TikTok sets its sights on Southeast Asian markets amidst mounting concerns over data security

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The Southeast Asian social commerce market is expected to grow at a rapid pace over the next five years. In Indonesia alone, the gross merchandise value is expected to increase from US$8.2 billion in 2023 to US$22.1 billion by 2028, according to PayNXT360 estimates. In Malaysia, the gross merchandise value is projected to increase from US$1.4 billion in 2023 to US$4.4 billion by 2028.

The high rate of mobile internet penetration is the major growth driver for the social commerce market across Southeast Asia. In the Philippines, consumers are increasingly using social media platforms like Twitter and TikTok to discover and buy products online. Similar trends are emerging in other Southeast Asian markets as well. To tap into the high-growth market, many leading global and domestic firms are investing heavily in the sector. In Indonesia, for instance, even payment firms such as DANA are entering the segment to garner market share.

TikTok, which has a presence in six Southeast Asian countries, has revealed that it plans to invest billions of dollars in the region to boost the growth of its e-commerce business. Over the next few years, the social media platform aims to double down on the region, as it continues to face global scrutiny over data security.

• In terms of the total user base, Southeast Asia is the biggest market for TikTok, and the number of users is increasing quarter-over-quarter. However, the huge user base is yet to translate into a major revenue source for the social media platform. This is because the firm is facing tough competition from other leading e-commerce platforms such as Shopee, Lazada, and Tokopedia.

Although the firm did not provide a detailed breakdown of its investment in the Southeast Asian market, it plans to invest significantly in advertisement, training, and supporting small vendors that are seeking to join the TikTok Shop platform. Currently, two million small vendors are selling products through the social platform in Indonesia alone, which also happens to be the largest market for TikTok in the region.

In Indonesia, the gross merchandise value for the firm is estimated to be over US$4 billion in 2022, which is significantly higher compared to gross merchandise value in 2021. TikTok, in 2023, is targeting a gross merchandise value of US$8-10 billion in Indonesia. The higher investment announced by TikTok will support the growth ambitions in the country in 2023. In the other Southeast Asian market as well, the firm is projected to record strong growth in 2023 and beyond, as Gen Z and millennial consumers are increasingly turning to social channels for their shopping requirements.

The strategy to invest billions of dollars in the Southeast Asian market comes at a time when other Asian rival firms are ramping up their presence in other overseas markets. Both Shopee and Lazada are exploring the European markets to accelerate their growth. Even though Shopee has exited several European markets, it continues to build up its operations in Brazil.

The move to increase its investment in the Southeast Asian market is also driven by the growing scrutiny faced by the firm in some of the other markets like the United States, the United Kingdom, and New Zealand.

• Government organizations in the United Kingdom and New Zealand have banned the app on government phones, as TikTok is accused of sharing sensitive consumer data with the Chinese government. However, TikTok has repeatedly denied that it has ever shared any data with the Chinese government and would not do so even if asked.
• In the United States as well, TikTok is reeling under heavy government scrutiny. Montana, in May 2023, became the first state in the United States to ban TikTok. In other states, the government has banned the usage of government-owned devices.

In Southeast Asia, on the other hand, the firm has not faced any major bans on government devices. However, it remains under scrutiny over its content. In 2018, Indonesia imposed a temporary ban on TikTok due to the presence of posts deemed to contain pornography, inappropriate content, and blasphemy. In Vietnam, on the other hand, authorities announced that they would probe TikTok as the toxic content on the platform is harming youth, culture, and tradition.

To know more and gain a deeper understanding of the social commerce market in Indonesia, click here.