TikTok, One Step Ahead

One of the recent buzzes in Indonesia revolves around the government’s official ban on social media platforms engaging in e-commerce or offering buying and selling services, commonly known as social commerce. TikTok, with its TikTok Shop, for instance, has been instructed to separate TikTok as a social media entity from e-commerce. They must apply for a license to conduct buying and selling operations, following the Minister of Trade Regulation No. 31 of 2023 on “Perizinan Berusaha, Periklanan, Pembinaan, dan Pengawasan Pelaku Usaha dalam Perdagangan Melalui Sistem Elektronik.”

This step was taken to ensure that it does not harm domestic businesses, the majority of which are still small traders or owners of Micro, Small, and Medium Enterprises (MSMEs) engaged in traditional trade.

But what is social commerce exactly? What are its regulations, and is it still considered a separate entity due to the difference in purpose between social media and e-commerce?

Any form of e-commerce highly influenced by social aspects, human relationships, or social experiences like real-time communication can be categorized as social commerce.

Cube Asia, in its report on social commerce development in Southeast Asia, provides the following characteristics of social commerce: (1) It is online in nature. Offline transactions influenced by social or digital communication are not included; (2) It can operate on any digital platform, including marketplaces, messaging apps, and, most importantly, social platforms; (3) It involves product selection and payment steps at the end of the user journey. Without such actions, it technically falls under online marketing rather than e-commerce; (4) It operates in the Business to Consumer (B2C) domain. B2B or C2C e-commerce is an exception.

With these characteristics, social commerce has significantly evolved and is at the intersection of social experience and e-commerce activities, especially since the COVID pandemic lockdown.

From the same report, Cube Asia concludes that around 42 billion USD or 25% of the Gross Merchandise Value (the total revenue from the sale of goods and services on sites or websites) of e-commerce in Southeast Asia is directly influenced by social experiences. Brands that can incorporate this complexity of social experience into their e-commerce channel strategies have the potential to be future winners.

TikTok is one of them and is on the path to success.

TikTok Shop, technically categorized as a social platform commerce, is where e-commerce functionalities are gradually introduced into the social media user journey.

Along with three other social commerce attributes—Live Shopping, Conversational Commerce, and Community Group Buy—Social Platform Commerce has become the most significant contributor to GMV, with estimated transactions of 34 billion USD. One of the reasons for this is that most e-commerce channels in Southeast Asia have adopted at least one of these four social commerce categories, from horizontal consumer marketplaces like Shopee and Tokopedia, messaging apps with e-commerce capabilities like WhatsApp and LINE, to social platforms with e-commerce capabilities like Facebook and TikTok.

This is where the core issue arises.

Despite being known as a content-focused social platform, TikTok now offers comprehensive e-commerce featuring a full-feature in-app e-commerce store. On the other hand, Meta, which also provides commerce on Facebook and Instagram—launched Shops a few years ago but has not offered the same capabilities. Shops do not include native check-out and ordering features, so sellers still need to use third-party devices or link these capabilities to external websites for payments.

TikTok currently provides integrated end-to-end e-commerce by offering payment facilities and flexibility for users to complete transactions within the app instead of redirecting users to separate websites. This also establishes a direct relationship between sellers and buyers, reducing the number of intermediaries.

If TikTok “semakin di depan,” I personally suspect that Yamaha may be behind the government’s reasons for banning TikTok Shop activities in Indonesia because their existence is threatened.

If we discussed technology earlier, let’s look at it from the audience’s perspective and, indirectly, the technological effects that affect the above review.

Neurosensum, in its “The Gen Z Code” release at the end of last September, focused on current issues closely related to the existence of Gen Z. Specifically, they observed some of the most critical issues among Gen Z, which may affect their relationships with brands. The report then concluded how brands could remain relevant due to the influence of these issues among Gen Z.

In fact, around 27.94% of Gen Z made up the total population in Indonesia in 2020, meaning the presence of Gen Z is essential for brand owners and marketers because they will be the subsequent purchasing decision-makers and currently lead the Indonesian population.

Gen Z is often portrayed as a tech-savvy, creative, and independent generation. They have grown up with technology from an early age, making them heavily reliant on technology and gadgets to seek information. They are also exposed to rapidly changing issues and trends, especially related to viral content. This prompts them to be more open to new topics, adapt to evolving trends, and explore new experiences, especially social experiences.

As a result, they spend 1.69 hours per day consuming content on TikTok, the highest compared to their average time on other platforms.

Specifically, TikTok’s FYP (For You Page) content, which typically consists of short, visually appealing content that is easy to digest, provides relatable content and experiences. It is not wrong to say that TikTok Shop’s presence becomes more effective with such visualization.

Returning to the initial question, is there still a de facto separation between social media and e-commerce? The above shoppertainment also shows that Shopee, which is primarily licensed as an e-commerce platform, leverages social experiences within its app. Conversely, TikTok, primarily licensed as a social media platform, does the same.

So, is this platform dichotomy still relevant now, separating the interests and uses of social media and e-commerce in the name of regulations while denying the presence and evolution of social commerce? Or is it more about trade policies because of the flood of imported products sold through social commerce platforms that threaten or even extinguish local products sold by MSMEs on the same platform?

Whether we like it or not, the regulation that still separates the two becomes the legal standard when discussing this dichotomy, primarily for the protection of e-commerce stakeholders in Indonesia. So, who is to blame?

If it’s not because of imported products, the government should have adapted earlier or been more disruptive, especially since this trend started to gain momentum during the pandemic. The government should have recognized the potential of social commerce much earlier, leading to the question that ultimately arises, “Kenapa baru sekarang?” So, if it’s not a matter of being late, what is it?

On Monday, September 25, the Indonesian E-Commerce Association (idEA) tried to facilitate communication and provide a space for open and comprehensive opinions from all relevant parties, including policymakers, digital industry players, observers, and business actors, through a Focus Group Discussion on the theme “Pros and Cons of S-Commerce in the Digital Economy.” This is one of the recent developments to look forward to the results.


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