TikTok Shop faces regulatory headwinds in Indonesia Indonesia’s Ministry of Trade is reportedly planning to announce the
country’s new online trade regulations, which may include laws to inhibit social media companies like TikTok from facilitating direct e-commerce payments on their platforms and placing additional bans on imported products sold through digital channels. Maybank says the regulatory scrutiny would see Sea Ltd being the biggest beneficiary as the company is navigating an intensely competitive e-commerce environment in Southeast Asia. The house thinks Indonesia’s decision may influence regulators in other countries as they assess TikTok’s growing e-commerce capabilities.
Maybank said its initial thoughts on the latest development TikTok’s possible split of e-commerce and social-media operations in Indonesia could impede the further conversion of its 125m local monthly active users (MAU) into shoppers, benefiting Sea’s Shopee, which similar to TikTok Shop, relies on beauty and personal care for most of its domestic sales. GoTo’s Tokopedia 34m MAU in Aug23 vs. Shopee’s 138m and Alibaba-owned Lazada’s 37m should be able to defend its GMV share in Indonesia, which drove 90% of the group’s 2022 sales. The house said it continues to believe that any disruptions that TikTok sellers experience during the transition would likely be beneficial to Shopee and other traditional e-commerce platforms in the coming months.
Competition becoming more rational
Competition may have become more rational as the two leading e-marketplaces in Thailand plan to raise their sales commission fees next month for goods sold on their platforms. Specifically, Shopee will increase its commission fee for Mall sellers from 4% to 5% while non-Mall sellers will pay up to 5% from 4% previously. Similarly, Lazada also updated its seller
page with new fees, raising the commission fee for LazMall sellers across electronics, FMCG, and other categories by ~100bps. The decision to increase fees by both Shopee and Lazada may signal competition is becoming less severe following recent fee increases by TikTok Shop.
Maintain BUY and SOTP-based TP of USD80
Maybank expects near-term share price volatility for Sea as competition continues to pressure GMV growth and take rate. However, it is encouraged by rising seller fees across platforms in the region, which may encourage increased monetization by newer entrants and more rational competition after a period of aggressive investment. Moreover, it believes Sea’s revenue may accelerate going forward as its gaming business has bottomed and GMV and commission rates of its overseas e-commerce platforms have improved.
