TikTok Shop, a growing threat to Shopee and Lazada in Southeast Asia

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

This comes as its parent ByteDance pushed the short video app into markets outside the US and India to create alternative revenue streams.

TikTok Shop is an e-commerce marketplace for short video app TikTok, which is owned by Chinese tech giant ByteDance. The shopping app enables merchants, brands and manufacturers to showcase and sell their goods to users.

In 2022, TikTok Shop expands to six Southeast Asian countries – Singapore, Malaysia, Indonesia, Philippines, Vietnam, and Thailand.

“TikTok continues to grow rapidly in Southeast Asian countries. We estimate that by 2023, [gross merchandise value] will reach ~20% of Shopee, which we suggest prompted Shopee to defensively ramp up sales and marketing from April,” said analyst Sean from Blue Lotus Research Institute in a recent report from Sea Group, owner of Shopee. Yang said.

TikTok neither wanted to comment nor give numbers.

The GMV, or gross value of goods sold, of TikTok shops in Southeast Asia is set to more than quadruple to $4.4 billion in 2022, according to internal data obtained by tech media outlet The Information. tiktok shop Reportedly targeting a GMV target of $12 billion by 2023,

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

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

A spokesperson for TikTok told CNBC that the TikTok shop “continues to grow rapidly” as users both large and small use the platform to reach new customers. The spokesperson said that TikTok is “focused on the continued growth of the TikTok Shop in Southeast Asia.”

According to market research company Insider Intelligence, as of May, the number of Tiktok users in Southeast Asia alone is 135 million.

According to Statista, Indonesia has the second largest population of TikTok users after the US.

Indonesia is the most populous country in Southeast Asia, with 52% youth and There are around 113 million TikTok users,

Sachin Mittal, head of telecom and internet sector research at DBS Bank, told CNBC, “One of the advantages of TikTok is impulse buying from viewing content.”

Sagar Group It is relying on its e-commerce arm Shopee to lift the group’s balance sheet as its gaming arm Garena faces a decline in revenue given the lack of a robust game pipeline and the continued ban of its flagship game Free Fire in India due to national security. is facing. Threat.

Shopee is expanding its footprint in Malaysia and has continued to build up its Brazil operations after exiting several European and Latin American markets.

This has been revealed in a survey conducted by online retail insights company Cube Asia. Consumers spending on the Tiktok Shop In Indonesia, Thailand and Philippines are reducing their spending on Shopee (-51%), Lazada (-45%), offline (-38%).

Shopee and Lazada declined to comment on TikTok Shop’s competition.

Data from web analytics firm SimilarWeb showed that Shopee is currently the largest online marketplace in Southeast Asia, holding a 30% to 50% traffic share across the region over the past three months, while Lazada has a 10% to 30% traffic share. With the share is in second place. ,

The TikTok Shop push comes as the app comes under scrutiny in its biggest market, the US, amid rising geopolitical tensions and tech rivalry between China and the US.

last week, the US state Montana bans TikTok, which may be analogous to other states. TikTok disputes Montana’s allegations that the Chinese government “can access data about TikTok users, and that TikTok exposes minors to harmful online content”. A lawsuit was filed Monday to try to overturn the ban.,

Tiktok CEO Show Zi Chew Testifies Before Congress That didn’t ease lawmakers’ concerns in March about the app’s connections to China or the adequacy of Project Texas, its contingency plan to store American data on American soil.

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

But TikTok is spending the cash to grow, a time-tested strategy for gaining market share.

“TikTok is spending an incredible amount of money right now to incentivize onboard buyers and sellers, which may not be sustainable,” said Jonathan Wu, senior analyst at Phillip Securities Research. Wu said he estimates the stimulus will be between $600 million and $800 million per year, or 6% to 8% of the $10 billion GMV in 2023.

Encouraging sellers to join platform, TikTok shop Commission fee waived upon launch in Singapore in August. Merchants were only required to pay a 1% payment fee.

Data from app analytics company Apptopia shows that the TikTok Shop Seller Center app has been attracting an increasing number of downloads in Indonesia over the past year.

Meanwhile, Shopee charges a commission, plus 5% on transaction and service fees.

An investigation by CNBC revealed that Nomio’s four-ply toilet paper was selling on TikTok for S$5.80 for twenty-seven rolls. In comparison, the same item is selling for around SG$16.80 on Shopee.

Wu said that the TikTok shop is “still very young” and “in a burn-cash-to-grow phase that may not be good given the high cost of funds in today’s market.”

He added that the TikTok shop is also “a platform with no end-to-end capabilities”, unlike Shopee and Lazada, which is investing heavily in improving logistics for faster deliveries and returns, overall user experience and Increases confidence for sellers and buyers, he said.

Wu said it also has a younger user base with a younger demographic at the moment, which means less spending power.

Mittal said, “I don’t think there is a big risk for Shopee from TikTok.” “Shopee may lose some market share, but Lazada may not.”

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

Noting the difference between TikTok Shop and Shopee’s GMV, Wu said, “Overall, I think TikTok Shop has the potential to be as big as Shopee or Lazada, although it may take years.”