hopping out of the chain, merchants through the TikTok ads to attract traffic, oriented to other platforms (Shopee, Lazada, independent station, etc.) to deal with the transaction; the second is the TikTok Shop divested out of the formation of an independent application. But in either case, it will be a major change for Indonesian station sellers.

Recalling the event, on 25 September local time, Indonesian Trade Minister Zulkifli Hasan said he would sign the revised Trade Minister Decree No. 31 of 2023, which deals with business licensing, advertising, guidance, and supervision of business actors conducting transactions through electronic systems.

In the new regulation, social media is banned as a platform for the sale of goods and may only promote goods or services. Meanwhile, the new regulation requires Indonesian e-commerce platforms to set a minimum price of US$100 for goods purchased directly from abroad.

In addition, the new regulations also address the need for imported goods sold in Indonesia to meet whitelisting requirements, the need for imported goods to meet the Indonesian government’s certification requirements for food, pharmaceuticals and cosmetics, and the inability of e-commerce platforms to sell their own products, among other provisions.

On 27 September, Indonesia’s Ministry of Trade held a press conference to officially announce the above decree, leaving a week as a transitional period to rectify the situation.

In this regard, a spokesperson for TikTok Indonesia publicly responded that social e-commerce was born to solve the real-life problems of local traditional small sellers, matching them with local creators and helping them increase traffic to their online shops. While respecting local laws and regulations, the company hopes that these regulations will take into account their impact on the livelihoods of TikTok Shop’s more than 6 million sellers and nearly 7 million associated creators.

TikTok Shop is understood to be one of the features attached to TikTok that allows merchants to bring in goods via live streaming or short videos. Users can learn about the details of the products directly on the platform, and all transaction aspects (such as payment, order confirmation, and after-sales) are completed in TikTok Shop.

In February 2021, TikTok Shop was first launched in Indonesia. Since then, TikTok Shop has been extended to more markets in Southeast Asia, including Thailand, Vietnam, the Philippines, Malaysia and Singapore, as well as the United Kingdom and the United States.

Just three months ago, TikTok CEO Zhou Shouzhi said at an event that TikTok would invest billions of dollars in Southeast Asia (mainly Indonesia) over the next few years to build its e-commerce platform TikTok Shop.

According to the “TikTok Eco-Development Whitepaper for the First Half of 2023” published by FastData, Indonesia is the country with the highest number of small shops with sales greater than 10,000 on TikTok’s platform, and also has the highest total hours of TikTok takeaway live streaming and total viewership.