TikTok Shops is becoming a real big threats to Shopee and Lazada

DNHN - Appearing since the parent company ByteDance pushed the development of short video applications to markets, Tiktok Shop is receiving a lot of attention.

According to CNBC, TikTok Shop is becoming a major "threat" to the position of Southeast Asian e-commerce titans such as Lazada and Shopee.

Appeared after the parent company ByteDance promoted the development of short video applications for markets outside of the United States and India to find new revenue streams, inheriting features that enable users to recommend and sell products. TikTok Shop is receiving considerable attention.

TikTok Shop is an online marketplace for the ByteDance (China) short-video application TikTok. The application facilitates the presentation and sale of products by brands and content creators.

TikTok Shop will enter six Southeast Asian markets in 2022, including Singapore, Malaysia, Indonesia, the Philippines, Vietnam, and Thailand. According to Blue Lotus Research Institute analyst Shawn Yang, TikTok continues to grow rapidly in the region. TikTok's estimated total merchandise value (GMV) in 2023 will be approximately 20% of Shopee's, requiring Shopee to actively retain customers.

According to internal data obtained by The Information, the TikTok Shop's GMV in Southeast Asia quadrupled to $4.4 billion in 2017. This year, TikTok Shop is expected to achieve a GMV of $12 billion.

However, the current GMV of TikTok Shop is a mere fraction of Shopee's $73.5 billion and Lazada's $22 billion.

A spokesperson for TikTok told CNBC that the TikTok Shop "continues to grow rapidly" as more users utilize the platform to acquire new customers. TikTok is also "focused on the continued growth of the TikTok Shop in Southeast Asia," according to the spokesperson.

According to market research firm Insider Intelligence, the number of TikTok users in Southeast Asia alone reached 135 million by May. According to Statista, after the United States, Indonesia has the second most TikTok users in the world. Indonesia is also the most populous nation in Southeast Asia, with approximately 113 million TikTok users and a youth population of 52%.

According to Sachin Mittal, head of telecommunications and internet research at DBS Bank, the ability to shop and watch videos gives TikTok a competitive advantage.

A recent survey by online retail specialist Cube Asia revealed that consumers using TikTok Shop are spending 51% less on Shopee, 45% less on Lazada, and 38% less on direct purchases.

The TikTok Shop was created during a time when the TikTok app was under special scrutiny in the United States. The US state of Montana banned the platform last week, and other states are considering similar legislation.

US officials remain unsatisfied despite TikTok's best efforts to refute allegations that the Chinese government "may access data" and "expose minors to harmful online content." Will and prohibition remain unchanged.

Sea Group, a competitor to TikTok Shop, relies on its Shopee e-commerce arm to improve its balance sheet as its gaming arm struggles. Garena's revenue continues to decline due to the absence of game delivery systems. strong and elite play Free Fire is still prohibited in India for a variety of reasons.

After exiting several European and Latin American markets, Shopee is expanding its presence in Malaysia and building its operations in Brazil.

According to data from web analytics company Similarweb, Shopee is the largest online e-commerce platform in Southeast Asia, with 30% to 50% of traffic across the region over the past three months, while Lazada is in second place with 10% to 30% of traffic.

Although experts are optimistic about the growth of this platform, many believe that TikTok is wasting money on its development and market share acquisition.

According to Jonathan Woo, senior research analyst at Phillip Securities, the app's strategy of "burning money" to gain market share by enticing buyers and sellers is unsustainable. According to his estimation, TikTok spends between $600 million and $800 million annually, or between 6% and 8% of the 2023 GMV.

When it launches in Singapore in August 2022, TikTok Shop will not collect commissions to entice sellers to join. The seller must only pay a 1% payment fee. According to data from app analytics firm Apptopia, the number of downloads of the TikTok Shop merchant app in Indonesia has increased over the past year.

Meanwhile, Shopee collects commission, transaction, and service fees of over 5%. CNBC compared the selling price of Nomieo's four-ply toilet paper rolls on both exchanges. As a result, the selling price on TikTok for 27 rolls is 5.8 SGD, while on Shopee it is 16.8 SGD.

Mr. Woo remarked that the TikTok Shop is "still very young" and in a "cash-burning stage to grow," which is "extremely bad in today's market as fundraising becomes increasingly difficult."

In contrast to Shopee and Lazada, which have invested heavily in enhancing the customer experience, he views this as "just a platform with no overall capabilities."

Mr. Woo noted the gap between TikTok and Lazada when he stated, "Overall, I believe TikTok Shop has the same great potential as Shopee or Lazada, but it will likely take them several years to realize this." Shop and Shopee's GMV.

Thu Phuong (t/h)