TikTok Shop's emergence as a formidable contender in the Southeast Asian e-commerce landscape has garnered attention and sparked concerns among major players in the region. As ByteDance, the parent company of TikTok, expands its focus on markets outside the U.S. and India, TikTok Shop has become a key component of their strategy to diversify revenue streams.
TikTok Shop, the e-commerce marketplace integrated within the popular short video app TikTok, allows users to seamlessly discover and purchase products featured by merchants, brands, and content creators. With ByteDance's substantial resources and the massive user base of TikTok, the platform has rapidly gained traction in the region.
Expanding its presence in 2022, TikTok Shop strategically entered six Southeast Asian countries: Singapore, Malaysia, Indonesia, the Philippines, Vietnam, and Thailand. This move placed the platform in direct competition with established e-commerce players like Shopee and Lazada, who have long dominated the market.
Analysts, such as Shawn Yang from Blue Lotus Research Institute, estimate that TikTok's GMV in 2023 could reach up to 20% of Shopee's GMV, which indicates the scale of TikTok Shop's potential impact on the industry. This estimation prompted Shopee to proactively increase sales and marketing efforts to defend its market share.
Although specific figures were not disclosed by TikTok, internal data obtained by The Information revealed a remarkable surge in TikTok Shop's GMV in Southeast Asia. In 2022 alone, the GMV skyrocketed more than four times to $4.4 billion. Moreover, TikTok Shop has set an ambitious goal of achieving a GMV target of $12 billion by 2023, signaling the platform's determination to solidify its position in the market.
However, it is important to note that despite its impressive growth, TikTok Shop's current GMV remains significantly lower than that of Shopee and Lazada. Shopee, for instance, amassed a staggering $73.5 billion in GMV in 2022, solidifying its status as the largest online marketplace in Southeast Asia. Similarly, Lazada, holding the second position, generated a GMV of $21 billion in the year leading up to September 2021.
Nevertheless, industry observers consider TikTok Shop a rising threat due to its massive user base and the unique advantage it possesses in terms of content-driven impulse buying. With 135 million TikTok users in Southeast Asia alone, the platform has an extensive reach and a significant influence over consumer behavior, especially among the region's sizable youth population. Indonesia, with its 113 million TikTok users, stands out as a particularly crucial market.
The impact of TikTok Shop's entry into the e-commerce landscape is already being felt. A survey conducted by Cube Asia indicated that consumers who engage with TikTok Shop are decreasing their spending on other platforms such as Shopee, Lazada, and even offline retail options. This trend poses a challenge to established players who must adapt to retain their customer base and remain competitive.
Sea Group, the owner of Shopee, is relying on the e-commerce platform to bolster its financial performance, especially as its gaming arm, Garena, faces revenue decline due to various factors. Shopee's expansion in Malaysia and its strategic developments in Brazil reflect its efforts to strengthen its market position amidst emerging competition.
While TikTok Shop's rapid growth and aggressive approach to attract buyers and sellers are notable, concerns have been raised about the sustainability of such spending. The platform's current incentives and promotions might not be feasible in the long run, and it remains to be seen how TikTok will balance its investment in the shopping experience with generating profitable returns.
As the e-commerce landscape in Southeast Asia continues to evolve, both Shopee and Lazada are closely monitoring the rise of TikTok Shop. These established players have refrained from commenting on the competition thus far, leaving the industry speculating about their future strategies to maintain their dominance in the market.
It's worth noting that TikTok Shop's expansion comes at a time when TikTok itself is facing scrutiny in its largest market, the U.S., due to escalating geopolitical tensions and concerns about data privacy. However, these challenges have not deterred TikTok's aggressive global expansion efforts, as the company continues to tap into new markets and explore alternative revenue streams.
Source: CNBC | Statista