TikTok, the popular social media platform, is set to expand its e-commerce business in Indonesia, targeting the largest market in Southeast Asia. To address regulatory challenges, TikTok has decided to form a joint venture with Tokopedia, the e-commerce unit of GoTo, a prominent Indonesian tech giant.
Under the agreement, TikTok will hold a controlling stake of 75.01% in the newly formed entity. The joint venture will require a total investment of $1.5 billion over time, with TikTok initially paying $840 million to acquire its stake. On the other hand, Tokopedia will acquire TikTok Shop Indonesia for $340 million in the fourth quarter of this year. Additionally, TikTok will also acquire a majority stake in Tokopedia for $840 million.
The main motive behind this partnership is to overcome Jakarta’s ban on direct payments for online purchases made on social media platforms. This ban had forced TikTok to suspend its e-commerce service in Indonesia. The overall transaction is expected to be finalized in the first quarter of 2024.
Indonesia’s e-commerce market is estimated to be worth between $50 billion and $60 billion, accounting for two-thirds of the total revenues generated across Southeast Asia. Recognizing the potential of this market, TikTok and GoTo intend to focus on assisting micro, small, and medium-sized enterprises, as over 90% of the merchants associated with the joint venture fall into this category.
Acknowledging the importance of local expertise, TikTok recognized the need for an Indonesian partner to navigate the country’s small business rules successfully. TikTok Shop Indonesia was launched earlier this year and has already garnered a user base of 106 million in the country as of October.
In a joint statement, TikTok and GoTo expressed their belief that this partnership will create millions of job opportunities within Indonesia’s e-commerce sector over the next five years. With TikTok’s massive user base and Tokopedia’s e-commerce expertise, the joint venture aims to tap into the enormous potential of the Indonesian market and provide support to local businesses.
“Introvert. Avid gamer. Wannabe beer advocate. Subtly charming zombie junkie. Social media trailblazer. Web scholar.”
