Indonesia’s ban on TikTok Shop fails to stunt its growth in 2023: Momentum Works
TIKTOK Shop’s growth in South-east Asia was barely stunted by the Indonesian government’s ban in October 2023, according to a report released on Tuesday (Jul 16) by consultancy Momentum Works.
The e-commerce platform’s gross merchandise value (GMV) – the total value of merchandise sold – nearly quadrupled from US$4.4 billion in 2022 to US$16.3 billion in 2024.
This puts TikTok Shop on par with Indonesia e-commerce platform Tokopedia at US$16.3 billion, down from US$18.4 billion in 2022.
Shopee had the lion’s share of GMV, racking up US$55.1 billion in 2023, up from US$47.9 billion in 2022. Lazada came in second with US$18.8 billion in 2023, down from US$20.1 billion in 2022.
Only Shopee and TikTok Shop registered GMV growth in 2023. New entrant Temu recorded less than US$0.1 billion in GMV in South-east Asia, as it focused on other affluent regions.
TikTok Shop acquired a majority stake in Tokopedia earlier this year and would be the second-largest e-commerce platform by GMV in 2023 if combined.
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Shopee continues to lead across South-east Asia, holding 40 per cent or more market share based on GMV in countries within the region.
Momentum Works noted that Shopee’s moat of localisation, in-house logistics, government and business relationships and digital financial services has served well until 2021.
But this might not hold against new entrants. TikTok Shop, for instance, was banned in Indonesia in October 2023, but was able to flip its disadvantage in government relations and announce its acquisition of a majority stake in Tokopedia just two months later.
Instead, Shopee’s “low-cost” brand image is what its newer and better-funded competitors will find hard to overcome, according to Momentum Works.
Chris Feng, who heads the company and is president at Sea, said in Shopee’s Q1 2024 earnings call that, as part of building a competitive moat, the group needs to “make sure that we can serve the transactions to our buyers and sellers at the lowest cost”.
E-commerce GMV across the region continues to grow amid macroeconomic uncertainties, hitting US$114.6 billion in 2023, up from US$99.5 billion in 2022. This represents a 2.1 times growth from 2020, when GMV hit US$54.2 billion in the first year of the pandemic.
Vietnam recorded the highest percentage growth in GMV, up 52.9 per cent from US$9 billion in 2022 to US$13.8 billion in 2023. Thailand was second, rising 34.1 per cent from US$14.4 billion in 2022 to US$19.3 billion in 2023.
Indonesia remains the largest market by GMV, but experienced the lowest growth, up 3.7 per cent to US$53.8 billion in 2023 from US$51.9 billion in 2022. Singapore experienced the second-lowest growth at 9.7 per cent to US$4.4 billion in 2023 from US$4 billion in 2022.
“With markets like Vietnam and Thailand showing remarkable growth and platforms like TikTok Shop rapidly expanding, it’s clear that innovation and adaptation are key to success in this region,” said Li Jianggan, founder and chief executive officer of Momentum Works.
A key trend in e-commerce is a new competitive dynamic among third-party logistics players.
Shopee and Lazada have continued to channel more packages through their in-house logistics arms. Now, over 50 per cent of Shopee orders in South-east Asia are delivered by ShopeeXpress.
The trajectory of TikTok Shop in South-east Asia will likely hinge on its fate in the US, as it fights efforts by the US government to ban the app. A refocusing on the US market will significantly impact TikTok’s leadership and resources allocated to South-east Asia, according to Momentum Works.
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