Indonesia’s TikTok Shop tires reveal mixed feelings on e-commerce revolution | Business and Economy News

Jakarta, Indonesia – Tanah Abang is the biggest textile and clothing market in Southeast Asia, well-known among traders all around Asia and as far as Africa. But business these days is not good, with foot traffic down by half compared with before the pandemic.

According to stallholders at the nearly 300-year-old market in Central Jakarta, TikTok Shop, the e-commerce feature of the world’s most popular video-sharing app, is squarely to blame.

“TikTok is really bad for my business,” Hairun Nisa, whose family has sold men’s casual clothing at Tanah Abang for 20 years, told Al Jazeera.

“It’s different to other kinds of e-commerce because, in TikTok, people sell their products using video and can interact with consumers in real-time.”

“It’s not like the old days when this market was always crowded,” added Roni Waskito, who has sold shoes at Tanag Abang since 2010 and who also blames TikTok for the drop in trade.

Business at the Tanah Abang textile and clothing market has taken a sharp dive since the pandemic [Al Jazeera]

TikTok Shop amassed 6 million sellers in Indonesia within a year of its launch in 2021 and last year captured about 5 percent of Indonesia’s $52bn e-commerce boom.

The e-commerce platform had been on target to increase sales by about 350 percent this year, according to Singapore research firm Momentum Works – until the Indonesian government banned it on October 5.

Jakarta has justified the ban as necessary to protect the country’s 64 million micro, small and medium enterprises (MSMEs), including merchants in markets such as Tanah Abang.

Indonesian Trade Minister Zulkifli Hasan has accused the platform of facilitating predatory pricing practices and an influx of cheap imported goods as well as not being in compliance with the law.

“Transactions are not allowed on social media. “Like television, social media is only for advertising,” Hasan told local media during a recent visit to Tanah Abang

The ban in Indonesia, where TikTok has 125 million users – more than any country apart from the United States – is just the latest in a series of setbacks for the app.

The US, the United Kingdom, Canada, Australia, New Zealand, Taiwan and several European Union countries have banned the app on government devices over concerns that its Chinese owner ByteDance could share sensitive user data like geolocation with Beijing to further its military and political ambitions .

India outright banned TikTok in 2020 over similar security fears, while Pakistan and Afghanistan cited concerns about “immoral” content when they banned the app.

TikTok declined an opportunity to comment on the Indonesian ban, saying only that it complies with the law.

Evo Shah
Evo Syah, founder of the women’s clothing brand Videlin Official, fears he will have to let go of his staff following Indonesia’s ban on TikTok Shop [Al Jazeera]

Some of the estimated 6 million sellers who previously earned a living through TikTok Shop have been less restrained in their response.

“We are very sad because the government closed our TikTok Shop and our sales dropped to almost nothing,” Evo Syah, the founder of Videlin Official, a women’s clothing brand based in Bali, told Al Jazeera.

“Previously, we had at least 200 sales per day. Now we have 10 or 20 uses [Singaporean e-commerce portal] Shopee. For the moment, I will try to keep my employees; I have 10 full-time staff. But if things continue like this, I might have to make a tough decision and let them go. The government should listen to our voice.”

Golda Pradeksa, the founder of Alya the Label, a Bali-based women’s clothing retailer that sells exclusively on TikTok, said that while she felt sorry for traditional retailers who lost business, banning the platform was not the answer.

“I’m really disappointed because now I have to redo all my content and go to Shopee and I don’t know if it will work because Shopee doesn’t have the same interactivity between sellers and buyers as TikTok,” Pradeksa told Al Jazeera.

“The retail world is evolving every day,” he added.

“Store owners need to catch up with the changes or get left behind. But there’s no reason they can’t have both offline and online stores because it gives them the ability to sell not only locally, but globally. It’s exactly what I do. I sell Videlin online and my first fashion label from a storefront in Bali.”

Many stallholders at Tanah Abang were already mixing offline and online sales before the ban, according to Fithra Faisal Hastiadi, a former spokesperson for the Ministry of Trade and an independent economist who is highly critical of the ban.

“It was the wrong move,” Hastiadi told Al Jazeera. “The government argues TikTok’s model – social media combined with e-commerce – has been the major disruptor at traditional markets like Tanah Abang. But that’s not entirely true.”

Hastiadi said the drop in business at markets like Tanah Abang was the result of low- and middle-income earners’ reduced spending power and a decline in wholesale buyers from Africa as well as other parts of Asia since the COVID-19 pandemic.

Arguments that cheap Chinese products are suddenly displacing local products are disingenuous, he said, because Chinese products have been flooding into Indonesia for more than a decade.

When it comes to e-commerce, Hastiadi said that platforms like Shopee and Indonesia’s equivalent Tokopedia have done more to disrupt traditional markets than TikTok.

He said TikTok Shop’s rivals had likely lobbied the Indonesian government to ban the platform, which had rapidly increased on their market share since it entered the marketplace.

“In economics, we have theories to help us understand the motives of actors,” he said. “The tendency revealed through previous scenarios shows those being disrupted trying to convince the powers that be to ban or restrict the disruptors.”

Roni Waskito
Shoe salesman Roni Waskito has noticed only a slight improvement in sales since Indonesia banned TikTok Shop [Al Jazeera]

When contacted by Al Jazeera, Shopee and Tokopedia did not confirm or deny that they lobbied the Indonesian government to ban TikTok Shop.

When Al Jazeera visited Tanah Abang a week after the ban, sellers did not report much of an improvement in human traffic or sales.

“Things have gotten a little better. But still not as good as they used to be,” shoe salesman Waskito told Al Jazeera.

“I haven’t noticed any change but I think it’s too early to tell,” added menswear seller Nisa. “But hopefully things are going to get better for us soon.”

By yowuj