A seller wraps merchandise to send to her customer who she's talking to using livestreaming at a store in the Tanah Abang textile market in Jakarta, Indonesia. TikTok said it will halt its online-retail operation in Indonesia to comply with the country's decision to ban ecommerce transactions on social media platforms. — AP
When Esther Erin Wong found out about Indonesia’s decision to ban ecommerce transactions on social media platforms like TikTok, she said it was quite surprising to see the move being implemented so quickly.
“I can understand from the government’s point of view because I read that retail sales and other marketplaces were drastically affected,” said Wong, the founder of Dododots, a beauty product company.
In an AP report, Indonesia’s Trade Minister Zulkifli Hasan stated that the decision was made to “prevent the domination of the algorithm and prevent the use of personal data in business interests” and “create a fair, healthy and beneficial electronic commerce ecosystem”.
The new regulation, which was announced on Sept 28, came after sellers at Tanah Abang, a wholesale market in Jakarta, complained that businesses have been affected due to customers choosing to buy imported products sold online at much lower prices.
In the same report, Indonesia’s Cooperatives and Small and Medium Enterprises Minister Teten Masduki claimed that TikTok was involved in predatory pricing that harmed local small- and medium-sized businesses and that the new regulation “will justly regulate fair trade online and offline”.
Based on her experience, Wong said social media platforms tend to offer hefty discount vouchers, especially to first-time users, sometimes as much as 90% off.
“Consumers will have this mindset of ‘I won’t buy anything until I see a huge discount on these goods’,” she said.
Loh Chi Fung, who runs the power tools division at Ken Prima Glass & Alum. Acc., said he has seen Facebook live sellers often selling products with lots of free gifts and doing promotional segments with influencers.
He felt that it may not be a sustainable way to do business in the long run.
“Our culture of livestream sellers has embedded the idea that discounts are the norm on live streams,” he said.
Still, Wong believes social media platforms like TikTok can help draw attention to local businesses and create additional revenue streams, claiming that their algorithm “works wonders”.
Her company uses TikTok to promote products by posting multiple times every day, believing that more content would lead to better brand awareness.
“We also have a whole team that streams live daily on TikTok for our brand. While it does help grow followers and sales, I would say it isn’t the main source of sales because live streams can be a hit or miss,” she added.
Under discussion
On Oct 7, Communications and Digital Minister Fahmi Fadzil said Malaysia would study Indonesia’s ban. Subsequently, on Oct 11, he held discussions with TikTok’s global vice president, Helena Lersch, during which he emphasised that TikTok needs to operate in accordance with Malaysia’s guidelines and laws.
“This follows complaints from businesses, the public, and media agencies severely affected by ads placed directly on social media platforms,” he said.
Lee says it’s crucial for sellers to be aware of rules and laws that apply in the markets where they do business. — GRACE LEE HOOI YEAN
He added that TikTok acknowledged shortcomings in its response, mainly due to the absence of representatives in Malaysia. It has also agreed to further discussions.
According to Dr Grace Lee Hooi Yean, economics department head for the School of Business at Monash University, Indonesia’s ban on ecommerce transactions shows why it’s important for ecommerce sellers to not rely on one platform.
“Sellers shouldn’t depend too much on just one site for their online business. It’s important for sellers to use more than one way to sell their products.
“This can be done by using more than one social media site, making your own ecommerce website, or selling through well-known online markets.
“By being present on several sites, sellers can make themselves less vulnerable to sudden changes or bans on the platform,” she said.
As ecommerce trends are always changing, Lee said that things can go wrong very quickly, recommending sellers focus on adopting a growth mindset.
“This mindset enables sellers to adopt a receptive attitude and a readiness to acquire knowledge while engaging with novel platforms, technology and marketing strategies,” she added.
Lee also said it’s crucial for sellers to be aware of the rules and laws that apply in the markets where they do business.
“Laws about ecommerce, taxes, and protecting buyers can change, and sellers need to be able to react to these changes in order to stay in business legally.
“Not knowing about changes to regulations is not a good excuse, so being proactive about following the rules is important,” she added.
Loh acknowledged that ecommerce was a lifesaver during the pandemic when selling through retail shops was not feasible.
He foresees that if Malaysia decides to emulate Indonesia’s move to ban ecommerce transactions on social media, then the impact on his family business will be minimal as they still rely on traditional B2B (business- to-business) strategies.
“I’ve tried various channels, including livestreaming, to promote our products in the past, but they underperformed,” he said.
If there is a ban, Wong said she is prepared to keep her business moving forward, as she has both online and offline channels.
“It’s always best for all businesses to have a plan B. As they say, ‘don’t put all your eggs in one basket’,” she said.
