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On September 26, Indonesia's social e-commerce situation suddenly changed - the local Ministry of Trade officially issued the revised Regulation No. 31 of 2023, which stipulates that social media platforms are not allowed to conduct direct sales transactions. A single stone stirs up a thousand waves. The first to be affected is TikTok, which has long occupied a large part of Indonesia's social e-commerce market share. On October 4, TikTok Shop announced that it would be shut down at 5 pm local time, thus returning to its traditional and "pure" social platform status in Indonesia. The ban on TikTok Shop is not just about a social media platform divesting its e-commerce business. What is at stake is the livelihoods of 6 million merchants and 7 million anchors who sell goods. What’s more, banning social e-commerce is by no means the end of the Indonesian authorities’ crackdown on foreign companies. All Chinese merchants going to Indonesia are on high alert: What kind of drastic changes will this storm, in the name of “protecting the local real economy,” ultimately bring to the Indonesian e-commerce market? The Indonesian e-commerce battlefield is undergoing tremendous changes. Most Chinese merchants first focus on Indonesia, a hot spot for cross-border overseas expansion in Southeast Asia. Indonesia has a huge demographic dividend, an online consumer market that is experiencing explosive growth, and more importantly, a developed live e-commerce industry. In 2022, Indonesia's live e-commerce sales will reach US$5 billion, and 55% of netizens will shop on social media. As TikTok becomes popular in Indonesia, low-threshold, low-cost social e-commerce has created a huge amount of opportunities, becoming an important bridge for many sellers to make money in Indonesia. But now, this bridge has been cut off. Indonesia's new e-commerce regulations have been finalized, officially sentencing social e-commerce to death: ordering social media platforms to divest their e-commerce businesses and prohibiting them from engaging in online transactions. Cross-border e-commerce , like 100 ▲ Follow MZ123 cross-border e-commerce video account to get more information This is a heavy blow to many sellers. According to INDEF research, about 64% of small and medium-sized enterprises in Indonesia currently sell through social media, and only 25% of sellers use e-commerce websites for sales. TikTok, which is used by nearly half of Indonesians, has become the hottest social e-commerce sales channel due to its huge user influence. The ban is like a tangible cage that traps social e-commerce and an invisible barrier that blocks TikTok's huge traffic pool. Sellers can of course switch to traditional platforms, but it is not easy to start from scratch in a short period of time; they can also use TikTok to divert traffic to other channels, but conversion rate is also the most difficult problem. Therefore, after TikTok Shop was closed, some sellers were immediately strangled: "We tried many channels in Indonesia, but the best effect was the TikTok store. When the traffic was good, the sales of a live broadcast in one night could match the sales of a Lazada store in a month. Now the store is gone, and the traffic of stores on other platforms can't support more than 3 million stocks."
But the battlefield is not limited to social e-commerce. Indonesia's industrial belts are scattered, and local production and supply capabilities are weak. Therefore, cross-border e-commerce backed by cheap supply chains is a dimensionality reduction attack on local offline retail. The flood of low-priced products has plundered the living space of a large number of physical merchants. In order to protect the real economy, the Indonesian government has targeted the most popular TikTok e-commerce platform. In TikTok Shop, a pair of sunglasses costs less than $1, while on e-commerce platforms, the price may exceed $10. However, the degree of internal competition in both platforms is far greater than that of offline stores. Therefore, although the Indonesian government has not implemented a one-size-fits-all approach to traditional platforms, it has also issued relevant suppression regulations. First, limit the price of cross-border goods : the minimum unit price of goods sold by cross-border merchants on Indonesian e-commerce platforms is US$100; second, strengthen the control of imported goods : all goods are subject to whitelist and certification requirements, and e-commerce platforms are not allowed to sell self-operated products. The Indonesian Presidential Office also announced on October 5 that it would upgrade regulatory measures on some imported goods, covering categories such as cosmetics, shoes, clothes, toys and electronic products. Under pressure from regulators, Shopee Indonesia has removed a large number of cross-border products from its shelves. According to industry sources, it officially closed its cross-border sales channels on October 4, and as of October 8, the cross-border transaction volume on Shopee Indonesia was less than 1%. Lazada was also forced to get involved in this mess. According to the latest announcement, it will comply with Indonesian e-commerce laws and remove or limit orders for products that violate the new regulations. LGS logistics services from overseas to Indonesia and the fulfillment of new orders may also be affected. After TikTok Shop collapsed, Shopee and Lazada took advantage of the situation and tried to share the 6 million displaced merchants. However, these platforms rarely have room for cross-border sellers. From banning TikTok e-commerce to restricting the categories and prices of imported goods, all of this is essentially aimed at protecting the real economy and preventing a large influx of low-priced overseas products from monopolizing the Indonesian local market. For cross-border sellers, the