Gossip that TikTok, owned by ByteDance, entering the e-commerce business in Southeast Asia has been ongoing for a while. One of the earliest signs was that many Shopee employees received the message from ByteDance headhunting on LinkedIn.
We found out that TikTok launched a website called TikTok Seller University in Indonesia a week ago. It’s probably a test product from Tiktok – its domain name “https://seller-id.tiktok.com/” and with the option of choosing English or Indonesian there, the target market is very obvious. This is a clear first step into the hot Southeast Asian e-commerce market in 2021.
The website contained content such as brand/merchant entry, registration process, video display, etc. TikTok sellers have to provide information including location, phone number, email, store and warehouse location, and related documents. Merchants and brands can also collaborate with TikTok’s influencers to promote their products.
When I checked the website of TikTok Seller University a day later, they had removed most of the content, leaving only relevant information such as product merchant entry and registration. Further reinforcing the fact that this is a test product.
We also found that TikTok is testing its live-streaming shopping cart feature – and the e-commerce website that the shopping cart is connected to is Shopee. We believe that they are testing the market to see whether they can convert their active customers into eCommerce buyers. If it works out, we won’t be surprised if TikTok goes into the full suite of eCommerce including logistics, payment, and customer service.
With the popularity of TikTok in Southeast Asia, many people are already using TikTok to promote and sell goods. In the absence of supervision, there could be an unintended backlash (e.g. mis-spelling, misrepresentation, etc) to the users and to TikTok’s brand.
That is why the launch of Tik Tok Seller University shows that TikTok is aware of the trends, and has begun to standardize its e-commerce features.
However, TikTok’s e-commerce ambition in Southeast Asia will still face many challenges – from merchants and customers alike.
The barriers (of entry) for Tiktok merchants
First, TikTok’s users prefer to live stream products such as clothing, cosmetics, and daily necessities. Clothing is a very localized industry, and the overall price per customer in Indonesia is relatively low. For cross-border e-commerce sellers who have not been exposed to the Indonesian market, there will be certain restrictions on category selection.
In addition, individuals that are thinking of using TikTok to promote their products will need to invest time and money into learning and adapting to video production, and TikTok content operation.
What we are seeing in China is that the quality of eCommerce live streaming improves, as competition intensifies. The operations become more specialized. You have streamers/ influencers, multichannel networks to manage streaming, sourcing agencies to source for goods/ brands. Tasks become highly compartmentalized, and people are more specialized in different areas. Think of it as a production line. This happens with any market that is highly developed.
Reflecting on Southeast Asia and in particular Indonesia, how fierce will the competition be amongst sellers?
So far, what we’ve observed in Indonesia is that many eCommerce live streaming – including Facebook, Shopee, and Tokopedia- are nice, but still quite slow. It a bit like talking to the sister in the neighborhood store. We don’t see the sense of hunger or the effort to make the streaming attractive to a more and more demanding crowd. They will evolve for sure – how fast, and to which form, are difficult to predict.
Moreover, social commerce, MCN, and community group buying, which has become the next big thing in eCommerce, are still in their infancy stage in Indonesia and Southeast Asia. It will take time to learn.
Customer behavior will be a challenge
Many Indonesian consumers still choose cash on delivery (COD), especially in non-urban areas. When TikTok ventures into the eCommerce business, it will need to deal with a large number of COD orders – and it will be a headache for both individual merchants and brands.
Our friends who are cross-border e-commerce sellers in Indonesia said that whether it is payment or logistics, the area for eCommerce development will still be limited to the metropolitan areas – e.g. Jakarta, Bogor, Tangerang, etc. For users outside this area, the return of goods is a common phenomenon. In terms of logistics, when batches of goods are sent out, quite a bit of these good returns will show up in the warehouse in the following few days.
Cooperation is on the table, but Caveat Emptor
These are just some of the issues that TikTok will need to be aware of when they test water and e-commerce in Southeast Asia.
Due to the complexity of the Southeast Asian market, TikTok may choose to cooperate with e-commerce players to solve the logistics, sales return, customer service, and problems. Compared with the live streaming from existing eCommerce players which have much fewer viewers, TikTok’s social influence and shopping scene are still imaginative.
However, even if the other e-commerce players do decide to cooperate with TikTok, it should be wary of TikTok’s ambition to build its own eCommerce ecosystem.