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

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A merchant sells crystal ornaments via a unrecorded TikTok broadcast.

CFOTO | Future Publishing | Getty Images

TikTok Shop is simply a rising menace to large e-commerce players specified arsenic Shopee and Lazada successful Southeast Asia.

It comes arsenic its genitor ByteDance pushes the abbreviated video app successful markets extracurricular the U.S. and India to make alternate gross streams.

TikTok Shop is the e-commerce marketplace of abbreviated video app TikTok, which is owned by Chinese tech elephantine ByteDance. The buying app enables merchants, brands and creators to showcase and merchantability their goods to users.

In 2022, TikTok Shop expanded to six Southeast Asian countries — Singapore, Malaysia, Indonesia, the Philippines, Vietnam and Thailand.

"TikTok continues to turn rapidly successful Southeast Asian countries. We estimation that TikTok's 2023 [gross merchandise value] volition scope 20%~ of Shopee, which we suggest prompted Shopee to defensively summation income and selling since April," said Shawn Yang, expert astatine Blue Lotus Research Institute, successful a caller study connected Sea Group, the proprietor of Shopee.

TikTok did not privation to remark oregon uncover numbers.

TikTok Shop's GMV, oregon full worth of goods sold, skyrocketed much than 4 times to $4.4 cardinal successful Southeast Asia successful 2022, according to interior information obtained by tech media outlet The Information. TikTok Shop is reportedly aiming for a GMV people of $12 cardinal by 2023.

Impulse buying from watching contented is an vantage TikTok has.

Sachin Mittal

Head of telecom & net assemblage research, DBS Bank

To beryllium clear, TikTok Shop's existent GMV is lone a fraction of Shopee and Lazada's.

Shopee netted $73.5 cardinal in GMV successful 2022 portion Lazada's GMV was $21 cardinal for the twelvemonth done September 2021, according to disposable nationalist figures.

Rising threat

A TikTok spokesperson told CNBC that TikTok Shop "continues to turn rapidly" arsenic some ample and tiny users usage the level to scope caller customers. TikTok is "focused connected the continued improvement of TikTok Shop successful Southeast Asia," said the spokesperson.

As of May, the fig of TikTok users successful Southeast Asia unsocial is 135 million, according to marketplace probe institution Insider Intelligence.

Indonesia has the 2nd largest colonisation of TikTok users after the U.S., according to Statista.

Indonesia is Southeast Asia's astir populous country, wherever 52% are young radical and it has astir 113 cardinal TikTok users.

"Impulse buying from watching contented is an vantage TikTok has," Sachin Mittal, caput of telecom & net assemblage probe astatine DBS Bank, told CNBC.

Sea Group is banking connected its e-commerce limb Shopee to assistance the group's equilibrium expanse arsenic its gaming limb Garena continues to spot gross decline, fixed the deficiency of a beardown games pipeline and the continued prohibition of its flagship crippled Free Fire successful India owed to nationalist information threats.

Shopee is expanding its footprint successful Malaysia and continues to physique up its Brazil operations aft exiting respective European and Latin American markets.

TikTok is spending an unthinkable magnitude of wealth close present connected incentives to onboard buyers and sellers, which whitethorn not beryllium sustainable.

Jonathan Woo

Senior analyst, Phillip Securities Research

A survey conducted by online retail insights institution Cube Asia revealed that consumers spending connected TikTok Shop are reducing their spending connected Shopee (-51%), Lazada (-45%), Offline (-38%) successful Indonesia, Thailand, and Philippines.

Shopee and Lazada declined to remark connected contention from TikTok Shop.

Data from web analytics steadfast Similarweb revealed that Shopee is presently the largest online marketplace successful Southeast Asia, holding 30% to 50% postulation stock crossed the portion successful the past 3 months, portion Lazada holds the 2nd spot with 10% to 30% postulation share.

Scrutiny connected TikTok

TikTok Shop's propulsion comes arsenic the app is being scrutinized successful its largest market, the U.S., amid rising geopolitical tensions and tech rivalry betwixt China and the U.S.

Last week, the U.S. authorities of Montana banned TikTok, which could spark different states to suit. TikTok disputed Montana's allegations that the Chinese authorities "could entree information astir TikTok users, and that TikTok exposes minors to harmful online content" successful a lawsuit filed Monday to effort and reverse the ban.

Banning TikTok astatine  a authorities   level   'doesn't marque   sense', says Craft Ventures' David Sacks

TikTok CEO Shou Zi Chew's grounds earlier Congress successful March did not easiness lawmakers' worries astir the app's connections to China oregon the adequacy of Project Texas, its contingency program to store U.S. information connected American soil.

TikTok has besides been banned successful India since 2020, alongside different apps said to person Chinese origin. It is not accessible successful China, though its Chinese mentation Douyin is wide utilized by implicit 750 million daily progressive users.

Not sustainable

But TikTok is burning currency to grow, a tested strategy to triumph marketplace share.

"TikTok is spending an unthinkable magnitude of wealth close present connected incentives to onboard buyers and sellers, which whitethorn not beryllium sustainable," said Jonathan Woo, elder expert astatine Phillip Securities Research. Woo said helium estimates the incentives to beryllium betwixt $600 cardinal and $800 cardinal a year, oregon 6% to 8% of a $10 cardinal GMV successful 2023.

To incentivize sellers to articulation the platform, TikTok Shop waived committee fees erstwhile it launched successful Singapore successful August. Merchants were lone required to wage a 1% outgo fee.

Data from Apptopia, an app analytics company, showed that TikTok Shop Seller Center app has been attracting an expanding fig of downloads successful Indonesia implicit the past 1 year.

Meanwhile, Shopee charges much than 5% connected commission, transaction and work fees.

A CNBC cheque revealed that four-ply toilet insubstantial from Nomieo was selling connected TikTok astatine 5.80 Singapore dollars for twenty-seven rolls. In comparison, the aforesaid goods are selling astatine astir SG$16.80 connected Shopee.

Woo noted that TikTok Shop is "still precise young" and successful the "burn-cash-to-grow signifier which whitethorn not bode good successful today's marketplace fixed higher outgo of funding."

TikTok Shop is besides "just a level with nary end-to-end capabilities" dissimilar Shopee and Lazada which person been investing heavy successful improving logistics for faster deliveries and returns, expanding wide idiosyncratic acquisition and spot for sellers and buyers, helium said.

Overall, I deliberation TikTok Shop has the imaginable to beryllium arsenic large arsenic Shopee oregon Lazada, though this mightiness instrumentality rather a fig of years.

Jonathan Woo

Senior analyst, Phillip Securities Research

It besides has a smaller idiosyncratic basal astatine this constituent successful clip with a younger demographic which means little spending ability, said Woo.

"I don't deliberation there's a large hazard to Shopee from TikTok," said Mittal. "Shopee tin spend to suffer immoderate marketplace share, but Lazada cannot."

Lazada has been trying to drawback up with Shopee ever since Shopee overtook the institution to go Southeast Asia's biggest e-commerce level successful 2020.

"Overall, I deliberation TikTok Shop has the imaginable to beryllium arsenic large arsenic Shopee oregon Lazada, though this mightiness instrumentality rather a fig of years," said Woo, noting the spread betwixt TikTok Shop and Shopee's GMVs.

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