TikTok e-commerce announced its return to Indonesia before " Double 12 " , becoming one of the most exciting events in the cross-border circle in the second half of this year. On December 11, TikTok announced a partnership with Indonesia's GoTo Group. TikTok's Indonesian e-commerce and GoTo Group's e-commerce platform Tokopedia merged into PT Tokopedia. At the same time, TikTok plans to acquire Tokopedia. 75% of the shares, holding control. After the cooperation was established, TikTok e-commerce was re-launched on December 12. This time, TikTok announced plans to make a long-term investment of more than $1.5 billion in Tokopedia. It can be seen that TikTok has invested a lot of money to return to Indonesia . This is not difficult to understand, because Indonesia is the largest market for TikTok e-commerce outside the United States. According to industry sources, in the first half of 2023, TikTok's Southeast Asian e-commerce has achieved a GMV of nearly $9 billion, of which the Indonesian market has contributed $4 billion. Southeast Asia is currently the most successful market for TikTok e-commerce. It is understood that TikTok e-commerce had planned to reach a global GMV of US$20 billion in 2023, mainly relying on the Southeast Asian market. Before the Indonesian site was temporarily closed, TikTok's GMV in Southeast Asia was expected to reach US$15 billion this year. It turns out that TikTok e-commerce has already occupied a considerable share in Southeast Asia and is eroding the market share of Southeast Asia's leading e-commerce platforms such as Shopee and Lazada. According to a Momentum Works report, TikTok Shop's market share in Southeast Asia will reach 13.9% in 2023 , while at the same time, Shopee's share will drop from 46.5% to 45.9%, and Lazada's share will drop from 17.7% to 17.5% . TikTok e-commerce is making every effort to promote its business in Southeast Asia. Since around 2019, the Southeast Asian market has become an emerging market with unlimited potential for Chinese cross-border e-commerce. A large number of sellers have flocked to Southeast Asia, delivering cost-effective products from China to Southeast Asian consumers. After several years of development, with the support of China's e-commerce industry chain, Southeast Asia's e-commerce landscape has also undergone profound changes. E-commerce infrastructure has grown from wild growth to gradual completion, and commodity categories have gone from undersupply to oversupply. Branding and localization have become new focuses for sellers. Southeast Asia is still one of the fastest growing e-commerce markets in the world. When considering emerging markets, many sellers and entrepreneurs will evaluate the feasibility of starting a business in Southeast Asia. The dividends are over, what changes have taken place in the Southeast Asian market this year? What opportunities are there for cross-border e-commerce in Southeast Asia? From general merchandise to high-quality products, the growth path of sellers in Southeast Asia As the most promising emerging market, Southeast Asia began to enter the vision of Chinese cross-border sellers around 2019. 2019-2021 can be called the bonus period of cross-border e-commerce in Southeast Asia. Many sellers entered the cross-border Southeast Asia during this period and made a lot of money. According to the official data of the platform, Shopee's order volume increased by 132.8% in 2020 to 2.8 billion, and the number of orders in 2021 increased by 116.5% year-on-year to 6.1 billion. Another major platform, Lazada, saw its order volume increase by 99% year-on-year in 2021. From 2019 to 2022, the number of monthly active buyers of LazMall increased by more than 3.5 times. During the boom of e-commerce, Chinese sellers seized the opportunity of the Southeast Asian platform bonus. Before 2019, Southeast Asian e-commerce retail sales accounted for only 2-3% of total retail sales, and the e-commerce penetration rate was very low. The supply of goods on e-commerce platforms was less than the demand, and most categories were blue ocean markets. The epidemic has led to the onlineization of consumption, driving the rapid growth of Southeast Asian e-commerce. Similar to the early European and American markets, cross-border sellers in Southeast Asia mainly focus on product selection and distribution, and mainly sell low-priced products. Sellers purchase goods from platforms such as 1688 and Pinduoduo, and then sell them on platforms such as Shopee and Lazada without stocking up. Due to the scarcity of goods, during the traffic bonus period, many sellers can get orders as long as they have high-quality products. In addition, the consumption level in Southeast Asia is lower than that in Europe and the United States, and consumers are more price-sensitive, so the products on e-commerce platforms are closer to the prices of the source factories. The low product premium and the fact that big brands " look down on " the Southeast Asian market have led to the entry of many " novice " sellers into Southeast Asian e-commerce in the past few years . Many cross-border