TikTok's livestreamed marketplace appears as a danger to Amazon, with a valuation of $20 billion expected

Hundreds of salesmen peddle cosmetics, contact lenses, and hair accessories inside a shophouse in Northeast Jakarta. A lady assists a potential client in selecting the appropriate lipstick colour for her skin tone, as a man shouts out the newest sale on vitamin pills.

This is not a rowdy flea market. TikTok's live-streamed marketplace is a gold rush for businesses looking to make a fortune on the world's most popular short-video app. TikTok Shop is the company's fastest-growing feature, with a huge fan base in Southeast Asia. It is primarily known for viral dance competitions and is owned by China's ByteDance.

TikTok's success in the area is critical since it confronts a probable ban in the United States due to national security concerns. It also gives the firm a blueprint for taking on Amazon.com in a way that no social networking company has attempted before, if it is permitted to continue operating in the United States.

Indonesia was TikTok Shop's first country and remains its largest, thanks to a young, mobile-savvy populace that has embraced the mix of short videos and in-app buying since its 2021 inception. TikTok Shop's total merchandise value is estimated to reach $20 billion (approximately Rs. 1,63,900 crore) by the end of this year, quadrupling from the previous year.

Analysts believe that if it can maintain its current trajectory, it has the potential to transform a firm whose principal video platform is already pulling customers and advertisers away from Meta Platforms and Alphabet's Google.

Hank Wang, who oversees a team of roughly 50 livestreaming hosts at the bustling Jakarta shophouse, believes it has the potential to alter the retail business and turn entrepreneurs like him become the next e-commerce billionaires.

"I want to be the next Forrest Li," the 33-year-old former venture investor said, alluding to the China-born founder of Sea, Southeast Asia's largest internet corporation. Wang leads his staff to sell products on behalf of cosmetics and consumer goods companies like L'Oreal, receiving a commission and splitting revenues with the livestreaming presenters. Despite not knowing the local language, he travelled from Shanghai to Jakarta seven months ago and founded Flame Media. "TikTok and social commerce will give rise to the next generation of tech unicorns in this region," he predicts.

TikTok CEO Shou Zi Chew visited Jakarta in June and vowed to invest billions of dollars in Southeast Asia over the next three to five years. He shook hands with a senior Indonesian minister while wearing a traditional batik shirt and visited local mom-and-pop stores with TikTok accounts.

This was in stark contrast to his experience earlier this year in Washington, where he faced a harsh five-hour congressional grilling. Politicians interrogated him on Chinese involvement in the corporation as well as the impact of its videos on children's mental health, and the company risks a possible ban ahead of the presidential elections.

TikTok Shop launched in Indonesia, the largest economy in Southeast Asia, at a time when ByteDance was looking to grow outside of China, where it confronts legal and economic obstacles. The worldwide e-commerce project was first codenamed "Magellan XYZ" after Ferdinand Magellan, the 16th-century navigator who circumnavigated the globe in search of a passage to the Spice Islands, which are now part of Indonesia.

Initially, the business positioned it as an underground feature for younger, in-the-know users in Indonesia. It attracted hundreds of livestreamers, some of them were just out of high school, through agents. The presenters used their own cellphones to videotape themselves in order to promote Tupperware and sunscreen. It was an instant success when it was launched during Ramadan, when Covid was still keeping many people at home.

As companies like Wang's Flame Media connect brands with livestreaming broadcasters and put up studios, the operations have become increasingly complex. Some firms are allocated a TikTok account manager who provides content and promotion assistance, while others are assigned skilled performers, or influencers, to assist brands in reaching millennials and Gen Z-ers. Despite this, the videos have remained a slightly amateur and unplanned touch when contrasted to the perfectly prepared Instagram profiles, and this is said to be a significant reason for their popularity: customers sense a deeper, true connection with the vendor.

Suanto, also known as Kohcun on TikTok Shop, is one of the most renowned Indonesian influencers, with over a million followers because to his impromptu, informal style. The 36-year-old was previously known for his YouTube gadget reviews, but he now spends six hours a day livestreaming on TikTok Shop, flogging Samsung phones and Louis Vuitton bags. According to him, the money he makes through commissions and sponsorship partnerships is almost three times what he earns from YouTube.

