TikTok's Livestreamed Marketplace Emerges as Threat to Amazon, Expected to Hit $20 Billion in Value

TikTok Shop could revamp a company whose mainstay video platform is already luring consumers and advertisers away from Meta Platforms.

By Zheping Huang, Olivia Poh, Alex Barinka and Yoolim Lee, Bloomberg | Updated: 5 July 2023 18:36 IST

TikTok's Livestreamed Marketplace Emerges as Threat to Amazon, Expected to Hit $20 Billion in Value

Photo Credit: Reuters

TikTok Shop is expected to hit $20 billion in gross merchandise value by the end of 2023

Highlights

TikTok is best known for viral dance challenges and owned by ByteDance
TikTok Shop is its fastest-growing feature
It has a a burgeoning fan base in Southeast Asia

Inside a shophouse in Northeast Jakarta, dozens of salespeople take turns peddling cosmetics, contact lenses, and hair accessories. A woman helps a potential customer choose the right shade of lipstick for her skin tone, while a man yells out the latest markdown on vitamin tablets.
This is no raucous flea market. It's a live-streamed marketplace within TikTok and a gold rush for entrepreneurs seeking fortunes on the world's most popular short-video app. For the company, best known for viral dance challenges and owned by China's ByteDance, TikTok Shop is its fastest-growing feature with a burgeoning fan base in Southeast Asia.

Its success in the region is crucial for TikTok as it faces a possible ban in the US on national security concerns. It also provides the company a template to take on Amazon.com in a way that no social media company has attempted before, provided it's allowed to keep operating in the US.

Indonesia was the first market for TikTok Shop and is still its biggest, helped by a young, mobile-savvy population that's embraced the combination of short videos and in-app shopping since its 2021 launch. TikTok Shop is expected to hit $20 billion (roughly Rs. 1,63,900 crore) in gross merchandise value by the end of this year, quadrupling from a year earlier.

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If it can sustain that momentum, analysts say, it could revamp a company whose mainstay video platform is already luring consumers and advertisers away from Meta Platforms and Alphabet's Google.

Hank Wang, who manages a cast of around 50 livestreaming hosts at the bustling Jakarta shophouse, believes it has the power to transform the retail industry and to turn entrepreneurs like him into the next e-commerce barons.

“I want to become the next Forrest Li,” said the 33-year-old former venture investor, referring to the China-born founder of Sea, the largest internet company in Southeast Asia. Wang directs his team to sell products on behalf of cosmetics and consumer goods makers such as L'Oreal, earning a cut and sharing the profits with the livestreaming hosts. He moved from Shanghai to Jakarta seven months ago and started his company, Flame Media, despite not speaking the local language. “TikTok and social commerce will give rise to the next generation of tech unicorns in this region,” he said.

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In June, TikTok's Chief Executive Officer Shou Zi Chew visited Jakarta and promised to invest billions of dollars in Southeast Asia over the next three to five years. Wearing a traditional batik shirt, he shook hands with a key Indonesian minister and visited local mom-and-pop shops that had TikTok accounts.

That was a marked contrast to his experience earlier this year in Washington, where he underwent a hostile, five-hour hearing in Congress. Politicians grilled him on Chinese influence over the business as well as its videos' impact on children's mental health, and the company faces a possible ban ahead of the presidential elections.

TikTok Shop's start in Indonesia, Southeast Asia's biggest economy, came as ByteDance was seeking to expand outside China, where it faces regulatory and economic challenges. In its early days, the global e-commerce project was given the codename “Magellan XYZ” after Ferdinand Magellan, the 16th-century explorer who circumnavigated the globe as he sought a route to the Spice Islands, part of what's now Indonesia.

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The company initially presented it as an underground feature for younger, in-the-know consumers in Indonesia. Through agents, it gathered hundreds of livestreamers, some of them just out of school. The presenters recorded themselves with their own mobile phones to sell items such as Tupperware and sunscreen. Launched during the month of Ramadan while Covid was still keeping many people at home, it was an immediate hit.

The operations have since grown more sophisticated as agencies like Wang's Flame Media connect brands with livestreaming hosts and set up studios. Some businesses are assigned a TikTok account manager who offers advice on content and promotions, while others are sent trained performers, or influencers, to help brands reach millennials and Gen Z-ers. Yet the videos have retained a somewhat amateur and improvised touch compared with the carefully staged accounts on Instagram, and that's considered a big reason for its popularity: shoppers feel a closer, authentic connection with the seller.

