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TikTok-Tokopedia union may elevate Shopee and Lazada

Published on January 10, 2024


According to research from Momentum Works, Shopee and Tokopedia led the Indonesian e-commerce sector with 36% and 35% market shares, respectively, in 2022. They created a significant gap with other players, such as Lazada, Bukalapak, and Blibli, which only held 10% or less of the market.

However, TikTok Shop, which had only a 5% market share by the end of the previous year, according to the report, experienced a significant surge in 2023. As such, the recent union of TikTok Shop and Tokopedia may well propel the merged entity into the position of market dominance in Indonesia.

The prospect raises questions on how the current champion, Shopee, as well as Alibaba-backed Lazada, may respond to this deal.

On a recent episode of Indonesia Digital Deconstructed, Adrian Li ⁠and Leighton Cosseboom of AC Ventures spoke with Momentum Works’ CEO Jianggan Li to discuss the potential future of the Indonesian e-commerce landscape after the TikTok-Tokopedia deal and possible counter-moves by Shopee and Lazada.

Adrian explained that Lazada might be less affected by the merger between TikTok Shop and Tokopedia, as most of its revenues come from LazMall and the brands’ official online stores, which feature original products and tend to be more expensive.

Adrian noted, “The products offered on LazMall are quite distinct from those typically sold on social commerce and Tokopedia. However, Lazada will probably have to stomach another phase of cash investment to build their businesses around Indonesia’s price-sensitive population.”

Products on TikTok Shop and Tokopedia are more similar to those on Shopee. However, Adrian opined that the strong and competent team at Shopee, along with its parent company Sea Group, would almost surely figure out ways to move forward, as competition usually breeds more innovation.

He also pointed out that the total penetration of e-commerce across Indonesia is still relatively low compared to China.

“There is huge headway to continue to grow. So, I think there is still ample room for all players to continue to innovate and serve the market,” said Adrian.

Jianggan said that Shopee may be in a disadvantageous position because it does not have as much cash as TikTok’s parent company ByteDance has in China. However, he agreed that such competition would still force the firm to think more creatively and likely open up more interesting opportunities.

“Over the years, Shopee has built a pretty formidable ecosystem in Indonesia, including logistics, digital financial services, lending, and consumer credit banking. Maybe it is time to think about how to integrate all these different pieces and create more value, instead of competing head-on just in e-commerce per se,” said Jianggan.

Jianggan also explained that based on the data Momentum Works has been tracking for the last two years, TikTok Shop did not impact Shopee’s user base and gross merchandise value. Thus, the entire e-commerce landscape in Indonesia still has a lot of upside, and having a bit of competition may push the whole ecosystem to mature.

“But of course, in the short term, because of this competitive pressure, the potential growth of each e-commerce firm now has to be shared with another bigger player,” Jianggan explained.

From east to west

Following the TikTok-Tokopedia deal, Leighton tossed up an idea about a possible partnership between Shopee and other major social media platforms, such as YouTube or Instagram, as a counter-response.

“They will have to respond with their own live-streaming plays, right? But I think they probably would not be able to create something in-house that could even stand a chance to rival TikTok,” he said. 

Jianggan agreed that there is a possibility of that, as platforms like YouTube and Instagram have not been optimized for commerce until now. However, he said that it depends on how the parties could come together, including what the concerns are and how the leadership can focus after such a deal.

“I won’t speculate about who may be discussing deals, but I definitely see a lot of possibilities,” Jianggan said.

Adrian said that there is a possibility that the TikTok-Tokopedia deal would encourage Western social media platforms, such as YouTube, Instagram, and WhatsApp, to consider live streaming or short video as a way to enter commerce in Indonesia.

“These are companies that predominantly generate revenues from media and advertising and haven’t really embraced commerce. Will a deal like this help them understand the importance of commerce as a third leg, especially in markets like Indonesia? It would be an interesting development if the deal catalyzed that type of partnership,” he said. 

Adrian pointed out that in the past, western tech companies usually brought what works in their country to eastern regions. However, the trend has been reversed in recent years with the emergence of gaming and short video apps from China that were copied into the US. Uber Eats, the currently popular food delivery service in the US, was likely even inspired by players like Gojek and Grab in Southeast Asia.

“Likely for innovations like these, they will not experiment in the US. They would experiment in emerging markets because it’s a smaller pool and they know that the audience is already receptive to this. So, some of these developments may first get piloted here and then ultimately make their way to the US,” Adrian concluded.

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