A merchant sells crystal trinkets via a TikTok livestream.

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The TikTok Shop is a growing threat to major e-commerce players such as Shopee and Lazada in Southeast Asia.

It comes as the short-form video app’s parent company, ByteDance, is pushing into markets outside the US and India to create alternative revenue streams.

TikTok Shop is an e-commerce marketplace for the short-form video app TikTok, which is owned by Chinese tech giant ByteDance. The Shopping app allows merchants, brands and creators to display and sell their goods to users.

In 2022, the TikTok store has expanded to six countries in Southeast Asia – Singapore, Malaysia, Indonesia, the Philippines, Vietnam, and Thailand.

Sean Yang, an analyst with Blue Lotus Research Institute, said in a recent report on Sea Group, owner of Shopee.

TikTok did not want to comment or disclose the numbers.

A TikTok Shop’s GMV, or the total value of goods sold, more than quadrupled to $4.4 billion in Southeast Asia in 2022, according to internal data obtained by technology media outlet The Information. TikTok Store is It is said to aim for a $12 billion GMV target by 2023.

Impulse buying from watching content is an advantage that TikTok has.

Sachin Mittal

Head of Telecoms and Internet Sector Research, DBS Bank

To be clear, the TikTok Shop’s current GMV is only a fraction of Shopee and Lazada’s.

Shopee made $73.5 billion in GMV in 2022 while Lazada’s GMV was $21 billion for the year to September 2021, according to available public figures.

The threat escalated

A TikTok spokesperson told CNBC that the TikTok Store “continues to grow rapidly” as both large and small users use the platform to reach new customers. “Focusing on the continued development of the TikTok Store in Southeast Asia,” said a TikTok spokesperson.

As of May, the number of TikTok users in Southeast Asia alone reached 135 million, according to market research firm Insider Intelligence.

Indonesia has the second largest number of TikTok users after the United States, according to Statista.

Indonesia is the most populous country in Southeast Asia, with youth accounting for 52% It has about 113 million Tik Tok users.

“Impulse buying from watching content is an advantage that TikTok has,” Sachin Mittal, head of telecom and internet sector research at DBS Bank, told CNBC.

Sea group It relies on its e-commerce arm Shopee to lift the group’s balance sheet as gaming arm Garena continues to slump in revenue, given the lack of a strong gaming pipeline and continued bans on its flagship game Free Fire in India due to national security threats.

Shopee is expanding its presence in Malaysia and continues to build its operations in Brazil after exiting several European and Latin American markets.

TikTok is spending an incredible amount of money right now on incentives for onboarding buyers and sellers, which may not be sustainable.

Jonathan Wu

Senior Analyst, Phillip Securities Research

A survey of online retail insights conducted by Cube Asia revealed this Consumer spending on the TikTok store They are reducing their spending on Shopee (-51%), Lazada (-45%), and Offline (-38%) in Indonesia, Thailand, and the Philippines.

Shopee and Lazada declined to comment on competition from the TikTok Shop.

Data from web analytics firm Likeweb revealed that Shopee is currently the largest online marketplace in Southeast Asia, holding a traffic share of between 30% and 50% across the region in the past three months, while Lazada is in second place with a traffic share of between 10% and 30%. .

Checking on TikTok

The TikTok ban is statewide, says David Sacks of Craft Ventures

Testimony by TikTok CEO Shou Zi Chew to Congress in March did not assuage lawmakers’ concerns about the app’s connections to China or the adequacy of Project Texas, its emergency plan to store US data on US soil.

TikTok has also been banned in India since 2020, along with other apps said to be of Chinese origin. It is not accessible in China, although its Chinese version Douyin is widely used by more than 750 million daily active users.

Not sustainable

Meanwhile, Shopee charges more than 5% on commission, transaction and service fees.

A CNBC check revealed that Nomieo’s four-ply toilet paper was selling on TikTok at S$5.80 for twenty-seven rolls. In comparison, the same merchandise retails for S$16.80 on Shopee.

Woo noted that the TikTok Shop is “still very young” and in a “cash-burning-for-growth phase which may not bode well in today’s market given the high cost of financing”.

He said TikTok Shop is also “just a platform without comprehensive capabilities” unlike Shopee and Lazada who are investing heavily in optimizing logistics for faster deliveries and returns, increasing overall user experience and trust for sellers and buyers.

Overall, I think TikTok Shop has the potential to be as big as Shopee or Lazada, although this could take a good number of years.

Jonathan Wu

Senior Analyst, Phillip Securities Research

It also has a smaller user base right now with a smaller demographic which means less spending power, Wu said.

“I don’t think there is much risk to Shopee from TikTok,” said Mittal. “Shopee can lose some market share, but Lazada cannot.”

Lazada has been trying to catch up with Shopee since Shopee overtook the company to become the largest e-commerce platform in Southeast Asia in 2020.

“Overall, I think TikTok Shop has the potential to be as big as Shopee or Lazada, although this could take a significant number of years,” Wu said, referring to the gap between TikTok Shop and Shopee’s GMVs.


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