On Monday, TikTok made a significant investment of $1.5 billion in GoTo to acquire its e-commerce unit, facilitating a potential restart of its online shopping operations in Indonesia.
TikTok had to shut down its recent e-commerce venture, TikTok Shop, in Indonesia due to the country's ban on social media platforms offering online shopping. This decision, implemented in September, aimed to safeguard smaller merchants and protect users' data.
Now, TikTok plans to resume operations in Indonesia through a partnership with GoTo, the owner of the popular local online shopping platform Tokopedia. The collaboration involves merging Tokopedia and TikTok Shop Indonesia's businesses under the existing PT Tokopedia entity, according to a joint statement from the companies.
As part of the agreement, TikTok will acquire 75.01 percent of Tokopedia's shares for $840 million, securing a controlling stake in the ecommerce platform. This investment allows TikTok to integrate shopping features into its app while committing to inject over $1.5 billion into the expanded entity over time, ensuring future funding without dilution to GoTo.
The collaboration among TikTok, Tokopedia, and GoTo aims to revolutionize Indonesia's ecommerce sector, generating millions of job opportunities in the next five years. The collaboration will initiate with a pilot period, conducted in consultation with relevant regulators.
“We are creating an Indonesian e-commerce champion, combining Tokopedia's strong local presence with TikTok's mass market reach and technological prowess," GoTo CEO Patrick Walujo said in a statement.
"GoTo now sits on a much stronger foundation and we expect this partnership to bring many benefits not just for e-commerce, but for our on-demand services and fintech businesses as well," he said.
Upon finalizing the deal, anticipated to be concluded by the first quarter of 2024, TikTok will issue a $1 billion note payable to Tokopedia, earmarked for future working capital needs, as outlined by GoTo. The inaugural campaign under this collaboration is set to launch on both TikTok and Tokopedia, coinciding with Indonesia's national online shopping day.
Tokopedia, competing with Shopee and Lazada, reported a 14% increase in half-year gross revenue to 4.5 trillion rupiah in August, with a narrowed underlying loss. Despite this, GoTo's shares fell 13%, the most significant drop in six months, as some investors took profits following stock rally expectations tied to the TikTok deal. Indonesia's e-commerce industry is projected to grow to approximately $160 billion by 2030 from $62 billion in 2023, as per a report by Google, Temasek Holdings, and Bain & Co.
While platforms like Tokopedia, Shopee, and Lazada have long dominated Indonesia's ecommerce market, TikTok Shop has gained substantial market share since its 2021 launch. Indonesia, with 125 million users, stands as TikTok's second-largest global market after the United States, according to the company's figures.
Industry experts predict that TikTok's investment and entry into the Indonesian e-commerce market will increase the competition among players. Tauhid Ahmad, the executive director of the Institute for Development of Economics and Finance in Jakarta, emphasizes that this move is strategic, especially in light of regulatory challenges in Indonesia. The increased competition is expected to benefit consumers with more choices in the e-commerce landscape.
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