Is the potential TikTok Shop-Tokopedia deal just a strategic stopgap?

As news broke this week about TikTok Shop’s potential comeback in Indonesia via a deal between its parent firm ByteDance and local super app GoTo, the latter’s shares experienced a slight uptick.

That optimism is much needed as GoTo’s shares have dropped by 20% in the last six months, reflecting investors’ growing impatience with its prospects for profitability.

Image credit: Timmy Loen

For TikTok Shop, the deal is a vital step in its efforts to regain a foothold in Southeast Asia’s largest market, where its estimated daily gross merchandise value (GMV) is worth US$20 million. Consequently, its two-month absence from Indonesia has been a significant setback.

However, is this partnership really a match made in ecommerce heaven? Doubts persist on how these two companies complement each other and whether teaming up would be enough to end Shopee’s dominance in the archipelago.

Tech in Asia asked TikTok Indonesia and Tokopedia for comment, but the companies declined to participate in this story.

Integrate or create?

If the deal pushes through, TikTok Shop will immediately benefit from Tokopedia’s existing ecommerce license. But for now, it remains unclear whether this partnership will be a joint venture or a stake investment.

If market share is the ultimate goal, then the combined forces of Tokopedia and TikTok Shop would capture 40% of Indonesia’s ecommerce market, surpassing Shopee’s 35%, according to research conducted by venture builder firm Momentum Works.

But projections aside, the situation is far more complex than that.

The most straightforward approach would be to integrate TikTok traffic into Tokopedia, suggests Roshan Raj, a partner at Redseer Strategy Consultants. This would allow TikTok sellers to do live commerce on the platform and then seamlessly direct customers to Tokopedia for purchases.

If it becomes the exclusive platform for orders generated from TikTok’s traffic, Tokopedia could address a couple of issues. For instance, livestreaming has never been its strongest suit even though it rolled out its Tokopedia Play feature in 2018. And before TikTok Shop was launched, sellers had to rely on affiliate links to direct buyers to other platforms like Shopee to finalize transactions.

Creating a platform from scratch was also considered, but experts caution that this approach could provide Tokopedia’s and TikTok Shop’s competitors with a substantial advantage in time and resources.

“Such a plan is strange,” says Tesar Sandikapura, chairman of the Indonesian Digital Empowerment Community (IDIEC). He notes that the companies have well-known brands, so introducing an app with a different name could diminish the appeal of the collaboration.

Which side has the leg up?

Should Shopee be worried?