Social media app TikTok is suspending its online shopping service in Indonesia to comply with new rules in South East Asia’s biggest economy. The move, which takes effect today, aims to protect local physical and online retailers, according to the Indonesian government.
Indonesia was the first country to pilot TikTok’s e-commerce service in 2021, and it quickly became one of the biggest markets for TikTok Shop. However, last week, Indonesia announced regulations that would require TikTok to separate its shopping feature from the popular video sharing service within the country.
The trade minister of Indonesia, Zulkifli Hasan, stated that “e-commerce cannot become social media” and that the two should be separated. Social media platforms like TikTok have been given a week to comply with the new rules or risk losing their license to operate in the country.
President Joko Widodo also emphasized the need for regulations in the e-commerce sector, stating that it can be beneficial with proper regulations but can turn harmful without them.
TikTok has expressed its compliance with the new rules and announced that it will no longer facilitate e-commerce transactions in TikTok Shop Indonesia.
Online retailing in Indonesia has been booming in recent years, with the value of e-commerce sales expected to increase more than sixfold between 2018 and next year, reaching 689 trillion Indonesian rupiah ($44 billion; £36.5 billion), according to the country’s central bank.
TikTok Shop had been gaining market share since its launch two years ago in Indonesia’s online shopping market, which is currently dominated by platforms like Tokopedia, Shopee, and Lazada.
Indonesia is home to more than 278 million people and has 125 million TikTok users. The TikTok Shop has provided opportunities for 6 million sellers and numerous creators to promote goods and earn money.
In June, TikTok’s CEO Shou Zi Chew visited Indonesia and pledged to invest billions of dollars in the region over the next few years, highlighting the app’s commitment to the Indonesian market.
However, the growth of online retailers has had a significant impact on physical shop owners. For example, Sukmamalingga, who has been selling Muslim clothing at Tanah Abang Market in Jakarta for nine years, stated that none of his customers from different regions of Indonesia shop anymore, despite his efforts to showcase new clothing models through photos.
The Indonesian government identifies more than 64 million micro, small, and medium enterprises, which constitute almost two-thirds of the country’s economy.
TikTok’s decision to suspend its online shopping service in Indonesia demonstrates its compliance with the new regulations aimed at protecting local retailers. The impact of this decision on the e-commerce market in Indonesia remains to be seen.