IN MARCH TikTok’S chief govt, Shou Zi Chew, confronted offended lawmakers in Washington, who grilled him for 5 hours on matters starting from misinformation to psychological well being. A risk of a ban in America, the short-video app’s largest market, looms giant. Different Western governments are making comparable noises. TikTok, which is owned by a Chinese language agency referred to as ByteDance, has already been locked out of India, one other massive market, since 2020 on grounds of nationwide safety.
Distinction that with the welcome Mr Chew obtained in June in Jakarta. He charmed a crowd within the Indonesian capital that included authorities officers along with his plans for the corporate in South-East Asia, promising to take a position “billions of {dollars}” within the area over the following few years. As uncertainty looms over its prospects elsewhere on this planet, TikTok, which in 2020 moved its international headquarters to Singapore, is eyeing South-East Asia’s almost 700m customers to bolster its fortunes. Reactions to his speak ranged from beneficial to gushing—besides among the many area’s digital incumbents.
That’s as a result of TikTok’s ambitions in South-East Asia transcend foolish dance movies. In 2021 it launched TikTok Store, which lets customers purchase merchandise immediately from the app. In response to Momentum Works, a analysis agency in Singapore, final 12 months merchandise price round $5bn had been bought globally on its platform. This 12 months the goal is $20bn, with three-quarters of that coming from South-East Asian wallets.
This foray into e-commerce comes at a risky time for the sector within the area. Shopee, which accounted for nearly half the $100bn or so in items bought on-line final 12 months in South-East Asia (see chart 1), has reported two quarters of declining gross sales on its platform. The market worth of its Singaporean father or mother firm, Sea Group, is a tenth of the $200bn it reached in October 2021. Sea has minimize employees, retreated from ventures past South-East Asia and, in August, advised buyers to brace for losses because it boosts spending within the face of rising competitors. Lazada, a Singapore-based e-commerce platform that has in all probability by no means turned a revenue, is on its fifth CEO in as a few years. In March its Chinese language father or mother, Alibaba, added extra commotion by splitting itself into six firms.
Can TikTok reap the benefits of its rivals’ troubles? The app actually appears to be like well-suited to South-East Asian online-shopping habits. It already has greater than 300m customers within the area. A research by Bain, a consultancy, and Meta, which owns Fb and Instagram, discovered that almost half of customers there use social media, significantly short-video and messaging apps, to seek out merchandise when buying on-line. As in China, the house of “social commerce”, the road between leisure and commerce is blurred amongst these “cell first” buyers, notes Fred Liu of Hayden Capital, an funding agency. To minimize its reliance on live-streamed product opinions, TikTok is testing a market tab in its app, which lets sellers checklist their items on the platform with out having to pay influencers to plug merchandise of their movies.
Don’t depend the regional incumbents out simply but, although. Whereas TikTok Store is dominated by issues best-suited for promotional video and impulse purchases, corresponding to garments and cosmetics, its rivals supply a broader assortment of wares, from devices to furnishings. Vion Yau of Momentum Works estimates that the common order worth on TikTok is round $5, in contrast with $8 at Shopee and $10 at Lazada.
Shopee, Lazada and Tokopedia, one other native champion, have additionally constructed their very own logistics networks and fee techniques to get round South-East Asia’s tough peninsular and archipelagic geography, and infrequently shabby infrastructure. This enables the businesses to function extra effectively than TikTok, which depends on exterior suppliers to retailer and ship its merchandise, giving it much less management over the buying expertise and consuming into margins. And although South-East Asians use social-media apps like TikTok to find new merchandise, they’re much less doubtless to purchase them there. In response to the report by Bain and Meta, greater than half of buyers swap to old-school e-commerce websites on the time of sale, lured by higher high quality and quicker supply occasions.
TikTok could overcome these hurdles. Because of its Chinese language father or mother’s $220bn valuation its pockets are deeper than most. However Shopee’s belt-tightening has given Sea a money buffer to defend its turf. Lazada obtained an injection of $845m from Alibaba in July. And the native incumbents will not be TikTok’s solely competitors. Final month Temu, an offshoot of Pinduoduo, one other giant Chinese language e-commerce agency, quietly launched its on-line retailer within the Philippines. The battle for South-East Asia’s internet buyers is simply getting began.
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Supply: Live Mint