Indonesia’s TikTok Shop ban reveals mixed feelings about e-commerce revolution | Business and economy news

Jakarta, Indonesia – Tanah Abang is Southeast Asia’s largest textile and clothing market, well-known among traders throughout Asia and as far away as Africa. But business isn’t good these days, with foot traffic down by half from pre-pandemic levels.

According to stall owners 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 to blame.

“TikTok is really bad for my business,” Khairun Nisa, whose family has been selling daily men’s clothing in Tanah Abang for 20 years, told Al Jazeera.

“It’s different from other types of e-commerce because on TikTok, people sell their products through video and can interact with users in real time.”

“It’s not like the old days when this market was always crowded,” added Ronnie Wasquito, who has been selling shoes at Tanag Abang since 2010 and who also blames TikTok for the decline in trade.

Business at the Tanah Abang textile and clothing market has plummeted 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 booming $52 billion e-commerce market.

The e-commerce platform was aiming to increase sales by about 350 percent this year, according to Singaporean 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-sized enterprises (MSMEs), including traders at markets such as Tanah Abang.

Indonesia’s Trade Minister Zulkifli Hassan accused the platform of facilitating predatory pricing practices and an influx of cheap imports, and of not complying with the law.

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

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

The US, UK, 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 such as geolocation with Beijing to support its military and political ambitions.

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

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

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Evo Syah, founder of womenswear brand Videlin Official, fears she will have to lay off staff after Indonesia bans TikTok Shop [Al Jazeera]

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

“We are very sad because the government has closed our TikTok store and our sales have dropped to almost zero,” Evo Siah, founder of Videlin Official, a women’s clothing brand based in Bali, told Al Jazeera.

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

Golda Pradeksa, founder of Alya the Label, a Bali-based women’s clothing retailer that sells exclusively on TikTok, said that while she regrets traditional retailers losing business, banning the platform is 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 world of retail is evolving every day,” she added.

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

Many stall traders in Tanah Abang were already mixing offline and online sales before the ban, according to Fitra Faisal Hastiadi, a former spokesman for the Ministry of Commerce and an independent economist who is highly critical of the ban.

“It was the wrong move,” Hastiadi told Al Jazeera. “The government claims that the TikTok model – social media combined with e-commerce – is the main disruptor of traditional markets like Tanah Abang. But that’s not quite true.”

Hastiadi said the decline in business in markets such as Tanah Abang was a result of the reduced purchasing power of low and middle income earners and the decline of wholesale buyers from Africa as well as other parts of Asia following the COVID-19 pandemic.

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

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

He said TikTok Shop’s competitors may have lobbied the Indonesian government to ban the platform, which has rapidly encroached on their market share since entering the market.

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

Ronnie Wasquito
Shoe seller Ronnie Wasquito has seen only a slight improvement in sales since Indonesia banned TikTok Shop [Al Jazeera]

When contacted by Al Jazeera, Shopee and Tokopedia neither confirmed nor denied that they had lobbied the Indonesian government to ban TikTok Shop.

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

“Things have improved a bit. But they are still not as good as they used to be,” shoe seller Waskito told Al Jazeera.

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

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