Numerous salespeople rotate selling cosmetics, contact lenses, and hair accessories inside a shophouse in Northeast Jakarta. A man shouts out the most recent discount on vitamin tablets as a lady assists a potential customer in selecting the best lipstick colour for her skin tone.
This isn’t some chaotic flea market. It’s a gold rush for business people looking to strike it rich on the most widely used short-video app in the world since TikTok has a live-streamed marketplace. The TikTok Shop is the firm’s fastest-growing feature, with a rising fan base in Southeast Asia. The company is primarily known for viral dance challenges and is owned by China’s ByteDance.
TikTok needs to be successful in the area if it wants to avoid being banned in the US due to national security concerns. Additionally, if the company is allowed to continue functioning in the US, it offers a model for competing with Amazon.com in a way that no social media company has ever done.
Indonesia was TikTok Shop’s first country and continues to be its largest, thanks in part to a young, tech-savvy populace that has welcomed the service’s 2021 introduction of short films and in-app purchasing. By the end of this year, TikTok Shop’s total merchandise value is anticipated to reach $20 billion (about Rs. 1,63,900 crore), quadrupling from the previous year.
Hank Wang, who oversees a team of about 50 livestreaming hosts at the busy Jakarta shophouse, thinks it has the potential to revolutionise the retail sector and make businesspeople like him into the upcoming e-commerce billionaires.
The 33-year-old former venture capitalist added, “I want to become the next Forrest Li,” alluding to the founder of Sea, the biggest internet business in Southeast Asia, who is Chinese-born and was born in China. Wang oversees his team’s sales efforts on behalf of manufacturers of consumer goods and cosmetics, such L’Oreal, earning a commission and splitting revenues with the livestreaming hosts. Despite not knowing the language, he began his company, Flame Media, seven months after moving from Shanghai to Jakarta. “TikTok and social commerce will give rise to the next generation of tech unicorns in this region,” he said.
Shou Zi Chew, the CEO of TikTok, made a visit to Jakarta in June and pledged to invest billions of dollars in Southeast Asia during the ensuing three to five years. He shook hands with an important Indonesian minister while donning a traditional batik outfit and went to nearby mom-and-pop stores with TikTok accounts.
That was in stark contrast to his earlier this year experience in Washington, where he was subjected to a contentious, five-hour session before Congress. Before the presidential elections, the company may be banned after politicians interrogated him about Chinese influence over the company and its videos’ effects on children’s mental health.
At the same time as ByteDance was looking to grow outside of China, where it faces regulatory and economic obstacles, TikTok Shop launched in Indonesia, the largest economy in Southeast Asia. The global e-commerce initiative was initially given the codename “Magellan XYZ” in honour of Ferdinand Magellan, a 16th-century explorer who sailed around the world in search of a way to the Spice Islands, which are now part of Indonesia.
It was initially promoted by the corporation as a secret feature for Indonesia’s savvy younger consumers. It attracted hundreds of livestreamers—some of them recent graduates—through agents. To promote products like Tupperware and sunscreen, the presenters used their own cellphones to make video of themselves. It was immediately successful when it was introduced during the month of Ramadan, when Covid was still keeping a lot of people at home.
Since then, the activities have become more complex as studios and brands are connected via companies like Wang’s Flame Media. When it comes to content and promotions, some businesses are given a TikTok account manager, while others are sent skilled performers, or influencers, to help them connect with millennials and Gen Z-ers. Nevertheless, compared to the meticulously planned Instagram profiles, the videos still have an amateurish and impromptu vibe, which is thought to be a major factor in their appeal because it makes customers feel more connected to the vendor.
One of the most well-known Indonesian influencers on TikTok Shop is Suanto, who goes by the online alias Kohcun. His impromptu, laid-back approach has garnered over a million fans. The 36-year-old, who was formerly well-known for his YouTube gadget reviews, now spends six hours each day livestreaming on TikTok Shop while hawking Louis Vuitton bags and Samsung phones. According to him, he makes almost three times as much money from commissions and brand deals as he did from YouTube.
