E38 – The Impulso Podcast – TikTok Shop after ban: all your questions, answered!

On the 3rd of November, we held an exclusive online briefing “Off the record: Indonesia after TikTok Shop ban”, where we touched upon some interesting topics such as who are beneficiaries and losers of the ban, what is the impact on the rest of the world, will TikTok Shop be able to reverse the ban and much more.

During the event, there were many questions answers to which we provide in this episode. If you want to know more about:

• Is the Indonesian ban going to prompt other Southeast Asian countries to take similar measures that will affect TikTok Shop?
• Why is it hard to make TikTok Shop buyers switch to other platforms?
• Could there be a partnership between TikTok Shop and another e-commerce player?
• Which direction will TikTok take not to lose their GMV in Indonesia?

Enjoy the episode and stay tuned for our guest episode next week!

Featured this week:

“Off the record: Indonesia after TikTok Shop ban” – https://youtu.be/Qeqok8WOQ70?si=H2F-36QSaSlLGaVS

Our revised TikTok Shop market share in SEA after Indonesia’s ban – Our revised TikTok Shop market share in SEA after Indonesia’s ban – The Low Down – Momentum Works

[Transcript]

Dalia 0:00
everyone and welcome back to the Impulso Podcast. Today with us we have Weihan and Jianggan as well. So on third of November, we had our exclusive online briefing “Off the record: Indonesia after TikTok Shop ban” where we touched upon some really interesting topics, for example, who are beneficiaries and losers of the ban? What impact does it have on the rest of the world? We’ll take a look shall be able to reverse the band, what lessons can we learn from this and much more. But today, we’re going to answer some of the questions that were asked for us during the event.

Weihan 0:33
But if you guys are interested in the event recordings to check out our previous podcast, it will be linked in the show notes to set some context for today’s q&a session. If the

Jianggan 0:43
previous podcast was, was off the record, right, so recording was not a full thing. But anyway, so I think we received lots of questions, and we didn’t have time to cover most of them. So we want to answer I think two to three out of the dozen questions that we had. So we just thought it would be useful for us to just come here and, and share our perspectives on the softer questions using the imposter podcast. So I think I have a list of questions in front of me. And I will just read out the questions that we can discuss the first question, just wondering why the government didn’t didn’t target other ecommerce players like Shopee? Or would they be the next target?

Weihan 1:31
I think it’s, I think the ban does not necessarily target ecommerce per se. But it’s more like the government is more concerned with the fact that social media is trying to do or trying to go into retail now. And especially because TikTok is going very big in Indonesia, they’re trying to go into payment, they’re trying to perhaps set up their own logistics. So the government is worried that this social media platform would gain a monopoly over all the other players. And because their social media platform, they have tons of data about all the Indonesian citizens. So I think that’s the main place of concern of the government. So in this case, I think for E commerce players like Shopee, I think back then they were not. They’ll they will also met with similar resistance into by the Government in terms of, let’s say, that is a portion of cross border Seller Centra Shopee. And then what many of these ecommerce platform does is that they are, they will try to balance in terms of what they want to get off the Indonesian market, as well as try to, let’s say, allow the Indonesians to sell on the platform as well. So I think Shopee did more like they tried to help the local merchants sell their products to other markets instead. So in this is a sense that they are trying to come to a consensus between both these ecommerce platforms, as well as the government. So I think this ban is not saying they will not specifically target any particular players, but it’s just overarching concern by the government to regulate all these social media platforms. Yeah,

Jianggan 3:22
you I think we we heard lots of talking about a government targeting this one government attacking, targeting that one. So as if we can make the government something that they don’t have anything else to do. We should have quite a bit about the real incentives of the government doing our off the record.

Chat, but but I think just to quickly look at it just as we had said, again, the government had some concerns about about certain platforms having too much power. Our team actually went to listen to the speeches by President Joko Widodo, about this issue. And he mentioned about digital sovereignty a few times. So there were some concerns, and specifically about about other players, I think, I think, I think with other players, which have been Indonesia longer, they have communication channels with, with, with the founders, the shareholders of these players, and I think I think they can talk about the differences and concerns, I guess for Tiktok was a bit harder for them. So for whatever reason. So that was the first question. The second question. Curious, what would this cause other Southeast Asian countries to similarly put a ban on the power shop?

