TikTok dives into South-east Asia with e-commerce push

BYTEDANCE’S TikTok is cranking up its e-commerce foray into South-east Asia as the Chinese tech giant pushes to commercialise the popular short video app to create a new revenue stream.

During the first half, TikTok launched e-commerce businesses in Thailand, Vietnam, Malaysia, the Philippines and Singapore, expanding its presence to all major markets in the region. TikTok has been operating online shopping services in Indonesia, South-east Asia’s largest economy, since early 2021.

Since August, TikTok kicked off several major shopping events in the region to attract shoppers to the TikTok Shop, its e-commerce marketplace. That included a week-long “8.8 Sale” campaign around Aug 8 in Singapore, a 12-day Sama sales promotion in Malaysia and its “9.9 Super Shopping Day” around Sep 9 in several countries.

The sales campaigns helped double and triple TikTok Shop’s average daily gross merchandise volume (GMV). In Indonesia, TikTok shop orders during Ramadan increased 493 per cent as GMV gained 92 per cent, according to official data.

South-east Asia, an 11-nation region with 682 million people and GDP totaling US$30 trillion, contributes nearly 80 per cent of TikTok’s e-commerce GMV and is a bright spot in the company’s global retail push as it struggles to make the business work in major Western economies. The region’s growing population and improving e-commerce infrastructure are expected to benefit future growth.

Betting on TikTok’s one billion monthly active users worldwide, ByteDance is counting on its e-commerce foray to help commercialize the app and finally turn a profit in the face of pressures from tightening regulations and mounting geopolitical risks.

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ByteDance hopes to carry over the e-commerce success of Douyin, TikTok’s domestic sibling, outside of China. In 2021, Douyin’s GMV surged 220 per cent year on year to more than 800 billion yuan (S$160 billion), boosted by popular livestreaming and influencers in China.

TikTok is also expanding its e-commerce footprint in the US and Europe, but acceptance has been lukewarm compared with South-east Asia.

In March 2021, TikTok made a high-profile investment of US$182 million on a 15-year lease of a new London office building, underscoring its commitment in the UK. Although the country accounts for 30 per cent of TikTok’s revenue, the company’s e-commerce expansion has gone slowly there. In the first half this year, TikTok’s GMV in the UK was less than half of its annual target of £2 billion British (S$3.2 billion).

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According to company data, TikTok’s monthly average GMV in Indonesia reached US$200 million, compared with US$24 million in the UK, where TikTok launched its e-commerce operation late last year.

TikTok’s foray into US e-commerce has also proceeded slowly. In 2020, the company entered a partnership with Walmart, the world’s largest company by revenue. The partnership raised speculation that the companies were forming an e-commerce tie-up such as the one between Douyin and JD.com. Under that arrangement, the e-commercial giant offers supply chain support to Douyin’s e-commerce push. But no new business initiative has been made under the partnership after just two livestreaming shopping events.

People close to the company said TikTok has yet to build up a complete online shopping business chain in North America due to regulatory hurdles, including different taxation and trade rules among US states.

Meanwhile, compared with Western customers who embrace more branded products, shoppers in South-east Asia are more attracted to price-competitive merchants on TikTok Shop, an electronics industry source said.

The different fate of the company’s e-commerce efforts in the West also reflects varying user habits and cultures, analysts said. In countries like the US, livestreamers usually position themselves as content creators to gain popularity and become celebrities instead of attaining commercial success as pitchmen, they said.

ByteDance set a target of increasing’s TikTok’s GMV to US$12 billion by 2023, nearly triple the 2021 figure.

TikTok, which currently accounts for nearly half of ByteDance’s valuation, has struggled with its business performance. And in 2021, TikTok’s total revenue was about 30 billion yuan — mainly from advertisements — and accounted for only 8 per cent of ByteDance’s total.

In South-east Asia, TikTok also faces challenges from established rivals such as Alibaba Group’s AliExpress and Singapore-based Shopee, which also operate livestream shopping. But an industry source said TikTok has a competitive edge over rivals as it better combines the livestreaming content with traffic distribution that supports the success of Douyin in China. CAIXIN GLOBAL