December 12, 2023
JAKARTA – Chinese video platform Tiktok is set to invest US$1.5 billion in Tokopedia, the homegrown e-commerce platform of tech giant GoTo, in a move that experts say is to save its e-commerce operation in Indonesia.
The deal would allow TikTok to acquire 75.01 percent of Tokopedia for $840 million, while GoTo would retain the remaining ownership, according to GoTo’s disclosure.
Tokopedia will gain full ownership of TikTok Shop for $340 million in a transaction that is slated to be completed in first quarter of next year.
TikTok also pledged to inject another $1 billion into Tokopedia, which it will use to support working capital of the newly acquired entity, though a specific timeline for this investment was undisclosed.
Both parties have agreed that GoTo’s ownership of Tokopedia will remain unaltered by any subsequent funding from TikTok, as outlined in the disclosure.
TikTok made the move just two months after the government imposed a new regulation in October that forced the video platform to stop transactions on its e-commerce app, TikTok Shop. Malaysia has expressed its intention to follow similar steps.
Indonesia was the second-biggest market for TikTok Shop after the United States, before its closure.
TikTok Shop’s market share in Indonesia is projected to reach 13.2 percent in 2023, tripling from 4.4 percent in 2022, according to Singapore-based venture builder firm Momentum Works data in October.
TikTok Shop’s operation resumed on Monday, coinciding with a campaign it has prepared for the monthly twin date shopping day on Tuesday.
Experts viewed the deal as highly advantageous for TikTok, while GoTo’s minority stake might constrain its ability to leverage the e-commerce platform going forward.
Momentum Works CEO Jianggan Li opined that the deal was “surprisingly beneficial” for TikTok, arguing that the platform had taken over Tokopedia at an extremely low cost, while it would gain full operational control and legitimacy of operating the e-commerce platform, including some useful local allies.
“It bypasses many of the technical challenges and allows almost full operational control of Tokopedia by TikTok, which not only has unlimited customer traffic, but also knows how to monetize this traffic well through e-commerce,” Li told The Jakarta Post on Monday.
If implemented and executed well, the deal would reshape the competitive landscape in the country, Li pointed out, adding that it would also put its rival, Sea Group’s e-commerce platform, Shopee, in a “tricky, defensive position.”
TikTok and Tokopedia together would command a 40 percent share of the country’s e-commerce landscape, according to a Momentum Works report in October. In comparison, Sea Group’s Shopee only held a 35 percent share, the report showed.
However, Li also saw a possibility that the deal would extend for TikTok acquiring other services, such as its ride-hailing arm because of its role in Tokopedia logistics, therefore leaving GoTo to heavily focus on financial services, which he added could be “much less operationally intensive but potentially very financially rewarding”.
“Shopee does not have many good options in e-commerce alone and it would require Sea Group’s whole ecosystem, including the bank and digital financial services, to put up a vigorous defense,” he explained.
Roshan Raj Behera, the Southeast Asia partner of Indian management-consulting company Redsheer, viewed the $1.5 billion deal as “undemanding” and believes it will allow TikTok to tap into its long-term growth potential, especially in the e-commerce landscape.
“This marks a significant shift from being excluded from the market. Holding a majority stake in a local entity allows TikTok to lead the e-commerce business with little to no interference from local shareholders,” Behera told the Post on Monday.
TikTok’s return through its new e-commerce entity is expected to heighten competition within the sector, Behera said.
“There will be short-term challenges for long-term benefits,” he added, foreseeing the exit of smaller or unprofitable players from the market and paving the way for long-term consolidation.
As competition heats up, Singapore-based e-commerce giant Lazada received $634 million in capital from its parent company Alibaba Group, Singapore’s Tech in Asia reported on Monday.
This capital infusion brought the total investment in the subsidiary to over $1.8 billion this year.