sellers, who have never done e-commerce before, can make a lot of money on Shopee and Lazada by distributing goods . Seller David is a typical growing seller in Southeast Asia. In 2020, he started to try Shopee on the recommendation of a friend. At the beginning, David followed the trend of " brainless distribution " like others , collecting goods from Pinduoduo and 1688 platforms, adding 10% to the price, and selling them on the Shopee platform. David has sold many common e-commerce categories on the market, including men's clothing, women's clothing, women's shoes, children's toys, maternal and child products, 3C products, etc. " We made money from the information gap. At that time, as long as we distributed the goods, we basically got orders. " David said. But David soon discovered that the benefits of distributing goods quickly disappeared. When the market first started to explode, a large number of sellers flooded in, causing the platform traffic benefits to gradually become saturated, and soon entered a price war. By the end of 2020, David found that distributing goods was becoming increasingly difficult. Among many categories, David found that the lamp category sold particularly well and became a hot product. As market competition intensified, David cut off other categories and focused on lamps. However, competition in Southeast Asian e-commerce is more intense than expected. It is difficult to choose a hot product. Once a hot product is found, due to severe product homogeneity competition, many people will follow suit and start a price war. In order to seize the opportunity of the lighting category and occupy the market share of this category, David went to Zhongshan to look for suppliers. At first, many suppliers were unwilling to lower their prices, and David even considered opening his own factory. Finally, he found a suitable supplier who was willing to offer him a low price, and then he established cooperation. " We are now focusing on volume, small profits but quick turnover. " Under the competition of price war, David can only work hard to lower the purchase price. Cost savings are comprehensive. On the logistics and warehousing side, David has tried his best to improve transportation efficiency. In the initial stage of distribution, David adopted the platform's drop shipping method, which had slow transportation time and high cost. In addition, the main payment method in Southeast Asia at that time was COD (cash on delivery), and the transportation time was 10-15 days. Many customers would regret their purchases or forget their orders, resulting in a very low order delivery rate. Later, after specializing in lamps, David began to ship locally from overseas warehouses. At first, he shared containers with others, and in July this year, he started to ship full containers himself. " For example, when shipping to the Philippines, I can save more than 10,000 RMB by shipping in a container instead of shipping in a consolidated container, " David said. " If I still wanted to ship in a consolidated container, I might have been eliminated by the market. Competition is so fierce. " In order to save costs and lower the sales price of goods, David looks for the lowest-priced suppliers himself and keeps reducing costs from the logistics costs. But even on the basis of reducing costs as much as possible, David's profit margin for lamps is still declining . When he first made lamps into hot products, David's profit margin was 40%, but after the price war, David's profit margin is now about 20%, which is half of the original. " But overall sales have increased a lot. " David said. David is currently focusing on the Thai and Philippine markets. He will next expand into the Indonesian market and try to develop more popular products. David's experience is a typical portrait of many Southeast Asian sellers. They start by distributing goods on the platform, earn a certain profit during the platform's bonus period, and when competition on the platform becomes fierce, they switch to categories where they have advantages, seize most of the traffic in this category, and make money by selling at a low profit but high volume. After the price war, most common categories on Southeast Asian e-commerce platforms have basically become saturated, the top sellers have basically stabilized, the market has gradually matured, and there are fewer opportunities for new sellers. " Southeast Asia is no longer suitable for newcomers to enter now, " said David. But the Southeast Asian market is still growing, and opportunities come from finding new growth points. A growing market For sellers, the e-commerce bonus period in Southeast Asia has passed. But objectively, Southeast Asian e-commerce still maintains a very high growth rate, which is why many people think there are still opportunities in Southeast Asia. According to eMarketer's research data, the compound annual growth rate of e-commerce retail sales in Southeast Asia reached 41.4% from 2019 to 2021. Even though the growth rate has declined, Southeast Asia is still one of the fastest growing regions in the world for e-commerce. According