TikTok to invest US$1.5b in ID eCommerce firm GoTo

Indonesian digital company, GoTo Group (GoTo), has forged a partnership with global short-form video sharing platform, TikTok, in a strategic move to drive long-term growth for Indonesia’s micro, small, and medium enterprises (MSME) sector. The transaction is expected to close in the first quarter of 2024, according to a press release by GoTo.

This follows news of Indonesia’s shut down of TikTok’s eCommerce wing, TikTok Shop, in September 2023, as a result of the country’s decision to ban all eCommerce transactions on social media platforms. At the time, the country gave TikTok Shop Indonesia a tight one-week deadline to become a standalone app.

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Under the new agreement, GoTo’s eCommerce arm, Tokopedia, and TikTok Shop Indonesia will be combined under the existing Tokopedia entity, in which TikTok will take a controlling stake. The shopping features within the TikTok app in Indonesia will be operated and maintained by the enlarged entity.

Additionally, TikTok has committed to invest over US$1.5 billion in the enlarged entity over time, aiming to provide future funding required by the business without additional dilution to GoTo. This arrangement seeks to allow both companies to serve Indonesian consumers and MSMEs more comprehensively.

GoTo will remain an ecosystem partner to Tokopedia through its digital financial services on GoTo Financial and its on-demand services on Gojek. It will also receive an ongoing revenue stream from Tokopedia commensurate with its scale and growth.

The strategic partnership will commence with a pilot period carried out in close consultation with and supervision by the relevant regulators. The first campaign, called the “Beli Lokal” initiative, will be launched on 12 December 2023 to coincide with Indonesia’s National Online Shopping Day (Harbolnas). The government programme was designed to grow Indonesia’s digital economy by supporting local MSMEs. The campaign, which will be available on both TikTok and Tokopedia’s platforms, will promote a broad range of merchants, focusing particularly on Indonesian products.

The partnership aims to transform Indonesia’s eCommerce sector by creating millions of new job opportunities over the next five years. The companies will undertake a series of joint initiatives to support their combined merchants, of which more than 90% are MSMEs.

The initiatives include a holistic programme for skills development and resource provision to build the MSMEs’ capacities for upstream production and selling. Technology centres will also be established across the country to develop local tech talent.

Additionally, the companies committed to providing support in areas such as marketing, branding, and sustainable business practices to support merchants in selling products online. This support will also extend to a global front, with promotions on international markets.

The Indonesian government’s initial decision against TikTok Shop arose from backlash against the company’s unreleased Global Selling Program (also known as Project S) earlier in August 2023. The eCommerce initiative was meant to enable global merchants to easily sell their products to TikTok users globally through TikTok Shop.

This development met with backlash from the Indonesian government on the grounds that the launch could hurt small businesses. While local businesses stood to benefit from TikTok Shop helping their products reach new audiences, the platform’s intentions to introduce a cross-border business service could pose a threat to micro, small and medium enterprises in Indonesia. This was attributed to predatory pricing that could put small businesses at a disadvantage.

Earlier in June 2023, TikTok had been ramping up support for sellers in Southeast Asia, with a multi-million-dollar investment planned to help more than 120,000 small and midsized businessed (SMBs) transition their businesses online and participate in the region’s digital economy.

The US$12.2 million investment would comprise cash grants, digital skills training and advertising credits for SMBs, including micro businesses, in rural and suburban areas, the platform said. A “Support Local” programme was also in the pipeline to empower micro and small businesses, especially those in rural areas, over the next three years. This involved partnering with over 25 government agencies and non-profit organisations across the region to give business opportunities to reach new digital consumers through cash grants, digital skills training, and advertising credits.

Shou Zi Chew, CEO of TikTok, emphasised the company’s commitment to help individuals, communities, and businesses grow and thrive at the time.

"Across Southeast Asia, more than 325 million people come to TikTok every month and 15 million businesses use the platform. The role we've played in expanding economic opportunities, education and community-building in this region and around the world is immense,” he added.

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