While the Temu app is available for downloads on smartphones in Indonesia, the app is not operational. - Reuters
JAKARTA: Despite its strong performance in other parts of the region, Chinese e-commerce platform Temu has been struggling to gain a foothold in Indonesia, South-East Asia’s biggest economy.
Several Indonesian officials said last week that Temu would “not be given a chance” to operate in the country, citing concerns over potential harm to local businesses.
Despite the frosty reception, Temu is unlikely to give up its quest to break into the Indonesian market, given the vast potential of the archipelago.
Analysts told The Straits Times that they expect Temu to work out a way to address Indonesia’s concerns about protecting its home-grown businesses, similar to how TikTok managed to start operating its e-commerce arm there in 2023.
While the Temu app is available for downloads on smartphones in Indonesia, the app is not operational.
Since applying for a licence to operate in the country in 2022, Temu has been rejected three times.
Officials have not shown any support for the platform so far. Minister of Communications and Informatics Budi Arie Setiadi said on Oct 1 that Temu could hurt Indonesia’s economy and society.
“We will not give it the opportunity. The public will lose out, and we want the digital space to make the public productive and more profitable,” he said.
Both the Ministry of Trade and the Ministry of Cooperatives and Small and Medium-Sized Enterprises (SMEs) have made similar remarks in recent months. The latter announced on Oct 7 that the Temu app will be taken down from Apple’s App Store and Google’s Play Store. However, as of Wednesday (Oct 9), the app remains available.
Temu has not made any public statement specifically addressing Indonesia’s rejection of its applications for a licence. It has also not responded to requests for comment from The Straits Times.
Launched in 2022 by Chinese firm Pinduoduo, or PDD Holdings, Temu made a quick impact on the international e-commerce market, amassing over 120 million downloads in the United States as at 2023. Reports indicated that its stock surpassed that of Amazon.
Temu currently operates in more than 60 countries, including the US, France, Germany, Australia and New Zealand. In South-East Asia, Temu is available in Brunei, Malaysia, the Philippines, Thailand and Vietnam.
But it is not yet in Indonesia, which, according to a report, is the largest e-commerce market in the region. The archipelago contributed 46.9 per cent of the US$114.6 billion (S$149.3 billion) total gross merchandise value of South-East Asia, said the report released in July by Singapore-based venture outfit Momentum Works (MW).
Temu’s appeal lies in the extremely low prices of its goods, enticing some people to wait nearly a month for delivery, according to Temu customers.
A report from The Guardian newspaper in November 2023 found that items like socks, re-usable drinking straws and kitchen utensils were available on the app at low prices. For instance, a large novelty kitchen spoon that would have retailed for up to £14 (S$24) in Britain was being sold for less than 10 per cent of the price at £1.25.
What sets Temu apart from Taobao, another popular online shopping service from China, is that Temu’s vendors are mostly factory stores offering lower prices for mass-produced goods, while Taobao sellers are often independent businesses.
Temu’s factory-to-consumer business model allows it to bypass resellers, with most of its products sourced from major Chinese production hub Guangzhou.
This is where the threat to Indonesia lies, said Jiayu Li, a senior associate at policy advisory firm Global Counsel who specialises in the China market.
“Temu’s success is built on offering cheap, unbranded products, with the platform continually pressuring sellers to undercut competitors and reduce prices,” she said.
“This approach is highly disadvantageous to small and medium producers and could be particularly damaging for small businesses in Indonesia.”
In 2023, Indonesia introduced stricter e-commerce guidelines to ensure fairness in pricing and increased accountability for online platforms. This came after President Joko Widodo in 2021 urged consumers to shun imported products, amid concerns about predatory pricing on such platforms, including those selling Chinese goods.
Such predatory pricing, coupled with Temu’s offerings of free shipping and discounts, is unhealthy for Indonesia in the long-term, said Muhammad Habib Abiyan Dzakwan of Indonesian think-tank Centre for Strategic and International Studies (CSIS).
“There is a possibility for Indonesia to be much reliant on imported cheap products, reducing Indonesia’s trade surplus while also pushing down competitiveness of local SMEs,” he added.
Li believes that Temu is unlikely to give up on Indonesia, noting how the country’s large, young, and price-sensitive population is an attractive market.
“Among Chinese companies expanding globally, there is a saying that one cannot capture the South-East Asian market without winning over Indonesia,” she said.
Li Jianggan, chief executive of MW, agreed that Temu is not likely to give up so easily, given the vast potential of the Indonesian market.
“On top of all the development and investments over the last few years by various players and investors, the e-commerce infrastructure and ecosystem education have already been established in the market,” said Li.
Habib added that geopolitical factors also mean that Temu will not give up on Indonesia
“Temu values Indonesia not only because of the notable size of our market, but also because of their growing struggle to operate in developed countries who impose stringent geopolitical scrutiny and due diligence against China-affiliated entities,” said the researcher at CSIS’ department of international relations.
Temu is likely to come up with a way to soothe the concerns of Indonesia while still being able to operate in the country, the observers predicted.
Li expects PDD Group to allocate more resources to its effort to get Temu into Indonesia.
This move, she said, will be bolstered by Beijing, which in June issued guidelines promising increased financing and policy support for cross-border e-commerce and overseas warehouse construction.
Habib and Li both drew a comparison between Temu’s experience and that of TikTok Shop, which initially faced resistance due to Indonesian laws prohibiting social media platforms from selling items, amid concerns about disrupting the local e-commerce ecosystem.
TikTok Shop eventually complied with the regulations by merging with Indonesian shopping platform Tokopedia in December 2023.
“It is necessary for Temu’s management to propose a solution that will allow their entry, but also address the legitimate concerns of the authorities, just like TikTok Shop did,” said Li. - The Straits Times/ANN
