Does TikTok Shop Really Damage Local Businesses?

Indonesian government banned TikTok Shop for several reasons.
Indonesian government banned TikTok Shop for several reasons. (Solen Feyissa/Pexels)

TikTok Shop is a milking cow for many e-commerce sellers around the world. As sales grew, so did the complaints. Does it really damage local businesses?

Remove TikTok Shop or Get Banned

On October 4, TikTok Indonesia ended its transactions on its e-commerce marketplace, TikTok Shop. The platform needs to adhere to new local guidelines or be banned. The channel is the country’s second-biggest market globally, having 125 million users.

Indonesian President Joko Widodo required social media regulations in the country. The action is due to the upsurge of several platforms that caused the decline in sales of local businesses. Most of the goods sold on TikTok Shop were foreign imports, particularly from China.

The Indonesian Ministry of Trade gave TikTok seven days to become an independent app with no e-commerce feature. If they don’t comply, they need to shut down. The platform said its primary concern is to stay complacent with such local rules and procedures.

“As such, we will no longer facilitate e-commerce transactions in TikTok Shop Indonesia by 17:00 GMT +7, 4 October, and will continue to cooperate with the relevant authorities on the path forward,” said TikTok.

Malaysian Communications and Digital Minister Fahmi Fadzil will analyse the Indonesian government’s action.

According to Fahmi, several Malaysians source the TikTok Shop to sell their merchandise. He will ask the Malaysian Communications and Multimedia Commission (MCMC) with the ministry to evaluate the basis of the neighbouring country’s action.

He thinks that TikTok should take the initiative and explain. One of the reasons why Indonesia banned TikTok Shop is due to predatory pricing, which threatens local entrepreneurs.

Fahmi added the platform needs to clarify the issue of personal data protection, which is the public’s biggest concern when buying goods online.

Appeal Not to Forbid the TikTok Feature For the Moment

E-commerce sellers asked the government to help market their goods at leading retail outlets before banning TikTok Shop.  They argue that online trading platforms helped many individuals and microbusinesses’ (small and medium) products to reach more customers.

“Although online sales activities, which come with many pricing issues and overzealous promotional tactics, are difficult and complicated to govern, these platforms, like TikTok Shop, have allowed microbusinesses to reach out to potential customers directly,” said Ding Hong Sing, president of SME Association of Malaysia (SME Malaysia).

He added manufacturers who depend on wholesalers, resellers and middlemen are at a disadvantage because they get affected. Retailers and supermarkets experience the same thing. This is also the reason why more of them switched to online selling.