Indonesia was one of the first countries where TikTok launched TikTok Shop, betting on the app’s potential to become a successful retail platform for the company’s second-largest user base.
Now, the country has become the first to block the feature.
TikTok, a hugely popular short-form video platform, shut down its Shop apparatus in Indonesia on Wednesday after the country banned commerce on social media platforms to protect local business owners, a setback for the app’s new venture in a major market.
TikTok Shop is one of the social network’s latest attempts to generate more revenue. Creators and brands can add a Shop button to their videos and live broadcasts, allowing users to buy products with a few taps without leaving the app.
The app itself was not banned in Indonesia. But people there could no longer buy or sell goods through TikTok or other social media platforms after the trade ministry issued new regulations last week. The rules, which essentially mandate the separation of e-commerce and social media, are meant to protect local merchants, prevent algorithms from dominating the market and stop the use of personal data for business purposes, the ministry said.
For months, Indonesian officials had expressed concern that TikTok Shop would threaten the country’s small businesses. The Minister of Cooperatives and Small and Medium Enterprises, Teten Masduki, accused the company of “monopolistic” practices last month. Zulkifli Hasan, Indonesia’s trade minister, said recently that “predatory pricing” by social media companies was hurting small merchants.
The company, which launched TikTok Shop in Indonesia in 2021, said in a statement this week that “our priority is to remain compliant with local laws and regulations,” adding that it would “continue to cooperate with the relevant authorities on the path forward.”
Some Indonesian merchants who had relied on TikTok Shop said that the new rules hurt their business. Dennies Soesanto, who sells bags and suitcases, said that his sales on TikTok Shop were triple that of other e-commerce platforms. Now, he said, that source of income is gone.
“Closing TikTok Shop is not saving the small and medium enterprises,” he said, “but saving other e-commerce platforms.”
Indonesia has 125 million TikTok users. Its e-commerce market is growing rapidly: Transactions in the country were worth about $52 billion last year, and about $2.5 billion of that was on TikTok, according to Momentum Works, a consulting firm in Singapore. No other social media platform had a comparable share of the country’s e-commerce market.
The crackdown in Indonesia, home to six million sellers on TikTok, could increase the pressure on TikTok Shop in the other countries where it operates. TikTok Shop is available in Britain, Malaysia, the Philippines, Singapore, Thailand and Vietnam, according to its website. In the United States, the shopping feature began rolling out in August and will reach all 150 million U.S. users by early October.
The Indonesian e-commerce market is dominated by Shopee, a Singapore-based website, and Tokopedia, run by an Indonesian technology company, Momentum Works said. Meta, which also runs e-commerce stores on its social media platforms, Facebook and Instagram, did not immediately respond to a request for comment on Indonesia’s new regulations.
Indonesia’s new rule is an obstacle to TikTok’s ambitions to grow in Southeast Asia, where it has about 325 million users. During a visit to Jakarta a few months ago, TikTok’s chief executive, Shou Zi Chew, had pledged to invest billions of dollars into the region over the coming years.
The country’s protectionist measures also add to the government backlashes that TikTok has faced elsewhere. Lawmakers in Australia, Canada, Europe and the United States have restricted access to TikTok, owned by China’s ByteDance, for political and security reasons. India banned the platform in 2020.
After TikTok Shop closed in Indonesia on Wednesday, the government thanked the company in a statement for complying with its regulations, adding that TikTok and other platforms were welcome to pursue e-commerce separately from social media networks.
TikTok was in the early stages of talks with the Indonesian authorities to obtain a payments license in the country, a spokeswoman for the company said. She added that the company was not aware of any signs that another country might restrict TikTok Shop in a similar way.