Social media application TikTok and Indonesian technology giant GoTo have formed a joint venture to relaunch TikTok’s online retail business in Indonesia.
Long-term, the firm, owned by Bytedance of China, intends to invest more than $1.5 billion (£1.2 billion) in Tokopedia, the largest e-commerce platform in Indonesia.
TikTok Shop ceased operations in Indonesia in October to comply with new regulations in the largest economy in Southeast Asia.
In Indonesia, TikTok has approximately 125 million users.
TikTok will acquire more than 75% of Tokopedia and incorporate its Indonesia operations, which TikTok Shop currently manages.
“The strategic partnership will begin with a pilot phase supervised by the appropriate regulators and conducted in close consultation with them,” the two corporations said in a joint statement.
Additionally, GoTo and TikTok intended to facilitate the growth of production and sales strategies for small and medium-sized enterprises in Indonesia and promote Indonesian products on their respective platforms.
Indonesian Moratorium and TikTok’s Market Challenges
The Indonesian government prohibited online shopping on social media platforms to safeguard smaller merchants and user data before the agreement.
Social media activities engage a significant portion of Indonesia’s over 270 million inhabitants. Before the implementation of the moratorium in October, this demographic comprised the most significant online retail market for TikTok.
In September, President Joko Widodo of Indonesia announced the moratorium, wherein he cautioned against the use of e-commerce. It can be highly beneficial in the presence of regulations but disastrous in their absence.”
In recent years, online retailing in Indonesia has seen an explosion. According to the country’s central bank, the value of e-commerce sales will have increased by more than sixfold between 2018 and next year, reaching 689 trillion Indonesian rupiah ($44 billion; £35 billion).
TikTok Shop has experienced consistent growth in its market share within Indonesia’s online purchasing industry since its inception two years ago. Prominent players in this sector include Tokopedia, Shopee, and Lazada.
The Indonesian regulations were an additional setback for TikTok, which has been scrutinized in the European Union, the United States, and the United Kingdom, where the app has been forbidden from the Parliament’s network due to security concerns.