TikTok Hit as Indonesia Announces e-Commerce Transaction Ban on Social Media

October 3, 2023 12:51:39

Indonesian authorities dealt a major blow to TikTok’s expansion plans after they announced a national ban on virtual transactions on social media platforms. The social media platform TikTok has been working to accelerate e-commerce transactions in Indonesia, its largest market in Southeast Asia, as it fields increased scrutiny in other markets. However, the country’s government seems to have pulled the rug out from under TikTok’s feet.

According to the government, the ban on social media e-commerce transactions is meant to protect offline marketplaces and merchants from the predatory pricing models on social media platforms that often outprice and threaten small and medium-sized businesses. The ban took effect immediately after its announcement and came only three months after TikTok said that it would invest billions of dollars into building its virtual shopping platform TikTok Shop in Southeast Asia.

As Indonesia is TikTok’s largest market in this region with around 106 million active monthly users as of December 2022 and 125 million users this year, most of this investment would go to the Indonesian market. TikTok launched the virtual shop in the United States in September, and the social media giant was looking to expand into the southeast Asian market by first setting up shop in Indonesia.

As such, the recent government ban is a significant blow to TikTok’s expansion efforts in Indonesia and will prevent the Chinese social media company from turning its massive Indonesian user base into a source of revenue.

The new regulation is intended to facilitate “fair and just” competition in the Indonesian market while protecting user data, Trade Minster Zulkifli Hasan said. Hasan also cautioned against letting TikTok morph into a kind of super app that serves as a bank, shop and e-commerce platform. He added that TikTok had seven days to comply with the new e-commerce regulation or the government would halt its activities in the country.

Research company BMI says that TikTok is the only business in the country that will be affected by the ban and noted that it is unlikely the ban will hinder the overall growth of Indonesia’s digital marketplace.

A TikTok Indonesia spokesperson noted that the social media platform was “deeply concerned” about how the announcement would impact the millions of Indonesian sellers who are currently active on TikTok shop. Still, the spokesperson noted that Tiktok would look for a “constructive path forward” in the national ban’s aftermath.

As per the new regulation, e-commerce websites in the country will have to set a minimum $100 price for certain products purchased from foreign sellers.

This policy change in Indonesia suggests that businesses may be better off looking to dedicated e-commerce platforms such as NextPlat Corp. (NASDAQ: NXPL) (NASDAQ: NXPLW), which are fairly insulated from the vagaries of arbitrary policy changes.

NOTE TO INVESTORS: The latest news and updates relating to NextPlat Corp. (NASDAQ: NXPL) are available in the company’s newsroom at https://ibn.fm/NXPL

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