The article was originally published in Chinese on WeChat by Momentum Works, translated into English here by the team. Some paragraphs were edited to better explain the context to a non-Chinese audience. 

Indonesia’s ban on social media platforms processing ecommerce transactions/payment has been enforced. At least the only target platform, TikTok, officially affirmed its commitment to comply and cease e-commerce transactions on the platform before 17:00 October 4th, Jakarta time.

The speed and decisiveness of the ban took many (including some promoters of the ban) by surprise. Here are some observations:

  1. Has transacting on TikTok Shop really stopped?
  • Yes, indeed.
  1. What have the sellers/MCNs been doing?
  • Some sellers tried to live stream with Whatsapp as the order taking platform, similar to what people had been doing with Instagram in Indonesia. The conversion rate, as we heard from a few sellers, is less than 1/8 as compared to directly transacting through TikTok Shop.
  • Some other sellers also moved to Shopee Live, but Shopee Live does not have the traffic and throughput to help these sellers clear inventory in the short term; 
  • Many MCNs with Chinese backgrounds have been significantly affected. Some MCN owners have hastily fled Indonesia overnight. The exact reasons for their sudden departure are unclear to us.
  1. Is it unreasonable or illogical for the Indonesian government to issue this ban?
  • Maybe. However, debating whether it is logical or not is completely missing the point. 
  1. Will other countries follow suit and ban TikTok Shop as well?
  • Some politicians and interest groups in other countries will surely be inspired by this episode in Indonesia. Nevertheless, each country has a unique political and business landscape, so the specific outcome will depend on local political interests in each country. A direct chain reaction might not materialize any time soon. 
  1. Will the ban have a significant impact on TikTok’s commercialization efforts?
  • Undoubtedly, very significant.
  1. Is there any room for reversal?
  • There is, but it requires not only a thorough understanding of the political landscape, especially the redistribution of political power and interests after the elections, but also patient communications, and timely, well-executed PR campaigns;
  • Learning from Shopee’s actions over the years might prove beneficial;
  • The question is how to model such long term undertaking clearly with OKRs. 
  1. What inspiration does it offer to other Chinese companies going overseas?

—

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].