TikTok’s Live Streaming Market Emerges as a Threat to Amazon, Expected to Hit $20 Billion in Value

TikTok’s Live Streaming Market Emerges as a Threat to Amazon, Expected to Hit  Billion in Value

Inside a shop in northeast Jakarta, dozens of vendors take turns selling 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 about the latest markdown of vitamin pills.
This is not a noisy flea market. It’s a live-streamed market inside TikTok and a gold rush for entrepreneurs looking to make their 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, the TikTok Shop is the fastest growing resource with a growing fan base in Southeast Asia.

Its success in the region is crucial for TikTok as it faces a possible US ban over national security concerns. It also provides the company with a model for taking on Amazon.com in a way no social media company has attempted before, as long as it is allowed to continue operating in the United States.

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

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

Hank Wang, who manages a cast of about 50 livestream presenters at the bustling Jakarta store, believes he has the power to transform the retail industry and turn entrepreneurs like him into the next barons of e-commerce.

“I want to become the next Forrest Li,” said the 33-year-old former venture capitalist, referring to the Chinese-born founder of Sea, Southeast Asia’s biggest internet company. 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 live-stream presenters. He moved to Jakarta from Shanghai seven months ago and founded his company, Flame Media, despite not speaking the local language. “TikTok and social commerce will spawn the next generation of tech unicorns in this region,” he said.

In June, TikTok CEO Shou Zi Chew visited Jakarta and pledged 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 top Indonesian minister and visited local family stores that had TikTok accounts.

That was a marked contrast to his experience earlier this year in Washington, where he endured a hostile five-hour congressional hearing. Politicians questioned him about Chinese influence over the business, as well as the impact of his videos on children’s mental health, and the company faces a potential ban ahead of presidential elections.

The start of the TikTok Shop in Indonesia, Southeast Asia’s largest economy, came as ByteDance was looking to expand outside of China, where it faces regulatory and economic challenges. In its early days, the global e-commerce project was codenamed “Magellan XYZ” in honor of Ferdinand Magellan, the 16th-century explorer who circumnavigated the globe in search of a route to the Spice Islands, part of what is now Indonesia.

The company initially pitched it as an underground resource for younger, more informed consumers in Indonesia. Through agents, it brought together hundreds of livestreamers, some of them fresh out of school. The presenters recorded themselves with their own cell phones to sell items like Tupperware and sunscreen. Released during the month of Ramadan, while Covid was still keeping many people at home, it was an immediate success.

Since then, operations have become more sophisticated as agencies like Wang’s Flame Media connect brands with live broadcast hosts and set up studios. Some businesses are assigned a TikTok account manager who offers advice on content and promotions, while others are assigned trained artists or influencers to help brands reach millennials and Gen Z. However, the videos have retained a somewhat amateurish and offhand feel compared to the carefully staged Instagram accounts, and this is considered a big reason for their popularity: buyers feel a closer, more authentic connection with the seller.

Suanto, known as Kohcun online, is one of the most prominent Indonesian influencers on the TikTok Shop, with his offhand, casual style attracting over a million followers. The 36-year-old was previously known for his gadget reviews on YouTube, but now he goes live on the TikTok Shop for six hours a day, selling Samsung phones and Louis Vuitton handbags. The money he earns from commissions and brand deals is about three times what he makes on YouTube, he said.

“TikTok has the great advantage of using its creators because it’s more fun, it’s more natural,” said David Nugroho, CEO of Jakarta-based DCT Agency, which manages 600 TikTok personalities and is one of the largest TikTok Shop partners in the country.

Today, TikTok claims to have more than 100 million monthly users in Indonesia, who spend an average of more than 100 minutes on the app every day. This virality is one of the main reasons why ByteDance became the world’s most valuable startup – worth over US$200 billion (approximately Rs. 82,21,700 crore) – in a single decade, revolutionizing social media and internet operators like Meta and Tencent Holdings on both sides of the Pacific.

Social networking sites in the United States tried to launch similar services, but users never enjoyed shopping like people in China and Southeast Asia. Instagram, owned by Meta, stopped allowing users to tag products during live streaming in March. YouTube and Amazon have also flirted with offering purchases from live videos, without going very far.

In Indonesia, TikTok Shop entered a market where consumers were already used to browsing catalogs online, spending hours on their smartphones for both entertainment and shopping. Tokopedia of GoTo Group, a local pioneer, and Lazada of Alibaba Group Holding Ltd., competing for users, have spent billions of dollars helping to establish delivery networks across the country. TikTok dove in and capitalized on it all.

TikTok has also benefited from experience gained through its sister app Douyin, ByteDance’s China-exclusive video platform that has become a US$200 billion (about 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 the lengthy Covid lockdowns that have forced people to spend more time on their phones and platforms like Alibaba’s Douyin and Taobao.

An important part of this experience is the algorithms. On both Douyin and TikTok, algorithms help pop the right music video in front of users to keep them scrolling and figuring out what kind of merchandise they’re likely to buy.

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

While many of the entrepreneurs working with the TikTok Shop are Indonesian, such as 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 Chinese capital and previous live shopping experience with them.

Richard Ma, a 31-year-old marketing expert in Beijing, is a TikTok Shop salesperson who trains a small team of Indonesian streamers to market items like $40 hot air fryers and $8 Bluetooth headphones. bestsellers in Douyin’s burgeoning e-commerce market.

“We can replicate China’s model and adapt it to different markets,” he said, although he acknowledged that his operation was still in the red due to initial investment and low prices. With the site’s growing scale, Ma said, he is convinced it will soon turn a profit.

US Crucial Market
While TikTok’s success in Indonesia will help shield the business from the impact of a potential 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 customers in Indonesia spend around $6 (approximately Rs. 493) to $7 (approximately 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 to TikTok’s e-commerce business.

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

“The first thing is to become number 1 in Indonesia,” he said. “Then we can try another region, another continent. It’s one step at a time.”

© 2023 Bloomberg LP

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