current trend of Indonesia's e-commerce market has changed dramatically. The low-price shortcut has been blocked, and the localization avenue faces the test of heavy assets. No one dares to make a conclusion about where they will go under the new rules of the game. Industry sources say that TikToK Shop will launch an independent program and make a comeback in a month. But for millions of displaced sellers, there is no time to worry about whether the rumors are true or not. How to clean up the mess left by the ban on social e-commerce and how to plan the future transformation path are currently urgent issues. While TikTok was still in the game, the new regulations were implemented vertically, which caught many sellers off guard too quickly. During the one-week grace period for the implementation of the regulations, a large number of sellers and brands rushed to live broadcast and sell goods in an attempt to recover losses to the greatest extent. For example, Skintific, a popular brand on TikTokShop, broadcast live on the platform for 24 hours continuously and attracted traffic for Shopee products. Until the last moment before TikTokShop closed, many anchors were still working hard in the TikTok live broadcast room, offering discounts or even selling at a loss, just to clear out more goods. Some sellers have reported that the ban had a great impact on small and medium-sized sellers on TikTokShop. Compared with normal days before, their sales through TikTok live broadcasts dropped by 60%. As the largest economy in Southeast Asia, Indonesia is an important strategic location for many overseas investors to explore new blue oceans. Some sellers even travel thousands of miles to settle down there and build a local team and e-commerce business from scratch. Now that TikTok, an important sales channel, has suddenly collapsed, it is not only facing a sharp drop in orders and a huge amount of unsalable inventory, but also means that years of hard work may be wasted. There is still room for trial and error in the multi-channel layout, but for sellers who have placed heavy bets on TikTok's single sales channel, it is tantamount to a fatal blow. "I finally built the foundation, but now the ground is gone. I have no choice but to return home overnight." In the turbulent Indonesian e-commerce market, millions of merchants are facing life-or-death decisions. Lazada and Shopee actively extended olive branches. Sellers who had originally developed multiple platforms began to shift their sales focus and use TikTok to promote their stores; while some sellers who only bet on TikTok stores rushed to traditional e-commerce platforms. However, although Shopee is much larger than TikTok Shop, there are differences between the models of social e-commerce and traditional e-commerce. The former focuses on interest-based consumption, while the latter focuses on "search" and "demand". From product strategy to traffic gameplay, they are incomparable. It is still unknown whether sellers can adapt to the new rules of the game. Another way is to set up an independent website. Although TikTok Indonesia has stripped away its e-commerce attributes, as a social media platform, TikTok, with a user base of 125 million Indonesians, is still a valuable traffic source. For this reason, some sellers believe that using its semi-closed loop model to divert traffic to independent websites may be a new trend in the future. Although Indonesia is a highly suitable soil for social e-commerce, live streaming e-commerce is not compatible with the independent station model with a higher threshold. Sellers who lack a brand foundation need to accumulate traffic from scratch. TikToK is certainly a way to attract traffic, but the conversion rate is the primary problem. Not to mention that independent stations are a money-burning business, and they rely on a strong financial foundation from marketing to customer acquisition to delivery and fulfillment. At this stage, social e-commerce merchants led by TikToK Shop have been hit the hardest in this turmoil, but sellers under the traditional e-commerce model are not immune to it. The ban on social e-commerce is caused by low-price internal competition. Due to the dispersion of industrial belts, the procurement costs of physical merchants in Indonesia are high, and the level of local production and supply cannot support the competition with cheap imported goods. In order to protect the real economy, the Indonesian government has "killed" the popular social e-commerce, but the suppression of cross-border e-commerce has never stopped. In recent years, the Indonesian government has continuously adjusted its import tax policy, reducing the tax threshold from $100 to $75 and then to $3. Now, it has imposed regulatory shackles on the categories and pricing of imported goods. As local merchants continue to increase their protection policies, it will be even more difficult to open up the Indonesian market in the future. According to foreign media reports, after TikTok Shop was shut down, many local physical merchants in Indonesia called for a ban on Shopee and Lazada. In the Indonesian market where consumers are highly price sensitive, the way many cross-border sellers have always tried to break through is to rely on domestic cheap supply chains and quickly seize market share by relying on low-price advantages. However, this round of storm has accelerated the transformation of the industry. This means that in Indonesia, the pure selling mentality is gradually being eliminated, and only by holding up the umbrella of product strength + brand strength + channel strength can we prevent being cleared out. Faced with the ever-changing regulatory policies and market environment, localization, compliance, branding and multi-channel layout will be the main theme for Chinese merchants to expand into Indonesia.
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