TikTok faced a huge blow to its ecommerce efforts last week as the company announced it would cease its online retail operations in Indonesia following the country’s ban on ecommerce transactions via social media.
Now neighboring country Malaysia is looking to follow suit by banning TikTok as it goes through TikTok’s policies to operate as a social commerce platform.
Why Is Malaysia Considering Banning TikTok?
After getting multiple complaints regarding the competition between online retail and brick and mortar stores, Communications and Digital Minister Fahmi Fadzil has requested the Malaysian Communications and Multimedia Commission (MCMC) to look into why TikTok Shop was banned in Indonesia. In a meeting with TikTok’s representatives on October 12, Fadzil claims TikTok has not done enough to comply with unspecified local laws.
He also stated that Malaysia will be cautious with their approach compared to its neighbors since many locals use TikTok to sell their products.
Why Did Indonesia Ban TikTok Shop?
In a statement from Indonesia’s Trade Minister Zulkifli Hasan, the ban was aimed at preventing the domination of the algorithm from using personal data in business interests.
One report also cited predatory pricing as another reason. By pricing goods at a very low price, local entrepreneurs in Jakarta reportedly experienced a 50% drop in profits since sellers at the market capital in Jakarta could no longer compete with inexpensive products sold online.
This marks the second time TikTok has stopped operations in Indonesia. Back in 2018, the platform was also banned for allegedly showing inappropriate content which was rectified by TikTok eight days later by sending moderators to the country.
What Other Countries Have Banned TikTok?
The following countries have banned the app from all government-issued devices to ensure government and sensitive information won’t be leaked:
- United Kingdom
- United States
- New Zealand
- EU institutions
Will We See More Countries Ban TikTok?
TikTok has a growing reputation for its security concerns and ties to China. The US has threatened to ban the app on several occasions, but it never materialized.
The main reason for the threat was to have the Chinese owners of TikTok sell their stake in the business since there are laws in China that the government can secretly demand data from Chinese companies and citizens for intelligence-gathering operations.
This led India to also ban TikTok and all other Chinese-owned apps over the belief that China was secretly transmitting users data to servers outside the country.
To this day, only Montana has completely banned the use of the app. Experts claim it will be difficult to permanently ban the app, especially if a fine is the only punishment.
For now, TikTok’s options are limited. For the app to continue to expand its operations globally, it must either create a separate ecommerce platform or sell the business to investors outside China. Two options that the company will be hesitant to do.
How Will the Ban Affect Tiktok’s Ecommerce Plans?
As per Bloomberg, Indonesia was the biggest market for TikTok Shop, leading the platform to invest billions of dollars in Southeast Asia in the next few years to drive growth in one of its biggest markets.
Statista reported that in 2022, 54% of consumers in Indonesia intend to use TikTok Shop over other social media apps to make future purchases. The ban not only hurts TikTok’s plans but also local sellers in the country.
In Indonesia, over 125 million users, including 2 million small businesses and 7 million affiliate creators use TikTok to make money. In a report from The Straits Times, one clothing store reportedly saw a 30% to 40% turnaround in profits through its TikTok Shop.
TikTok does have the option to create a separate ecommerce app. However, they’ve been hesitant to do so since most of the purchases made were impulse buys.
The Future of Social Commerce in Other Social Media Apps
One of the biggest concerns of using social media to shop over ecommerce platforms is how they protect buyers and sellers from potential scams.
However, it hasn’t limited users from buying and selling on different platforms. In fact, the main purpose of 28% of users is to use social media to find a product to purchase. Social commerce in the US alone was responsible for nearly 6% of all online sales.
Facebook and Instagram have implemented purchase protection in several countries that give customers and sellers a chance to get their product or money back if they fall into a scam. It will have to meet the following criteria:
- The listing came with a shield icon
- Customer uses Facebook Checkout
- Shipping fee was included in the purchase of the item.
Customers can seek a refund when they receive a damaged item, the item was never shipped, and if the seller fails to adhere to his return policy.
Pinterest has provided zero consumer protection as they will not be held liable for any disputes or issues with retailers.