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TikTok and GoTo team up in Indonesia, threatening Southeast Asia’s e-commerce giant

Monday witnessed the revelation of a strategic partnership between GoTo's Tokopedia  and TikTok in Indonesia, aiming to cater to micro, small, and medium-sized enterprises. Kai Wang, a senior equity analyst at Morningstar, expressed concerns about the impact of this collaboration on Shopee, emphasizing that Shopee is already grappling with profitability challenges.

TikTok and GoTo team up in Indonesia, threatening Southeast Asia’s e-commerce giant

In response to these developments, Sea's U.S shares concluded Monday's trading session with a 5.33% decrease, settling at $37.87.

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TikTok will take a controlling stake of 75.01% in an enlarged Tokopedia entity, with a commitment to inject $1.5 billion into the venture. This move is seen as a shift in Tokopedia's direct presence in e-commerce, transferring it to TikTok for a minority stake, a decision that didn't sit well with the market.

This deal comes after Indonesia's ban on e-commerce on social media platforms in October, a measure aimed at protecting local merchants. TikTok Store was forced to suspend its e-commerce service following the ban.

TikTok's strengthened presence in Indonesia, boasting 125 million users, the largest in Southeast Asia, and second-largest globally, poses a formidable challenge to Shopee. Analysts suggest that Shopee needs a clear strategy beyond traditional e-commerce to compete effectively.

Morningstar's Wang highlighted Sea's strategic pivot to growth over profits amid rising competition from TikTok and Alibaba's Lazada in Southeast Asia. As TikTok gains ground with livestreaming e-commerce, Sea may face increased operating expenses, potentially leading to reduced margins in the medium term.

Shopee's response to these challenges remains unclear. Meanwhile, GoTo's Jakarta-listed shares experienced fluctuations, initially dropping 20% post-announcement but rebounding over 3% on Tuesday morning. Analysts remain watchful of the evolving landscape and its impact on key players like Shopee and GoTo.

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