TikTok is wading into South-East Asia’s e-commerce wars

Distinction that with the welcome Mr Chew acquired 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 speculate “billions of {dollars}” within the area over the subsequent few years. As uncertainty looms over its prospects elsewhere on the earth, TikTok, which in 2020 moved its world headquarters to Singapore, is eyeing South-East Asia’s practically 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 instantly from the app. In line with Momentum Works, a analysis agency in Singapore, final yr merchandise price round $5bn had been offered globally on its platform. This yr 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 offered on-line final yr in South-East Asia (see chart 1), has reported two quarters of declining gross sales on its platform. The market worth of its Singaporean dad or mum firm, Sea Group, is a tenth of the $200bn it reached in October 2021. Sea has reduce employees, retreated from ventures past South-East Asia and, in August, informed traders to brace for losses because it boosts spending within the face of rising competitors. Lazada, a Singapore-based e-commerce platform that has most likely by no means turned a revenue, is on its fifth CEO in as a few years. In March its Chinese language dad or mum, Alibaba, added extra commotion by splitting itself into six firms.

Can TikTok make the most of its rivals’ troubles? The app actually appears well-suited to South-East Asian online-shopping habits. It already has greater than 300m customers within the area. A examine by Bain, a consultancy, and Meta, which owns Fb and Instagram, discovered that just about half of customers there use social media, notably short-video and messaging apps, to search out merchandise when purchasing on-line. As in China, the house of “social commerce”, the road between leisure and commerce is blurred amongst these “cell first” consumers, notes Fred Liu of Hayden Capital, an funding agency. To minimize its reliance on live-streamed product evaluations, 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, resembling garments and cosmetics, its rivals provide a broader assortment of wares, from devices to furnishings. Vion Yau of Momentum Works estimates that the typical 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 cost programs to get round South-East Asia’s tough peninsular and archipelagic geography, and sometimes shabby infrastructure. This permits 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 purchasing expertise and consuming into margins. And although South-East Asians use social-media apps like TikTok to find new merchandise, they’re much less seemingly to purchase them there. In line with the report by Bain and Meta, greater than half of consumers change to old-school e-commerce websites on the time of sale, lured by higher high quality and sooner supply instances.

TikTok could overcome these hurdles. Because of its Chinese language dad or mum’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 bought 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 web shoppers is just getting began.

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