In the Tanah Abang market in Jakarta, which used to rank high among Southeast Asia’s textile hubs, about 20% of capacity now sits empty. Yasril Umar, who chairs the traders’ association, puts the number of stores in and around the district at about 20,000. Videos of shuttered stalls, fittings draped in cloth and darkened hallways with no shoppers spread online in the middle of 2023. The shopkeepers in them pointed at one culprit: TikTok Shop.
Their complaint reached President Joko Widodo, who held cabinet meetings on how to help traditional small sellers. At the end of September 2023, the government answered with a rule.
What the rule says
Trade Ministry regulation number 31/2023 lets social media apps carry advertising and promotion for sellers, but no payment can be made inside the app to buy anything. Trade Minister Zulkifli Hasan announced it at a press conference on a Wednesday. “Social commerce can advertise products, but social media is separate, you cannot combine social media and social commerce,” he said. He framed it as protection for local small businesses and called the goal “equality in business competition.”
The rule also added a clause aimed at cheap imports, setting a minimum of $100 per item for imported goods sold online. Many of the sellers’ complaints, Asia Tech Review reported, centred on low-priced goods arriving mainly from China.
Hasan told DW the ministry had not discussed TikTok Shop by name, and that the rule “applies for all” platforms. Even so, Indonesia had been one of TikTok Shop’s biggest markets. Reuters noted that the service had generated $6 billion in transactions up to September, a figure that took Tokopedia 10 years to reach. TikTok said the next day that it regretted the decision.
Cheap goods, quiet markets
The appeal for shoppers was easy to see. Toto Prastowo, a Jakarta resident, said he once bought a vacuum cleaner for his car for under 40,000 rupiah with free shipping. Against that, a market stall has little to offer.
Nada Agi, a 25-year-old apparel seller in Tanah Abang, was not expecting much change. She sells online as well as from her shop, and said sales had been low for years. Umar told DW that most merchants had struggled since the pandemic began in March 2020, and that people’s buying habits had shifted and had not swung back even as the economy picked up. “People are not really interested in visiting any kind of empty and quiet market,” he said.
The workaround
The ban did not end TikTok’s presence for long. In December 2023, Tokopedia acquired exclusive rights to operate TikTok Shop in Indonesia for $340 million, while TikTok bought 75.01% of Tokopedia through new shares worth $840 million. The shopping tab in the TikTok app came back in Tokopedia’s branding.
Asia Tech Review’s verdict was blunt. Nothing in the deal changed how people find and buy products inside the app, and it did nothing to bring shoppers back to Tanah Abang. The Trade Ministry allowed the arrangement as a trial of three to four months, even though it conflicted with the September rule.
Sources
- Can Indonesia's social media e-commerce ban help merchants? (DW)
- TikTok Shop's suspension was supposed to help small shop owners in Indonesia (Asia Tech Review)