to the "2023 Global Retail E-commerce Forecast Report" released by eMarketer, in 2023, the growth rate of the Southeast Asian e-commerce market will rank first in the world, and it has been the fastest growing region in the world for three consecutive years. Among them, the Philippines, Malaysia, Indonesia, and Vietnam are all included in the list of the fastest growing countries in the world for e-commerce, with an average growth rate of 12%. Devin , head of Southeast Asia country operations at Alibaba International Station, told Ennet: "The absolute economic size of the Southeast Asian market is still behind that of Europe and the United States, but it has a fairly large population, so its consumption volume and potential are there. Moreover, the growth rate of e-commerce in Southeast Asia is very fast, and everyone's consumption demands are constantly upgrading." Devin said that there is an obvious trend at Alibaba International Station. With the growth of economic consumption, the local manufacturing industry in Southeast Asia is developing, and more and more factories are purchasing machinery and equipment online at Alibaba International Station. Devin said that the statistics we have seen show that the average age of the population in Southeast Asia is still younger, and overall consumption is showing a trend of getting younger. They like trendy products and have a high desire to shop. From another perspective, there is an obvious ceiling for e-commerce retail in Southeast Asia. Take Indonesia, the largest economy in Southeast Asia, for example. In 2022, Indonesia's per capita GDP was about US$4,800, far lower than China's per capita GDP of US$12,741, and there is a big gap from the high-consumption markets in Europe and the United States. The economic level is limited, so the product logic of China or Europe and the United States cannot be fully copied to Southeast Asia. But objectively speaking, with the growth of e-commerce, the overall e-commerce ecosystem in Southeast Asia is maturing. Take logistics as an example. E-commerce logistics has transitioned from its wild stage in 2019, with many immature " wild " overseas warehouses on the market, to now gradually forming a head effect of logistics companies, and logistics warehousing services have approached the level of China. Xiao Gao, a senior practitioner in Southeast Asian logistics, told Ennet that before 2019, the warehousing in Thailand and Malaysia was mainly " wild " small warehouses. Some sellers with good order volume would build their own warehouses with an area of about 1,000 to 3,000 square meters, and the logistics management was very extensive. In recent years, with the support of capital, logistics service providers have moved China's advanced e-commerce warehousing equipment system to Southeast Asia. " The overall level of logistics infrastructure is now able to serve most e-commerce needs. " Xiao Gao said, taking Thailand as an example, Thailand's logistics level has reached the level of " four links and one reach " in China . Thailand can achieve full delivery within three days; West Malaysia in Malaysia can basically achieve full delivery within three days, and East Malaysia takes longer; the Philippines' full delivery rate is between 3-5 days; and the capital region of Indonesia can achieve full delivery within two days. In terms of price, the price of logistics in Southeast Asia has been pushed down to a very low level. " The price of warehousing has been pushed down to a very low level, basically close to the cost, " Xiao Gao said. From the perspective of a logistics practitioner, Xiao Gao said that the number of orders in Southeast Asia is growing rapidly this year. Since the platform promoted local delivery in 2021 and encouraged platform certification warehouses, the logistics industry has been doing very well from the second half of 2022 to this year. " The number of sellers has increased several times, and in the second half of 2023, many overseas warehouses in several countries such as Thailand, the Philippines and Malaysia are expanding. " Xiao Gao said. The platform encourages local stocking, and the overall e-commerce market size is still growing, including TikTok e-commerce which has brought a large number of orders, so Southeast Asian logistics and warehousing will grow rapidly from 2022 to 2023. According to the "2023 Southeast Asia Digital Economy Report" released by Google, Temasek and Bain , e-commerce consumers in Southeast Asia already account for 50%-60%, among which e-commerce transactions in 2023 accounted for 63.76% of the total e-commerce transactions. With several years of development, the e-commerce ecosystem in Southeast Asia has matured, the e-commerce infrastructure is basically complete, and consumers have formed e-commerce shopping habits. For sellers, Southeast Asia remains an incremental market. " Xiaobai " leaves, e-commerce upgrades Southeast Asia is no longer friendly to newcomers, but more opportunities are waiting for those who are prepared. Jerry is also a seller who entered the Southeast Asian market during the bonus