“TikTok has the big advantage using their creators because it’s more entertaining, it’s more natural,” said David Nugroho, CEO of the DCT Agency in Jakarta, which oversees 600 TikTok personalities and is one of the largest TikTok Shop partners in the nation.
In Indonesia, TikTok claims to have more than 100 million monthly users who spend, on average, more than 100 minutes each day using the app. ByteDance disrupted internet and social media giants like Meta and Tencent Holdings on both sides of the Pacific, becoming the most valuable startup in the world in a decade, valued at more than $200 billion (approximately Rs. 82,21,700 crore).
Although US social networking sites have attempted to introduce similar services, their members haven’t taken to online shopping as quickly as those in China and Southeast Asia. In March, Meta, the company that owns Instagram, stopped allowing users to tag things while live streaming. Without much success, Amazon and YouTube have also dabbled in allowing live video shopping.
In Indonesia, TikTok Shop entered a market where customers were used to swiping through online shops and using their smartphones for pleasure and shopping for hours at a time. Tokopedia and Lazada, two early adopters of local e-commerce that are vying for users, have invested billions in building out nationwide delivery networks. TikTok pounced and profited from all of that.
TikTok has also profited from knowledge garnered from its sister app Douyin, a China-only video platform owned by ByteDance that has grown to be a $200 billion (approximately Rs. 82,21,700 crore) retail destination after adding food delivery and hotel booking to its list of services. China is years ahead of the rest of the world in terms of live shopping, thanks in part to sites like Douyin and Alibaba’s Taobao as well as protracted Covid lockdowns that made consumers spend more time on their phones.
Algorithms play a significant role in this expertise. On both Douyin and TikTok, algorithms assist in presenting the appropriate video clip to consumers in order to keep them browsing and determine the type of goods they are most likely to purchase.
The TikTok Shop’s top executives are Chinese. Bob Kang, a top ByteDance executive who frequently travels between Shanghai, Singapore, and the US, is in charge of thousands of workers for the e-commerce departments of both Douyin and TikTok. TikTok Shop is operated in Southeast Asia by Yu Weiqi, a former assistant to the company’s millionaire co-founder Zhang Yiming.
Some of the entrepreneurs working with TikTok Shop are from China, bringing with them Chinese capital and prior live shopping experience. While many of the entrepreneurs working with TikTok Shop are Indonesian, like DCT’s Nugroho and Pasar Kreatif Digital founder Daniel Tjandra, who have strong networks of local influencers as well as businesses.
A small group of Indonesian live streamers are coached by Richard Ma, a 31-year-old marketing expert in Beijing, to promote items like $40 (about Rs. 3289) air fryers and $8 (approximately Rs. 657) Bluetooth earphones. His business has been purchasing products recently from Alibaba’s wholesale website 1688.com and transporting them to a warehouse close to Jakarta. Numerous of those items are top sellers in the developing Douyin e-commerce business.
“We can replicate the China model and adapt it to different markets,” he said, nothing that his business was still losing money because to the high upfront costs and low pricing points. Ma claimed that given the site’s expanding scope, he is confident that he will soon make a profit.
Important US market:
There are still unknowns, despite the fact that TikTok’s success in Indonesia helps shield the company from the effects of a potential US ban.
According to research firm Cube Asia, TikTok customers in Indonesia spend an average of $6 (roughly Rs. 493) to $7 (roughly Rs. 575) per transaction, which is why the US is still crucial for TikTok’s e-commerce business despite the fact that there are numerous bills in Congress that could outlaw the app.
However, for the time being, businesspeople like Wang only foresee TikTok Shop growing. He has ambitions to soon relocate into a recently renovated office block in Menteng, a posh area of the Indonesian capital, as his company is close to $1 million (approximately Rs. 8,300 crore) in monthly goods sales. By the end of this year, he additionally intends to hire 500 livestreamers. He stated that he might then go on to other growth markets after that.
The first step is to take the top spot in Indonesia, he declared. “After that, we can attempt a different continent or location. One step at a time is required.