Weihan 4:38
I think it’s it’s a natural question that everyone asked after Indonesia events, Tik Tok Shop, right? But you have to consider that every country, every government, they have different concerns as to whether let’s see what they want to get out of. Let’s say this, this kind of like weird social Media platforms or ecommerce platforms? So in this case, we can’t really generalize sap that oh, hey, because Indonesia has already been social media transaction. So that’s why, in a sense, banning Tiktok shop, we can for sure, say the same thing about other governments because ultimately, they are concerned about very different things. And you can see that I think four is a Vietnam was in Malaysia, and not too sure which country it was. But they are more concerned in terms of like, the communications side of things. So not only that was Vietnam, right. Yeah. So it’s not exactly on the shutdown, perhaps they’re more concerned with the data, what the TikTok is actually showing to say, the kids, whether it’s regulated in that sense, so because ultimately, tick tock shop has provided a lot of employment opportunities for let’s say, local sellers, or you have that your local influences your life selling hosts. So in a sense, that is help, it’s helping to add on to, let’s say, the GMV, or providing extra sources of income in assets for the country, as opposed to a completely let’s say, cutting off sales from of the local merchants as what the Indonesian government is trying to ban.

Jianggan 6:22
I think, I think when the ban was put in place, there was a concern that okay, the others are looking at this, and hey, oh, okay. We didn’t know this could be done. So we’ll get inspired. And I do think that I mean, of course, because the cost is rising very fast across almost all countries. So you would have people who benefit from that you would have people who, whose whose interests are impacted by that. And the latter group would naturally try to lobby for something which, which, which impedes tick tock shop, scrolls or a very existence. But, but as we have said, Right, I mean, it’s, it’s a balance of different interest groups in each, each country and the government has to has to sort of consider different parties and stuff. So far, we do not see any, any government sort of having a inclination towards I mean, restriction Tiktok shop. I mean, of course, in certain countries, we heard like non people asking questions with governments and governments are sort of obliged to respond to such concerns. What I think will be interesting is whether this will become something in the political debate in the US it has not happened. But they’re doing like more than $10 million GMV in the US a day. I think. So.

Weihan 7:43
Yeah, 10. October, so yeah. So

Jianggan 7:49
it is growing very fast. And as us goes into, into into the election cycle, and of course, I mean, previously, Cooper bashing was more deliberate activities over the politicians in the US. So maybe there’ll be some some dialog there, but so far, nothing has happened. So I guess people have other priorities now. Okay, that’s the second question. The third question.

What what channel? Check, you guys have done observed data, or volume remained relatively flat after titop? Ben and how can you tell if shopee laving effective? Let me address this one. So we’re not saying that the shop he orders, order volume, remunerated flat, what we’re saying is that we didn’t see the volumes last to do to detail shop, I mean, transferring to Shopee at massive scale. And of course, as our GMV estimation, that we have been doing for different industries in Southeast Asia, we have lots of sources on ground, I mean at different data points that I mean, we do look at lots of recording services, we do talk to executives in logistics sector to get a sense of I mean, how the how the how the sort of movement of parcels are really happening. So, we do have a few other like sellers and brands that we talk to regularly. So we do not see a massive surge of shopping volume because of as a result of the taper ban. At the same time we do know that okay, shop is actually quite aggressive for the last two three months in terms of promotions in terms of growth, so So but but I think we will get a better sense

sometime soon. And how can you tell if shopping live is effective. We do have a few activity accelerated for short sellers, Indonesia, that we have spoken to who have been moving their volume to, to shop alive and they are gradually building up their presence. But what they told us is that it’s not entirely the same playbook. So it takes a while for them to actually build things up. So it’s not like they’re like tick tock when suddenly you can have a certain Enrolling in shopping you need to work your way through it. Okay, number four wonder how does little Ben effect keep us up and to be specific? last mile delivery Indonesia, especially Chen t, which is detox number one partner. I think we mentioned about this numbers in Unitec. Right. Yeah, I think I think before the before the ban will do what, close to 3 million parcels a day? Yeah. And, of course, I mean, as we mentioned, that most of this volume did not go to Shopee or another player. So which means I think, I think across the common sector, Indonesia, there will be a loss of at least 2 million parcels a day. And and of course, the players are affected. So will the market grow this bad? How long will it take? I think I think that will depend on the interactions of different players as well as some macro economic situations in the country. Whereas looking at me, because she just concluded a very successful immersion program for more partners, and over five days, and she looks tired. Not an excuse. It’s legitimate reason not excuse, but yeah, okay. Let’s go to question number five. Do you elaborate more why you think the previously for ad buyers or how to switch to other market place platforms? What are the opportunities to capture those buyers, anything?

