TikTok Shop giving Shopee, Lazada a run for the money

This development was unveiled in an annual study by Singapore-based consultancy Momentum Works, which was published in Nikkei Asia on Tuesday.

TikTok’s e-commerce arm, TikTok Shop, saw a remarkable surge in its gross merchandise volume (GMV), nearly quadrupling from US$4.4 billion in 2022 to $16.3 billion in 2023.

This dramatic growth, combined with TikTok’s majority stake acquisition in Indonesia’s Tokopedia last year, has propelled the platform to second place in the ASEAN e-commerce market, commanding an estimated 28.4% share in 2023.

The report indicates that the total e-commerce GMV in Southeast Asia reached $114.6 billion in 2023, marking a 15% increase from the previous year.

While Shopee maintained its market leadership with a 48% share, Lazada slipped to third place with 16.4%.

TikTok and Tokopedia each claimed 14.2% of the market. According to the report, Tokopedia is now TikTok’s “shop” service in all but name and branding, and “integration is happening post-Indonesian elections with TikTok Shop team replacing systems and processes gradually”.

The report added that while “TikTok Shop has yet to touch Shopee’s core, it has taken a large portion of Shopee’s potential growth”.

Agile moves
Momentum Works also noted that TikTok Shop’s ability to find a solution to the ban in Indonesia in just two months occurred remarkably quickly. The move transformed Tokopedia’s parent GoTo group’s stakeholders, including some powerful business interests in Indonesia, from adversaries to allies, demonstrating TikTok Shops’ agility and rapid learning.

The Chinese short video platform turned e-commerce facilitator wasn’t the only one looking for a solution from the strategic partnership.

Tokopedia's GMV and market share were declining, its parcel volume remained stagnant even during the pandemic boom, and its cut of third-party sales on the platform was significantly lower than its competitors, owing in part to the app's proliferation of less profitable goods and services.

In a bold move to diversify its offerings, TikTok launched a pilot program for local services in Indonesia and Thailand, marking a significant expansion beyond its core short-video platform. The initiative focuses on group-buying packages, initially for dining merchants, leveraging TikTok's app to recruit both merchants and consumers.

 
Fast expansion
To support this expansion, TikTok is hiring across the region and building infrastructure to address local challenges such as supply chain management and regulatory compliance. This diversification comes as TikTok faces restrictions in other markets, particularly in the United States, where recent legislation requires the app to be sold to a US-approved buyer or face a potential ban.

TikTok's move into local services demonstrates its adaptability and innovative approach to growth, especially in Southeast Asia. This strategy could prove crucial for the platform's long-term sustainability as it navigates global regulatory challenges and seeks new revenue streams.

New player in the market
Notably, Pinduoduo's global arm, Temu, has also entered the Southeast Asian market, though its primary focus remains on more affluent regions like North America and Europe.

The report also highlighted Vietnam and Thailand as the fastest-growing e-commerce markets in the region. Indonesia, however, continues to dominate as the largest e-commerce market, contributing a substantial 46.9%  to the region's total GMV.

This shift in the e-commerce landscape underscores the growing influence of social media platforms in online retail and signals intensifying competition among major players in Southeast Asia's digital marketplace.