"TikTok has a big advantage using their creators because it's more entertaining, more natural," said David Nugroho, CEO of Jakarta-based DCT Agency, which handles 600 TikTok personalities and is one of the country's largest TikTok Shop partners.

TikTok now claims to have over 100 million monthly users in Indonesia, who spend an average of more than 100 minutes each day on the app. That virality is one of the reasons ByteDance became the world's most valuable startup in a single decade, valued more than $200 billion (approximately Rs. 82,21,700 crore), upsetting social media and internet incumbents like Meta and Tencent Holdings on both sides of the Pacific.

Similar services have been attempted by social networking sites in the United States, but consumers there have not taken to live shopping in the same way that people in China and Southeast Asia have. In March, Instagram, which is owned by Meta, stopped allowing users to tag things while live broadcasting. YouTube and Amazon have also dabbled in live video shopping, although without much success.

TikTok Shop entered a market in Indonesia where customers were already used to skimming through online catalogues and spending hours on their cellphones for both pleasure and purchasing. Competing for consumers, local e-commerce pioneers GoTo Group's Tokopedia and Alibaba Group Holding Ltd.'s Lazada spent billions of dollars assisting in the establishment of delivery networks around the nation. TikTok rushed in and exploited everything.

TikTok has also benefited from knowledge gathered from Douyin, ByteDance's China-only video platform that has grown to become a $200 billion (approximately Rs. 82,21,700 crore) retail destination after expanding its range of services to include food delivery and hotel booking. In terms of live shopping, China is years ahead of the rest of the world, thanks to extended Covid lockdowns that forced people to spend time on their phones and sites like Douyin and Alibaba's Taobao.

Algorithms are a significant element of that skill. Algorithms assist put up the correct video clip in front of users on both Douyin and TikTok, keeping them browsing and determining what type of items they're most likely to buy.

TikTok Shop's top executives are Chinese. Bob Kang, a top ByteDance executive who regularly travels between Shanghai, Singapore, and the United States, is in charge of thousands of personnel for Douyin and TikTok's e-commerce operations. TikTok Shop's Southeast Asia branch is led by Yu Weiqi, a former assistant to the company's millionaire co-founder Zhang Yiming.

While many of the TikTok Shop entrepreneurs are Indonesian, such as DCT's Nugroho and Pasar Kreatif Digital founder Daniel Tjandra, with strong networks of local influencers and businesses, some are from China, bringing with them Chinese capital as well as prior experience with live shopping.

Richard Ma, a 31-year-old marketing professional in Beijing, is a TikTok Shop salesperson who instructs a small team of Indonesian live broadcasters to sell items such as $40 (about Rs. 3289) air fryers and $8 (approximately Rs. 657) Bluetooth earphones. His firm has just purchased products from Alibaba's wholesale portal 1688.com and shipped them to a warehouse near Jakarta. Many of those items are best-sellers on Douyin's expanding e-commerce platform.

"We can replicate the China model and adapt it to different markets," he stated, while admitting that his business was still losing money due to the initial investment and cheap price tags. With the site's expanding size, Ma is confident he'll soon earn a profit.

Important US Market

While TikTok's popularity in Indonesia helps to mitigate the impact of a potential US ban, there are still doubts.

Despite Indonesia's expanding middle-class purchasing power, many of its customers earn significantly less than US consumers. According to research firm Cube Asia, TikTok consumers in Indonesia pay between $6 (approximately Rs. 493) and $7 (about Rs. 575). That is why, despite repeated measures in Congress threatening to ban the app, the United States remains critical to TikTok's e-commerce operation.

For the time being, though, entrepreneurs like Wang see only potential for TikTok Shop. As his company's monthly goods sales exceed $1 million (approximately Rs. 8,300 crore), he hopes to relocate to a freshly refurbished office block in Menteng, an affluent neighbourhood in Jakarta's capital. In addition, he intends to recruit 500 livestreamers before the end of the year. He may then go on to other growing areas, he suggested.

"The first step is to become the number one player in Indonesia," he stated. "Then we can try a different region, a different continent." It's all about taking one step at a time."