Weihan 11:22
I think to understand why it’s hard to switch, I think we should go a bit deeper into S. How tic tock shop really differs from all the other marketplaces, mainly because tick tock started off as a social platform, so you’re being fed a lot of videos based on your interests. And in among this videos, there are videos which are product videos, it can be production videos, in which you have like a small shop icon that you can buy directly on Tik Tok, or it comes in the form of let’s say, you have your live shopping videos. So you have all these brands, or the small sellers trying to do live streaming to sell off their products. So I think from a consumers perspective, right, we score tick tock for entertainment. And then there are certain things that we are interested in. And that’s why the TikTok algorithm is very smart in sort of feeding us more of such videos. And it can trigger like, let’s say, even if you don’t buy on the spot very after you watch the video, if you linger slightly longer on the video itself, they know that perhaps you’re interested in and then they will fit you again. So perhaps the next time is go through, it will really encourage you to buy and then you can start to buy on the platform itself. So this kind of impulse buying behaviors could be developed from a very, in a very early stages, especially if let’s say you’re new ecommerce users, because quite a fair bit of that say tick tock shops, users, those those that actually buy from tick tock shop that itself, they do not necessarily have accounts on let’s say Shopee Lazada Tokopedia. So because they are influenced by tick tock, they were just by tearing through it as compared to let’s say shopping and Plaza right Tokopedia this is their ecommerce platforms by nature, so people will only go there if they already have something in mind. So I think the tactic consumer behavior that tick tock is targeting here is really to get you to buy the moment you see it get you interested in as compared to let’s say, Shopee and other ecommerce platforms. So if you start off as being influenced heavily by tick tock itself, pushing you to actually have to go and search for certain products you want to buy, or even to just to browse through the entire catalogue, it could be a hassle, if you are already not You’re not initially planning to do such a thing. So for these types of users, it is very hard for them to switch marketplaces platforms in order to do that this kind of shopping

Jianggan 14:08
at the end of the day. We have spoken with quite a number of sellers so what has that I mean after the ban and we may have they were asking the buyers to switch to sa P and other platforms and lots of people telling them that they don’t have accounts so many people say that that many sellers are asking that their followers and and consumers that their videos to choose to switch to shopping and and the freedom attic areas that most people do not have accounts on shopping of other platforms and asking for help how to set up those accounts. We also heard from logistics sources that a significant percentage of vertical shops orders are cash on delivery. So so many of these are people who are not regularly buy in for E commerce and and of course there’s also debate of whether it’s right to get these people to buy or it’s not essential stuff in commerce anyways, So, so So the question also translates back to what’s the natural rate of growth of E commerce penetration that we expect in Indonesia? And can you fast charge that? So these are valid questions, which, which I think, I think will take a bit of thinking, yeah. Um, next question. How much do you estimate a kid ought to be burning in Southeast Asia where they commit resources to make a comeback in Asia in which they need to be? Separate? I think they want to come back. Right.

Weihan 15:30
They definitely don’t want to lose Indonesia, as a market, thankfully, is the largest consumer market in Southeast Asia. Yeah, yeah. In terms of absolute value in terms of how much they will be burning. I think we don’t have the exact numbers. We

Jianggan 15:47
haven’t tracked this number. And I think the reason why we didn’t track this number is that we don’t really think it is that relevant, to be honest. And of course, the investors are concerned about data, we are printing too much money or whatever. But I think there was, there was those Financial Times article which said that bytedance as a whole data to people’s parent company, last year had positive EBIT of 25 billion or a profit of $15 billion, or whatever. So so whatever money you see that they’re burning in Asia, I think they can afford that. So So then it comes down to a decision of the leadership, right, whether it’s worth to spend that, and for us to track the dollars and cents, and then try to find reason ourselves will probably not be very meaningful. Question number seven. Do you have an estimate or God for shop? Data? Indonesia before the ban? Do you have I think we did have I mean, they had a target, but they were exceeding that target right. There. We’re doing about what 20 million $20 million a day? Yeah. Yeah. So

Weihan 16:57
he’s on track to exceeding this 15 million by the end of the year before that.

Jianggan 17:04
So So yeah, so So of course, I mean, it’s still not that big compared to shopping, for example. But but but if they follow this trend, they also get a marketplace, etc, etc. So it could be a formidable competitor to other players. I think other players will see that as well. Number eight, what do you think about the potential partnership between papaya or Tokopedia, or the local commerce players?

