China’s TikTok, is set to invest $840 million to acquire a significant portion of the e-commerce unit of Indonesian tech conglomerate GoTo, following Indonesia’s ban on online shopping through social media platforms in September.
The new deal seems to be TikTok’s way of reenter the e-commerce service in Indonesia, after being forced to shut it down due to the social media e-commerce ban.
As part of the deal, TikTok will purchase 75.01% of Tokopedia, Indonesia’s largest e-commerce platform and a part of the GoTo conglomerate. TikTok’s total investment in Tokopedia will amount to $1.5 billion, marking a strategic partnership that aims to create an “Indonesian e-commerce champion.” This collaboration will leverage Tokopedia’s established local presence with TikTok’s extensive mass market reach and technological capabilities.
The deal is expected to be finalised by the first quarter of 2024. As part of the arrangement, TikTok will inject its Indonesia business from TikTok Shop into the expanded Tokopedia entity. Additionally, Tokopedia will receive a $1 billion promissory note from TikTok, which can be utilised to fund working capital needs.
The partnership will kick off with a pilot period supervised by relevant regulators, and conducted in close consultation with said regulators. GoTo’s businesses encompass various sectors, including ride-hailing, delivery, and financial services, and the partnership is expected to extend benefits beyond e-commerce to on-demand services and fintech.
TikTok’s foray into the Indonesian e-commerce market aligns with its efforts to monetise its large user base in the country, where over 270 million people are active social media users. TikTok Shop, which allows sellers and brands to sell products directly on TikTok through videos, is currently available in select countries, including the United States, Britain, and Singapore.
While the collaboration marks a significant move in the Southeast Asian e-commerce landscape, shares in GoTo experienced a 13% decline on Monday, representing the largest percentage drop in six months. Some investors opted to take profits following the stock’s rally in anticipation of the deal with TikTok.
The e-commerce industry in Indonesia is projected to grow substantially, reaching approximately $160 billion by 2030, up from $62 billion in the current year, according to a report by Google, Temasek Holdings, and Bain & Co. This partnership positions TikTok to tap into the expanding market and capitalise on the growth potential in Indonesia’s digital economy.