period. Before doing cross-border e-commerce, he was engaged in the new media industry. He started doing cross-border business in Southeast Asia in 2020 , mainly in Thailand and the Philippines, with annual sales of more than 50 million yuan. Jerry believes that under the current market conditions, it is difficult for pure operational sellers to do business, but product sellers and sellers with supply chain advantages still have opportunities. As a platform seller, Jerry's team advantage lies in " extreme product selection " and creating new hot products through market information integration. Most categories have formed a head effect, consumer demand is expanding and iterating, and there are always blue ocean products that have not yet been discovered. The new platform has also brought more business opportunities. Many sellers and practitioners are very optimistic about the growth of TikTok e-commerce in Southeast Asia, believing that content e-commerce will bring a new round of market dividends. Xiao Gao, a logistics practitioner, feels that TikTok e-commerce is growing very fast in Thailand and Malaysia. " The order volume is almost catching up with Lazada. " This is Xiao Gao's intuitive judgment . Xiao Gao's company has contacted the investment manager of TikTok e-commerce. Xiao Gao said that TikTok e-commerce directly targets Shopee in Southeast Asia. They are attracting investment for products that sell well on Shopee, and they want to be cheaper than Shopee. In 2023, TikTok released a set of data, saying that TikTok has 325 million monthly active users in Southeast Asia, a quarter of whom have purchased goods through TikTok Shop. In the Vietnamese market, TikTok Shop has surpassed Lazada in the second quarter of this year and occupied the second largest e-commerce market share. According to the latest news, TikTok e-commerce has set a GMV target of US$50 billion for 2024, with Southeast Asia and the United States as its two core markets. This year, TikTok's GMV in Southeast Asia has exceeded US$13 billion. In December, TikTok e-commerce returned to Indonesia by acquiring Tokopedia, which shows the importance of the Southeast Asian market to TikTok e-commerce.
Dapeng, a DTC brand seller, has been working in the Indonesian market for a year. When he came to Indonesia a year ago, the Southeast Asian market had already passed its bonus period. Dapeng believes that in order to stand out in Indonesia in the future, localization is needed. One is to operate in compliance with regulations, and the other is to enhance brand power. " But the most difficult thing is how to find a localization process that takes into account the market. We must take into account the actual local conditions, and then gradually incorporate the local supply chain and transition from domestic to local. " Dapeng said that, for example, the bright packaging cartons that are very common in China cannot be produced in Indonesia for the time being, so the localization process is challenging. The two months that TikTok e-commerce temporarily withdrew from Indonesia brought great turmoil to many practitioners. According to a survey, after the closure of TikTok Shop in Indonesia, 45% of sellers cleared their inventory, some sellers chose to move to other Southeast Asian countries, and some sellers left the market. In this regard, Dapeng, which also uses TikTok Shop as its primary platform, said that during this turmoil, many of the sellers who were cleared out had low operating efficiency and lost their source of income after the platform was banned. However, Dapeng found platforms and channels to take over sales, and carried out multi-platform and multi-channel operations, which helped it pass the window period smoothly. " What we have seen is that a reshuffle has begun, with a group of sellers being cleared out. But this has also given prepared brands like us more room for growth. I expect that in the first half of 2024, a group of new brands will emerge and change the entire competitive landscape, " said Dapeng. According to the " 2023 Southeast Asia Digital Economy Report", the scale of e-commerce in Southeast Asia is expected to reach US$186 billion in 2025, an increase of approximately 33.8% from US$139 billion in 2023. Xiao Gao told Ennet that some mature Chinese brands have also begun to enter the Southeast Asian market, including Sanban mouthwash and Bear electrical appliances. Some brand products can already sell thousands of orders a day in Thailand. Brands from China are beginning to be welcomed by Southeast Asian consumers. 3C brands such as Xiaomi, OPPO, TCL, and KingSpec are on the best-selling list on Southeast Asian e-commerce platforms. It is understood that in July this year, a sweeping robot from Shenzhen Purrick won the best-selling title in the home appliance category on Lazada Philippines. Whether it is extreme product selection , exploring blue ocean categories, or looking for new platform opportunities, moving towards localization and branding, Southeast Asia always leaves a broad space for determined entrepreneurs.
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