In response to new regulations in Indonesia, TikTok is suspending its online shopping service, TikTok Shop, in the country. The move, aimed at ensuring compliance with local laws, comes as the Indonesian government introduces rules separating e-commerce from social media platforms. The regulations, designed to safeguard local retailers, require platforms like TikTok to divide their shopping features from their core services. Indonesia was the first country where TikTok piloted its e-commerce offering in 2021, and TikTok Shop quickly became one of the platform’s largest markets.
Indonesia’s trade minister, Zulkifli Hasan, emphasised the need for clear distinctions between e-commerce and social media platforms. Social media platforms were given a week to comply with the new regulations or face the risk of losing their operating licences in the country. TikTok, home to 125 million users in Indonesia, expressed its commitment to adhering to local laws, leading to the suspension of its e-commerce transactions in TikTok Shop Indonesia.
Online retail in Indonesia has experienced exponential growth, with e-commerce sales projected to reach 689 trillion Indonesian rupiah (US$44 billion) by next year, according to the country’s central bank. Despite TikTok Shop’s significant market share and its chief executive Shou Zi Chew’s recent investment pledge in the region, the regulatory changes pose challenges to the platform’s expansion plans.
The impact of these regulations extends to small businesses. Owners like Sukmamalingga, who has operated a store selling Muslim clothing at Jakarta’s Tanah Abang Market for nine years, noted a decline in customers from various regions due to the rise of online retailers. Indonesia, with over 64 million small businesses constituting a significant portion of its economy, faces the delicate task of balancing the growth of digital platforms with the protection of local businesses.
TikTok’s move to suspend its e-commerce service underscores the complexities global tech companies face as they navigate varying regulations worldwide, reflecting the growing challenges in the intersection of digital platforms, e-commerce, and local governance.
