Medium and small businesses have complained about a drastic decline in their sales due to the existence of Tiktok Shop. The Tiktok application provides a platform for sellers both domestic and foreign to sell their various products. With China dominating sales in e-commerce, sales traffic on Tiktok Shop has increased rapidly. However, there are allegations that all this time Tiktok has carried out cross-border trade, thereby allowing imported goods to enter at prices that are much cheaper than local prices, which attracts more interest from buyers. The cross-border trade that occurs does not go through the screening process and comply with incoming customs regulations, so this makes Indonesian traders even more worried. So far there have been approximately 21 million local traders who have also sold their products on Tiktok, but there are still many remaining traders with technological problems who are unable to sell their goods online, so in terms of calculations this also weakens the economy of small traders in Indonesia.
Tiktok application is also dominated by China with its strong algorithm so that it is able to predict the needs of its users and then connect them to the For You Page in this application. This strategy really manipulates foreign traders, allowing China to dominate the market in Indonesia. Based on The Bank of Indonesia calculations, trading results on Tiktok are capable of generating IDR 476 trillion in 2022, with 90% of the profits enjoyed by foreign market players, especially China. This is certainly worrying and needs to be followed up as soon as possible.
Traders at Tanah Abang Market, which is one of the markets with the highest sales traffic in the nation’s capital, began protesting and submitted a request to the Government to act on this issue as soon as possible. Based on testimonials from business actors, they admitted that their previous income could reach 50 million rupiah a day, but after the existence of the Tiktok Shop, their sales dropped drastically to a maximum of 5 million rupiah a day. The obstacles they found were a lack of technological education in registering their business on Tiktok Shop and the dominance of influencers who were supported by the Tiktok algorithm system so that their shop got very high exposure.
In response to this, the Government officially closed the TikTok Shop on Wednesday (4/10/2023) at 17.00 WIB which refers to government regulations, Minister of Trade Regulation (Permendag) Number 31 of 2023. Minister of Trade Regulation Number 50 of 2020 and Minister of Trade Regulation Number 31 of 2023, causing the official closure of the TikTok Shop on the grounds that social commerce is a place for promotions and transactions are prohibited. This policy is believed to be able to restore small and medium business actors because it creates more intense competition in the e-commerce industry and increases sales in e-commerce Facebook Ads and Instagram Ads. This action is the form of government’s politic protectionism policy in protecting the economy, especially for the small people. The phenomenon of the existence of Tiktok Shop is considered threatening because this application combines entertainment with a shopping experience, thereby using big data analysis to present content that suits consumer preferences and displays products that suit their wishes. That creates a more effective impulse buying phenomenon.
This policy certainly received positive and negative responses from all levels of society. However, in the future, it is hoped that the government’s role in following developments in digital technology and changes in consumer behavior can be targeted directly at all levels of entrepreneurs, both small and medium, and the government needs to support the creation of local platforms similar with TikTok and assist MSMEs in increasing digital literacy. It is believed that this can improve the national economy evenly and can prevent problems like this from appearing again.