Weihan 17:32
I think there were rumors swirling around the partnership between Tik Tok and Tokopedia. But I think both sides have not officially confirmed or address this rumors. But I think for in terms of partnership wise, it really boils down to what how they negotiate and balance the interests of both, let’s say tick tock per se, as well as the other ecommerce players, because ultimately, these are all very big companies, there might be, to a certain extent, a conflict of interest, especially for example, if you think about like, I don’t know, tick tock, and maybe Sharpie potentially kept collaborating.

Jianggan 18:14
Collaborating, right, the shop is spending money on tick tock to advertise.

Weihan 18:18
I’m not too sure about how they would go about with the E commerce because ultimately, ticked on once that piece of once a piece of that pie in Southeast Asia. So if there’s a conflict of interest with, let’s say, the biggest player, for example, I think it’s shocking. I think, from a competitors perspective, they will not want someone to come in and take a ship, or they have to share it with someone else.

Jianggan 18:44
I do see that both shop and shop are putting more resources in Vietnam, it seems that they are doing a fight there. So it’s hard to see them sort of collaborate, collaborate in Indonesia. And I do think that I mean, the ideal solution for Tepa shop Indonesia is to bring the exact same thing back, I mean, one way or another, so that you don’t lose in a commercial because I mean, converting to any third party app would be not be as efficient. And there’s also lots of rumors in China, like last few days saying that octopus shop will resume as a separate app and on the 28th of November. So we cannot, very soon we tend to not to comment on this rumors. But but but but but but I do think that they will come back one way or another. And it’s just a matter of when how and what level of efficiency and conversion that they will have. As we have mentioned, I mean talking to sort of local e commerce players, I think I’m sure they’re talking to everyone. I’m sure that all the options are explored. I’m sure that okay, they will make their judgment to see which one’s the most optimal. Bearing in mind that the partnership or collaboration will also depending on as we have said that I mean, the other party is sharing the same interests. which is not always easy. Nine? Question number nine. Okay with two, three more. If at the end, Tito will collaborate with Indonesian commerce, do you think you’d be as smooth as before social media and purchase on the app? Or what action would you take as mitigation, not losing GMP? Endo? I think we talked about this right in answer to the previous question. So of course,

third party app will not be different and will not be as efficient as as conversion within the same app. So so how much that will drop? We don’t know. And we know that in China, I think, I think doing tested a separate app and Tumeric is horrible. But that depends on so many different different factors. We don’t know exactly how things will play out in Indonesia. Question number 10. Do you see other countries take a similar approach towards video platform company as Indonesia? I think that we talked about in question number two? Yeah, we’ll address that. And we also get the bonus of talking about what might happen in the US. Maybe there will be a second Trump term, and we’ll see how it goes. Last year, we exclude one market from shopping, what’s the percentage number will be I think we already excluded one. So we do have to do to one round of lottery numbers the the market share that we have estimated.

Weihan 21:35
Okay, so in our previous estimation that we did in July, we have estimated Tiktok shop to hold about 13.2%, in terms of its e commerce market share in Southeast Asia. And then our revised projections that we did in October had shown that tic toc shop has grown, it has now become 13.9%. And I think the interesting question is that there have already lost Indonesia for now, why why did the? Why did the market share increase? I think you have to think about how much they have been doing for the first three quarters of the year before the ban actually got put in place. So they as mentioned earlier, they were already on track of exceeding their 15 million, billion dollars target by the end of 2023. And the fact that they are on track to exceeding this even by around July, I’m not wrong.

Jianggan 22:34
I think yeah, by July and August, you already have a sign of that and exiting back. So. So obviously, obviously, we heard from certain sources that that I mean, the growth of data sharp also helped Tiktok as well, because there are people who just come here to just buy stuff. So it helps with the diu of data as well. So it’s, it’s beneficial for the platform. And of course, that’s when they don’t want to lose it. Okay, we have addressed all the the 11 questions. And I mean, just just from our perspective, of course, the situation that we see, is still evolving. And there’s lots of discussions happening behind the scenes, etc. And of course, you do see the color of Indonesian politics. Now the elections are coming. And just this week, I think there’s some reshuffling of judges in the constitutional court because certain decisions are made and et cetera. I think former minister was put in jail for 5050 years. So so a lot of lot of things will happen before the election. And but now we don’t know what candidates of the election and what we don’t know is who will be elected. So So I think what makes sense for these players is to engage with all parties, which takes a bit of effort.

Dalia 23:58
Okay, thank you very much for sharing with us. I hope that members of the audience that asked these questions received the answers. And everyone stay tuned for our next episode. We’re gonna bring into your very interesting guests. So until next week, all right. Bye bye.