How the TikTok-GoTo deal could shake up ecommerce in SEA

Thu Huong Le contributed to this article.

TikTok Shop has secured a comeback in Indonesia thanks to its deal to take a controlling stake in local ecommerce player Tokopedia. But plenty of questions remain as to how the new entity will operate, which side will benefit the most, the wider effect on Southeast Asia’s ecommerce market, and more.

Paul Srivorakul, co-founder and group CEO of aCommerce, spoke to Tech in Asia to try and answer some of those questions. The following interview has been edited for clarity and brevity.

Image credit: Timmy Loen

1. What surprised you most about the deal between GoTo and TikTok?

This looks like a classic scenario of “if you can’t beat them, join them,” where both companies likely identified significant strategic synergies. Thanks to regulatory constraints, GoTo seized the opportunity to evade intense competition with yet another deep-pocketed marketplace platform competing for Indonesian consumers.

Tokopedia had long been wary of TikTok Shop’s growing momentum, despite having a greater gross merchandise value (GMV) at the time of the deal and approximately 35% market share. Choosing a merger over investing billions in developing competitive capabilities and engaging in costly subsidy battles was a swift path to ascending the market hierarchy. This move could potentially see the new entity overtake Shopee in 2024.

The biggest surprise would be if the Indonesian government, which was adamant about ensuring the sustainability of local small businesses, allowed this move to be completed without scrutiny or extensive involvement in the direction of the new entity. The deal means the top ecommerce platforms in the country will have Chinese ties – Shopee with Sea Group and Tencent, Lazada owned by Alibaba, and now potentially Tokopedia and ByteDance.

2. What are the implications for a national champion like Tokopedia selling to a China-owned company like TikTok?

First, there will be data concerns. TikTok has been facing worldwide issues around data protection or, more specifically, where the data is stored and who (i.e., the Chinese Communist Party) has access to it.

The second challenge is around cross-border sellers, as this deal could create additional supply chain dependencies to China. Throughout the banning process, Indonesian government officials have stated the protection of local SMEs as the most important goal, and with this acquisition, we can expect legislation to look into any prioritization of Chinese merchants in the app’s algorithm.

From a national perspective, this could be a blessing in disguise. TikTok is motivated to achieve direct access to Indonesian customers. If legislators play their cards right, push to appoint local leadership in the company, create clear guidelines on how to operate, and have tight control over cross-border merchants, this merger will serve the local economy well.

The first campaign, Beli Lokal, kicked off on December 12 and champions local MSMEs, promoting Indonesian products on TikTok and Tokopedia.

3. Is TikTok’s US$1.5 billion investment in Tokopedia over the next few years likely to be sustainable?

As a long-term investment, it remains to be seen how legislators and consumers will react to this new experience, but ByteDance, similar to Temu and other Chinese businesses, is known to develop technology fast and built its reputation as a company that knows how to adapt thanks to its long runway.

This US$1.5 billion investment was likely money put aside by ByteDance to compete in the region. This will now be invested into the new entity and spent on aggressive marketing and promotions. The first payment of US$500 million will go into the newly established entity, which is ByteDance’s way of signaling that it has the cash to back up the agreement.

GoTo’s stock price can also be an interesting proxy for how the public market and investors value ByteDance. TikTok becoming a major shareholder of an entity that is publicly listed is an interesting way to create value for shareholders without all the Chinese-associated geopolitical issues.

4. As TikTok will own 75% of Tokopedia, what are the potential consequences for GoTo?

5. Who stands to benefit the most from this deal?

6. How do you see this deal affecting Southeast Asia’s ecommerce industry?

7. Do you think this deal will resolve the regulatory concerns surrounding TikTok Shop in Indonesia?

8. Do you foresee any potential impact on TikTok Shop’s operations in other Southeast Asian countries?