Imagine building an online business from scratch, only to have the foundation suddenly pulled out from under you. This is the reality facing millions of TikTok Shop sellers in Indonesia after the government abruptly banned social commerce platforms from conducting direct transactions.
The Sudden Ban: A Hard Stop for Social Commerce
In late September, Indonesian authorities prohibited social media platforms from facilitating direct online payments and transactions. Trade Minister Zulkifli Hasan stated clearly: "Social media should only be for promotion, not for payment transactions or direct sales."
The policy aims to protect small and medium-sized enterprises by encouraging consumers to return to physical stores. However, this sudden shift has left millions of sellers who relied on TikTok Shop scrambling for alternatives.
Seller Struggles: Plummeting Sales and Uncertainty
Ruby Devy, who operates a clothing store in Jakarta's Tanah Abang textile market, reveals that 80% of her customers were online sellers using TikTok Shop and Shopee Live. "I asked them what they'll do now—some said they'll move to other e-commerce platforms," Devy said. "The government must provide alternative sales channels."
Research from the Institute for Development of Economics and Finance (INDEF) shows that 64% of Indonesian SMEs sell directly through social media, compared to just 25% using dedicated e-commerce websites. TikTok alone hosts over 6 million sellers and 7 million content creators in Indonesia.
"Because of TikTok Shop, my children could get better education," said Koh Cun, a creator with 1.4 million followers, in an emotional video shared under the hashtag #KamiUMKMdiTikTok (We are SMEs on TikTok).
The impact has been immediate—some sellers report sales dropping by 60% since the ban took effect. This particularly affects Chinese sellers who recently expanded operations in Indonesia.
Indonesia's Lucrative Live Commerce Market
As Southeast Asia's largest live shopping market and the world's fourth most populous country, Indonesia saw $5 billion in live commerce sales in 2022. About 55% of internet users shop via social platforms like Facebook, Instagram, and TikTok, spending an average of $100 annually.
While Facebook and Instagram dominate, TikTok's market share grew rapidly since launching its Shop feature in 2021. Momentum Works data shows TikTok Shop reached $2.5 billion in Indonesian sales within its first year—about 5% of the country's total e-commerce volume.
Behind the Ban: Regulatory Gaps and Unfair Competition
INDEF researcher Nailul Huda explains that TikTok Shop violated Indonesian laws by operating without proper e-commerce licensing. More critically, its platform enabled sellers to avoid taxes and business permits, allowing artificially low pricing that undercut traditional retailers.
"In social commerce, there's no VAT, no business permits, no product certifications—sellers can offer extremely cheap prices," Huda said. "This creates unfair competition against offline sellers who comply with all regulations."
A Tanah Abang clothing vendor complained about declining sales: "Items on TikTok Shop are too cheap." While she also sold via TikTok, customers constantly sought lower prices. "They use different materials—quality varies—but people only care about price," she noted, citing sunglasses selling for under $1 on TikTok versus $10+ on e-commerce sites.
Government Response: Just Switch Platforms?
Cooperatives and SMEs Minister Teten Masduki downplayed concerns, suggesting sellers simply migrate to other e-commerce platforms. "It's not just TikTok Shop—any Indonesian platform can sell. Just change channels," he stated.
Masduki argued the ban wouldn't significantly disrupt sellers' marketing since they could still promote products on TikTok—just not complete transactions within the app. "Online SMEs can use TikTok for promotion while directing sales through multi-platform links," he explained.
The Road Ahead: Challenges and Opportunities
However, transitioning platforms proves more complex than suggested. Each platform has different rules and algorithms—what worked on TikTok may not translate elsewhere. "You must redesign your strategy to compete with sellers experienced on those platforms," one seller noted.
For sellers who built their entire business on TikTok Shop, this represents an existential challenge. Yet some remain optimistic about Indonesia's e-commerce potential. "The live commerce trend is established here, and online sales penetration remains relatively low—opportunities still exist," said a veteran seller.
Lessons for Cross-Border Sellers
This episode serves as a cautionary tale for international sellers, particularly from China. Compliance with local regulations must take priority over short-term gains through cutthroat pricing. Diversification across platforms also proves crucial for risk management.
While disruptive, Indonesia's TikTok Shop ban may ultimately encourage more sustainable, quality-focused e-commerce practices. Sellers who adapt quickly to regulatory changes while maintaining operational flexibility will likely emerge stronger in this evolving market landscape.