Out of hope in the US, TikTok focused on reaching SEA, trying to make the position of Shopee and Lazada shaken

Far from the tense atmosphere of his testimony before the US Congress, TikTok CEO Shou Zi Chew drew a passionate crowd when he attended an event held in Indonesia this month. In a traditional shirt, amid disco lights and vibrant music, the CEO announced that he would “invest billions of dollars” in Southeast Asia. In which, Indonesia alone will receive 10 billion USD in investment within 5 years.

“The Tiktok platform in Indonesia is now too big and popular. No politician wants to touch this platform because they could lose votes from young voters,” said Associate Professor Ross Tapsell of the Australian National University.

This scene is in stark contrast to March – the day Shou Zi Chew in a suit faced a series of questioning questions from US officials. His hugely popular short-form video app, owned by China’s ByteDance, has been called by various names, from surveillance tools to “cancer”.

Disgraced in the US, TikTok ventured into Southeast Asia – where the nearly 700 million population could influence the success or failure of the application. ByteDance, the parent company of Tiktok, is looking to justify its $300 billion valuation, making itself the world’s most valuable private startup.

This makes the hunt for revenue in Southeast Asia extremely important. The app only launches regionally in 2021, but the TikTok Shop is already set to more than double its e-commerce revenue. Total GMV merchandise sales are expected to reach $15 billion this year, up from $4.4 billion last year.

“This year is indeed the year of Tiktok. The size of their customers and their willingness to spend are unmatched by any other app,” said one user.

A TikTok Shop representative said the app will “continue to grow rapidly” as more and more sellers use the platform to reach new customers. In 2022, TikTok Shop expands to 6 Southeast Asian countries, including Singapore, Malaysia, Indonesia, Philippines, Vietnam and Thailand.

“TikTok continues to grow rapidly in Southeast Asian countries. We estimate that TikTok’s gross merchandise value (GMV) by 2023 will reach 20% of Shopee’s,” said Shawn Yang, an analyst at Blue Lotus Research Institute.

However, according to Jonathan Woo, senior analyst at Phillip Securities Research,

TikTok Shop is “still very young” and is in “the stage of burning money to develop”. Moreover, the TikTok Shop itself is also facing many concerns surrounding poor quality sales. The algorithm recommends videos from strangers, so new accounts can immediately go viral, thereby helping shop owners reach audiences faster than Instagram and YouTube – where each account must have a certain number of followers. .

“Overall, TikTok Shop has great potential like Shopee and Lazada, although this could take quite a few years,” Woo said.

However, it is undeniable that the special attraction of the TikTok Shop shopping application in particular and TikTok in general. FT recently cited an Indonesian account named @Octaviana_tas_grosir with 3 million followers. This user took advantage of the large following to open 3 warehouses and create a lot of jobs for everyone.

TikTok, with its ambitious goals, is still predicting tremendous growth in Asia. An executive in the region said the $15 billion figure might be “modest” compared to the app’s appeal today.

“TikTok is currently spending an incredible amount of money to incentivize both buyers and sellers,” said Jonathan Woo, estimating incentives to be between $600 million and $800 million a year.

Of course, TikTok still faces some challenges in Asia, such as getting out of the comfort zone of cheap products.

“They have strengths in cosmetics and beauty products, not electronics or household goods with high profit margins. They have struggled despite strong efforts,” said an executive at an e-commerce platform, adding that the heavy reliance on third-party delivery is seen as a weakness of the TikTok Shop. .

Currently, data from web analytics company Similarweb shows that Shopee remains the largest online marketplace in Southeast Asia, holding 30%-50% of traffic across the region over the past 3 months. Lazada holds second place with 10%-30% of traffic.

For comparison, TikTok Shop’s current GMV is only a fraction of that of Shopee and Lazada. Shopee’s GMV will reach $73.5 billion by 2022, while Lazada’s GMV is $21 billion as of September 2021, according to CNBC. Shopee is currently expanding its operations in Malaysia after withdrawing from some European and Latin American markets.

By: FT, CNBC