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

A merchant sells crystal ornaments via a TikTok live broadcast.

CFOTO | Future Publishing | beautiful pictures

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

It comes as parent company ByteDance pushes the short video app to markets outside the US and India to create alternative revenue streams.

TikTok Shop is the e-commerce marketplace of short video app TikTok, owned by Chinese tech giant ByteDance. Shopping apps allow merchants, brands and creators to showcase and sell their merchandise to users.

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

“TikTok continues to grow rapidly in Southeast Asian countries. We estimate that in 2023 of TikTok [gross merchandise value] will reach 20%~ of Shopee, which we think has pushed Shopee to increase sales and marketing defensively since April,” said Shawn Yang, analyst at Blue Lotus Research Institute. know in a recent report on Sea Group, owner of Shopee.

TikTok does not want to comment or disclose the number.

The TikTok Shop’s GMV, or gross merchandise value, more than quadrupled to $4.4 billion in Southeast Asia by 2022, according to internal data obtained by tech media outlet The Information. TikTok store is is said to be working towards a GMV target of $12 billion by 2023.

Impulsive buying when viewing content is an advantage that TikTok has.

Sachin Mittal

Head of Telecom & Internet Research, DBS Bank

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

Shopee earns 73.5 billion USD in GMV by 2022 while Lazada’s GMV is $21 billion for the year to September 2021, according to publicly available figures.

Increased threat

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

As of May, the number of TikTok users in Southeast Asia alone was 135 million, according to market research firm Insider Intelligence.

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

Indonesia is the most populous country in Southeast Asia with 52% young and there are about 113 million TikTok users.

Sachin Mittal, head of telecom & internet research at DBS Bank, told CNBC: “Pursuant buying when viewing content is an advantage TikTok has.

Sea group is relying on its Shopee e-commerce arm to improve the group’s balance sheet as its gaming arm Garena continues to see revenue decline due to the lack of a strong game and game delivery system. Free Fire continues to be banned in India due to national security threats.

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

TikTok is currently spending a staggering amount of money to incentivize buyers and sellers on board, which may not be sustainable.

Jonathan Woo

Senior Analyst, Phillip Securities Research

A survey conducted by online retail savvy company Cube Asia revealed that consumers spend on TikTok Shop is reducing spending on Shopee (-51%), Lazada (-45%), Offline (-38%) in Indonesia, Thailand and the Philippines.

Shopee and Lazada declined to comment on competition from the TikTok Shop.

Data from web analytics firm Similarweb reveals that Shopee is currently the largest online marketplace in Southeast Asia, holding 30% to 50% of traffic across the region over the past three months, while Lazada hold second place with 10% to 30% of traffic. .

Monitoring on TikTok

TikTok Shop’s push comes as the app is under scrutiny in its biggest market, the United States, amid rising geopolitical tensions and tech rivalry between China and the United States. Ky

Last week, the The US state of Montana bans TikTok, which can spark other states accordingly. TikTok refuted Montana’s allegation that the Chinese government “might access data about TikTok users and TikTok exposes minors to harmful online content” in a statement. lawsuit filed on Monday to try and overturn the ban.

Craft Ventures' David Sacks says banning TikTok at the state level 'makes no sense'

TikTok CEO Shou Zi Chew’s testimony before the National Assembly in March did not assuage lawmakers’ worries about the app’s connections to China or the adequacy of Project Texas, a contingency plan to store U.S. data on U.S. soil.

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


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

A CNBC check revealed that four-layer toilet paper from Nomieo is being sold on TikTok for S$5.8 for 27 rolls. For comparison, the same item is being sold for around S$16.8 on Shopee.

Woo noted that the TikTok Shop is “still very young” and is in a “cash-burning phase of growth, which may not be as good in today’s market as the higher funding costs.”

The TikTok Shop, he said, is also “just a platform with no end-to-end capabilities” unlike Shopee and Lazada, which have invested heavily in improving logistics for faster deliveries and returns. , increasing the overall user experience and trust for sellers and buyers.

Overall, I think TikTok Shop has great potential like Shopee or Lazada, although this could take quite a few years.

Jonathan Woo

Senior Analyst, Phillip Securities Research

It also has a smaller user base at this point with a younger demographic, which means less ability to spend, says Woo.

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

Lazada has been trying to catch up with Shopee since Shopee overtook the company to become Southeast Asia’s largest e-commerce platform in 2020.

“Overall, I think TikTok Shop has great potential like Shopee or Lazada, although this could take quite a few years,” Woo said, noting the gap between TikTok Shop and Shopee’s GMV.


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