TikTok, a Chinese social media platform, has agreed to purchase most of GoTo’s e-commerce unit for $840 million in an effort to re-enter the online shopping industry in Indonesia. TikTok will also invest an additional $660 million in Tokopedia, Indonesia’s largest e-commerce platform, for a total cost of $1.5 billion.
TikTok was forced to shut down its e-commerce service, TikTok Shop, in Indonesia after the government banned online shopping on social media platforms in September due to concerns over protecting smaller merchants and user data. The partnership will begin with a pilot period, which will be closely supervised by relevant regulators, according to the companies’ joint statement.
The partnership aims to create an Indonesian e-commerce leader by combining Tokopedia’s strong local presence with TikTok’s massive market reach and technological expertise. GoTo CEO Patrick Walujo stated that “GoTo now sits on a much stronger foundation and we expect this partnership to bring many benefits not just for e-commerce, but for our on-demand services and fintech businesses as well.” GoTo’s businesses include ride-hailing, delivery, and financial services.
TikTok, which is owned by China’s ByteDance, will buy 75.01% of Tokopedia and merge TikTok Shop’s Indonesia business into the newly formed Tokopedia entity. The Indonesian trade ministry officials did not respond to requests for comment.
Indonesia has over 270 million active social media users, and TikTok has been looking to convert its 125 million user base into a major source of e-commerce revenue. Currently, TikTok Shop is only available in a few countries, including the United States, Britain, and Singapore, according to its website. The deal is expected to be completed by the first quarter of 2024, and Tokopedia will receive a $1 billion promissory note from TikTok that can be used to fund working capital needs.
Tokopedia competes with Shopee, owned by Singapore-headquartered Sea, and Lazada, owned by Chinese e-commerce giant Alibaba. In August, Tokopedia’s half-year gross revenue increased by 14% to 4.5 trillion rupiah ($288 million), while its underlying loss narrowed significantly to 752 billion rupiah from 3.7 trillion rupiah a year ago. However, GoTo’s shares fell by 13% on Monday, their largest percentage decline in six months, as some investors took profits after the stock had rallied on expectations of a deal with TikTok.
According to a report by Google, Singapore state investor Temasek Holdings, and consultancy Bain & Co., Indonesia’s e-commerce industry is expected to grow to about $160 billion by 2030 from $62 billion this year.