Shawn Lim
Sep 26, 2023

Indonesia to regulate social commerce: What should marketers expect?

An impending law is being introduced in Indonesia, allowing the government to determine how e-commerce vendors sell their products on social media. Campaign explores.

Indonesia to regulate social commerce: What should marketers expect?

Indonesia has indicated it wants to regulate e-commerce on social media to protect brick-and-mortar businesses within the country. 

As existing laws do not cover e-commerce transactions on social media, the country has expressed concerns about e-commerce sellers employing potentially "predatory" pricing strategies on various social media platforms, with specific references made to TikTok as an example.  

Indonesia ranks as the second largest user of TikTok globally as Indonesians scroll through and spend many hours on the app daily. Brands like L'Oreal host multiple livestreams daily on TikTok, Shopee, Lazada, and Tokopedia to sell their products. 

The regulators have not yet divulged the specifics of the changes, as they are currently in the formulation stage under the auspices of the country's trade ministry. The ministry first broached the topic of regulating social commerce in 2021.

"We just decided on the use of social media for e-commerce. Tomorrow, it will perhaps come out. What the people expect is that technological advancement can create new economic potential, not kill existing economies," said Joko Widodo, the president of Indonesia, on Monday. 

A TikTok spokeperson said: "While we respect local laws and regulations, we hope that the regulations take into account its impact on the livelihoods of more than six million sellers and close to seven million affiliate creators who use TikTok Shop." 

What does this mean for marketers?

Marketers have started transitioning their budgets and team resources toward supporting work in social commerce channels over the past 12-18 months, as it is common to catch the front end of a trend showing potential return on investment. 

However, the impending regulations would potentially force marketers to revisit their 2024 budget allocation, and even hold back a particular portion to assume a "wait and see" position.  

David Lim, who previously led marketing for online grocer Happy Fresh in Indonesia, suggests the new regulations will impact the entire marketing and advertising ecosystem and will substantially stagnate the economies of big and small industry players. 

"Marketers will have to return to the drawing board and spending in channels that have proven to provide reasonable ROI while keeping their target audience engaged through the social media channels that work in Indonesia," Lim, who is now principal consultant at Avante Strategies, tells Campaign

"This could also be an excellent opportunity to carry out small test-and-learn campaigns with channels which have not been overly crowded by brands, making them cheaper channels to spend on." 

Fionn Hyndman, the founder of Stickler, points out that as live commerce is still in its infancy for big brands outside of cosmetics, smaller brands transact most sales. So, live commerce-wise, he says this creates a gap for major brands in markets with significant traction. 

"For brand advertisers, I would say that it should make the platform more compelling, there will be fewer commercial messages on the platform, this should lower prices and increase audience attention," Hyndman explains to Campaign

"TikTok gets a lot of the mind share of advertisers, but the advertising is still at an incredibly low penetration rate compared to the attention it gets from consumers." 

Hyndman notes the number of major brands and agencies who engage TikTok on the commerce side at a level that would be considered significant by the industry is surprisingly low, and yet the results for the ones who do are seeing great results, with individual brands driving tens of millions of dollars through live commerce.   

"Many agencies are learning from, or at least with, their clients. Most agencies are still trying to work out who is responsible for live commerce," says Hyndman. 

"Is it the e-commerce guys, most of whom are just ad-buying guys with experience in marketplace ads, or the social team? The media team? Or is it the brand themselves? Is it their retail team? It depends on the organisation and what they are hoping to achieve." 

What should marketers do to prepare?

If passed, marketers can prepare themselves for the new regulations by assessing how they may affect the social commerce industry, including potential constraints on advertising, platform functionalities, and user data access.  

They should also study how Indonesian consumers engage with social commerce platforms and how they perceive local sellers and creators. Are they receptive to new regulations, or do they have concerns?  

In addition, they should analyse how the regulations affect local sellers' and creators' income and livelihoods. Are there opportunities to collaborate or support them? 

"Some of the strategies in the lower-funnel marketing playbook remain the same. Prepare for potential restrictions on data-driven targeting by exploring alternative approaches such as contextual advertising and influencer partnerships. Adjust content strategies to align with regulatory guidelines and consumer preferences," explains Lim. 

"Focus on authentic, locally relevant content by collaborating with local influencers and creators to maintain a strong presence on social commerce platforms. This ensures firm support for local communities while keeping the authenticity of brands' content that aligns with what the target audience wants to consume on these channels." 

If transactions now cannot happen on platforms like TikTok Shop, brands can also channel transactions towards their own mobile apps or direct-to-consumer (D2C) websites, explains Myre Gustam, Indonesia country lead for Impact.com.
 
She explains this approach not only provides a seamless user experience but also enables brands access to transparent first-party customer data.
 
"For those without a D2C presence, the alternative is to direct transactions to marketplaces that they are on, like Shopee and Tokopedia. This strategy can then help maintain their brand presence on social media and be able to continue ecommerce promotion via these channels," explains Gustam.
 
"The choices brands make in response to these changes will be crucial to successfully navigating the rapidly evolving e-commerce landscape in Indonesia."
 
 
Source:
Campaign Asia

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