Should Malaysia follow in Indonesia's steps with TikTok Shop's ban?

The Malaysian government is mulling and reviewing the strong action taken by the Indonesian government to ban eCommerce transactions on social media platform TikTok.

The ByteDance-owned social media channel was forced to suspend its online shopping service in Indonesia, one of its biggest markets, as government officials looked to protect local physical and online retailers. TikTok Shop Indonesia was given a tight one-week deadline to become a standalone app and separate itself from the main app.

Since the enforcement in Indonesia, Communications and Digital Minister Fahmi Fadzil shared that the Malaysian government was watching the space, and acknowledged that many Malaysians use the TikTok Shop platform to sell goods.

According to reports by MalayMail the minister said he had received complaints and concerns around the move from the public, while some large stores raised issues around price competition on products sold via the platform. He urged TikTok to give an explanation to the “issue of predatory pricing, which is threatening local entrepreneurs in Indonesia.”

In Malaysia, TikTok Shop has been actively amping up its presence. Just last week, it revealed that it intends to push out a series of marketing and promotional support tools for its merchants. This includes more subsidies so that more entrepreneurs and creators can kickstart their eCommerce journey or expand their businesses. These updates were announced at the TikTok Shop Summit 2023.

Sandeep Joseph, CEO and co-founder of Ampersand Advisory, the winner of the Overall Creative MARKie and Overall Media MARKie for Malaysia 2023, said Indonesia has curtailed TikTok almost overnight, to protect its citizens who sell in the brick-and-mortar world.

“It’s ironic because Indonesia was one of the first countries where TikTok launched TikTok Shop, placing huge hopes on the app’s potential to become a successful retail platform,” he said, adding:

The app is possibly now too successful and has encountered opposition.

While the ministry of trade said the new rules, which essentially mandate the separation of eCommerce and social media, are meant to protect local merchants, prevent algorithms from dominating the market and stop the use of personal data for business purposes, Joseph added that real question is why the ban is on one social platform alone?

“TikTok has less than 5% of eCommerce market share in Indonesia. Why are American owned social commerce platforms such as Instagram and Meta allowed to flourish?”

As Malaysia potentially explores this move, Joseph shares two key points to be considered:

1. What problem are we trying to address with a ban? Is it the problem of small retailers losing business?
   
   “The digital transformation of retail is inevitable and irreversible. Is it better to train and guide small independents to use these platforms to reach new markets and audiences? Potentially small retailers could export or find new revenues, and retailers since the days of the pyramids, always need to adapt and compete in business,” he said.
   
   
2. Banning TikTok shop or separating it from the social platform doesn’t reduce all the volumes of ecommerce happening on other platforms.

“Southeast Asian economies should see how to grow from ecommerce and help brick and mortar players migrate online at least in part,” he said, adding that to its credit. 

The Malaysian government is examining the situation and is not making knee- jerk decisions.

“The pandemic, as one wit said, was the greatest digital transformation officer of all. By trying to curb social commerce, we may be trying to do the impossible and turn back the tide of change,” he said.

Newly appointed CEO of Havas Malaysia, Nizwani Shahar said that the move has both short-term and long-term implications for TikTok. In the short term, there might be a reduction in revenue, especially if TikTok Shop has been contributing to the platform’s earnings.

Reported on DealStreetAsia, according to  Momentum Works report titled “The TikTok shop playbook: How ecosystem stakeholders should respond to the eCommerce insurgent” , TikTok Shop has demonstrated impressive growth in Southeast Asia since 2021. The platform grew from US$0.6 billion GMV in 2021 to US$4.4 billion in 2022 and is on track to hit the US$15-billion target in 2023.

However, in the long term, it may strengthen TikTok's position as a social media platform by allowing it to focus on its core function of content sharing and engagement. It could also improve the platform's reputation in terms of user safety and data privacy, which could attract more advertisers and users over time.

According to Nizwani the reason why the governments are now scrutinising the platform is because of the concerns around consumer protection, fraud, and the potential for counterfeit or unsafe products being sold on these platforms. Moreover, there are concerns regarding data privacy and security, especially given the vast amount of user data that social media platforms collect.

“Last but not least, the potential for misinformation and the spread of harmful content on these platforms has caught the attention of governments worldwide,” she said, adding:

The effectiveness of such measures will depend on how well they are implemented and their impact on various stakeholders, including the platform itself and the merchants who use it for their businesses.

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