In a strategic move to re-enter Southeast Asia’s largest economy, China’s TikTok is set to invest a substantial $840 million to acquire a majority stake in Tokopedia, the prominent e-commerce platform of Indonesian tech conglomerate GoTo. This collaboration, announced after TikTok was compelled to shutter its Indonesian e-commerce venture following a nationwide ban on social media platform-based online shopping, marks a significant step toward reviving its presence in the region.
The comprehensive deal encompasses a $1.5 billion investment by TikTok in Tokopedia, positioning the Chinese social media giant as the majority stakeholder with a 75.01% ownership. The injection of TikTok Shop’s Indonesia business into the expanded Tokopedia entity further solidifies this partnership.
TikTok and GoTo Deal
GoTo CEO Patrick Walujo expressed enthusiasm about the collaboration, stating, “We are creating an Indonesian e-commerce champion, combining Tokopedia’s strong local presence with TikTok’s mass market reach and technological prowess.”
“GoTo now sits on a much stronger foundation and we expect this partnership to bring many benefits not just for e-commerce, but for our on-demand services and fintech businesses as well,” he said.
The strategic alliance is designed to navigate regulatory frameworks, with both companies committing to a pilot period conducted in close consultation and under the supervision of relevant regulators. This approach underscores the commitment to compliance and cooperation with Indonesian authorities.
TikTok’s foray into the Indonesian market faced a setback in September when the country imposed a ban on online shopping through social media platforms, citing concerns about protecting smaller merchants and user data. The closure of TikTok Shop followed suit.
The joint statement from TikTok and GoTo highlighted the establishment of an “Indonesian e-commerce champion” and emphasized the synergy between Tokopedia’s local strength and TikTok’s extensive market reach.
With businesses ranging from ride-hailing and delivery to financial services, GoTo aims to leverage this collaboration to strengthen its foundation. The $1.5 billion investment by TikTok not only revives Tokopedia but also promises positive implications for GoTo’s broader portfolio.
While officials at Indonesia’s trade ministry remained silent on the matter, the implications of this colossal investment are substantial. With over 125 million users in Indonesia, TikTok is eyeing the translation of its massive user base into a formidable source of e-commerce revenue in a country where over 270 million people are active social media users.
TikTok Shop, the platform’s e-commerce service, currently operates in select countries, including the United States, Britain, and Singapore. The acquisition of a 75.01% stake in Tokopedia signals TikTok’s ambitious plans to expand its e-commerce footprint in one of Southeast Asia’s largest economies.
The deal, slated to conclude by the first quarter of 2024, involves TikTok providing Tokopedia with a $1 billion promissory note, earmarked for addressing working capital needs. The collaborative effort will navigate regulatory complexities during a pilot period, conducted with the close consultation and supervision of relevant regulators, as emphasized in the joint statement by the companies.
Tokopedia, a key player in Indonesia’s e-commerce landscape, faces competition from Shopee, owned by Singapore-based Sea, and Lazada, owned by Chinese e-commerce giant Alibaba. Despite registering a 14% increase in half-year gross revenue to 4.5 trillion rupiah ($288 million) in August, Tokopedia reported a sharp narrowing of its underlying loss from 3.7 trillion rupiah a year ago to 752 billion rupiah.
However, the market response to the deal was mixed, with shares in GoTo plummeting by 13% on Monday—their most substantial percentage decline in six months. Some investors opted to take profits following a rally in the stock, fueled by expectations of a collaboration with TikTok.
The Indonesian e-commerce sector is poised for significant growth, projected to expand to approximately $160 billion by 2030 from its current value of $62 billion this year, according to a report by Google, Singapore state investor Temasek Holdings, and consultancy Bain & Co.