Suanto, who goes by Kohcun online, is one of the most prominent Indonesian influencers on TikTok Shop, with his improvised, casual style attracting over a million followers. The 36-year-old was previously known for his gadget reviews on YouTube, but he now livestreams on TikTok Shop for six hours each day, peddling Samsung phones and Louis Vuitton bags. The money he earns from commissions and brand deals is around three times what he got through YouTube, he said.

“TikTok has the big advantage using their creators because it's more entertaining, it's more natural,” said David Nugroho, CEO of Jakarta-based DCT Agency, which manages 600 TikTok personalities and is one of the biggest TikTok Shop partners in the country.

Today, TikTok says it has more than 100 million monthly users in Indonesia, who on average spend more than 100 minutes on the app every day. That virality is a key reason ByteDance became the world's most valuable startup -- worth more than $200 billion (roughly Rs. 82,21,700 crore)-- in a single decade, disrupting social media and internet incumbents such as Meta and Tencent Holdings on both shores of the Pacific.

US social networking sites have tried to launch similar services, but users there never took to live shopping in the way people in China and Southeast Asia have. Instagram, owned by Meta, stopped allowing users to tag products while live streaming in March. YouTube and Amazon have also flirted with offering shopping from live videos, without making much headway.

In Indonesia, TikTok Shop entered a market where consumers were already accustomed to scrolling online catalogs, spending hours on their smartphones for both entertainment and shopping. Local e-commerce pioneers GoTo Group's Tokopedia and Alibaba Group Holding Ltd.'s Lazada, competing for users, spent billions of dollars helping to set up delivery networks across the country. TikTok swooped in and took advantage of all that.

TikTok has also benefited from expertise gained through its sibling app Douyin, ByteDance's China-only video platform that's become a $200 billion (roughly Rs. 82,21,700 crore) shopping destination after expanding its range of services to include food delivery and hotel booking. China is years ahead of the rest of the world in terms of live shopping, helped by lengthy Covid lockdowns that forced people to spend time on their phones, and platforms like Douyin and Alibaba's Taobao.

An important part of that expertise is algorithms. On both Douyin and TikTok, algorithms help serve up the right video clip in front of users to keep them scrolling, and figuring out what kind of merchandise they're most likely to buy.

Key executives of TikTok Shop are from China. Bob Kang, a senior ByteDance executive who travels frequently between Shanghai, Singapore and the US, oversees thousands of employees for both Douyin and TikTok's e-commerce operations. Yu Weiqi, a former assistant to the company's billionaire co-founder Zhang Yiming, runs TikTok Shop's operation in Southeast Asia.

While many of the entrepreneurs working with TikTok Shop are Indonesian like DCT's Nugroho and Pasar Kreatif Digital founder Daniel Tjandra, with strong networks of local influencers as well as businesses, some are from China, bringing with them Chinese capital as well as prior experience with live shopping.

Richard Ma, a 31-year-old marketing specialist in Beijing, is a TikTok Shop seller who coaches a small team of Indonesian live streamers to market things like $40 (roughly Rs. 3289) air fryers and $8 ((roughly Rs. 657) Bluetooth earbuds. Recently, his company has been buying goods from Alibaba's wholesaling site 1688.com, and shipping them to a warehouse near Jakarta. Many of those products are bestsellers in Douyin's burgeoning e-commerce marketplace.

“We can replicate the China model and adapt it to different markets,” he said, while acknowledging his operation was still in the red given the upfront investment and low price tags. With the growing scale of the site, Ma said, he's convinced he'll soon turn a profit.

Crucial US Market
While TikTok's success in Indonesia helps shelter the business from the impact of a possible US ban, there are still uncertainties.

Even with the growing purchasing power of Indonesia's middle class, many of its users are earning far less than US consumers. TikTok's customers in Indonesia spend around $6 (roughly Rs. 493)to $7 (roughly Rs. 575) on average, according to research firm Cube Asia. That's why, despite facing multiple bills in Congress that could ban the app, the US is still so important for TikTok's e-commerce business.

For now, though, entrepreneurs like Wang see only growth ahead for TikTok Shop. As his firm is approaching $1 million (roughly Rs. 8,300 crore) in monthly merchandise sales, he plans to soon move into a newly renovated office building in Menteng, an upmarket neighborhood in the Indonesian capital. He also plans to hire 500 livestreamers by the end of this year. After that, he said, he might move on to other growth markets.

“The first thing is to become the No.1 in Indonesia,” he said. “Then we can try another region, another continent. It's one step at a time.”

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