A merchant sells crystal ornaments via a live TikTok broadcast. CFOTOPublishing of the Future Pictures TikTok Shop is a rising threat to major e-commerce players like Shopee and Lazada in Southeast Asia. It comes as its parent company ByteDance is pushing its short video app to markets outside the US and India to create alternative revenue streams. Related investment news Morgan Stanley names 2 chip stocks 'significantly upside' as China bans Micron TikTok Shop is the e-commerce marketplace of TikTok, the short video app owned by Chinese tech giant ByteDance. The shopping app allows merchants, brands, and creators to showcase and sell their products to users. In 2022, TikTok Shop expanded to six Southeast Asian countries Singapore, Malaysia, Indonesia, Philippines, Vietnam and Thailand. “TikTok continues to grow rapidly in Southeast Asian countries. We estimate TikTok [gross commercial value] to reach ~20% of Shopee by 2023, which has driven Shopee to defensively increase sales and marketing since April. " said. The Blue Lotus Research Institute has a recent report on Sea Group, owner of Shopee. TikTok did not want to comment or disclose the figures. TikTok Shop's GMV, or total merchandise value sold, more than quadrupled in Southeast Asia to $4.4 billion in 2022, according to internal data obtained by tech media outlet The Information. TikTok Shop is reportedly aiming for a $12 billion GMV target by 2023. Instant buying by watching content is an advantage that TikTok has. Sachin Mittal Telecom and head of internet industry research, DBS Bank To be clear, TikTok Shop's current GMV is just a fraction of Shopee and Lazada. According to publicly available figures, Shopee netted $73.5 billion in GMV in 2022, while Lazada's GMV was $21 billion for the year through September 2021. Rising threat A TikTok spokesperson told CNBC that TikTok Shop "continues to grow rapidly" as users both large and small use the platform to reach new customers. The spokesperson said that TikTok is "focused on the continued development of TikTok Shop in Southeast Asia." According to market research firm Insider Intelligence, the number of TikTok users in Southeast Asia alone as of May was 135 million. According to Statista, Indonesia has the second largest TikTok user population after the United States. Indonesia is the most populous country in Southeast Asia with approximately 113 million TikTok users, 52% of which are youth. "Immediate purchase from watching content is an advantage that TikTok has," Sachin Mittal, head of telecom and internet industry research at DBS Bank, told CNBC. Sea Group is raising the group's balance sheet by relying on e-commerce arm Shopee as its gaming arm Garena continues to see revenue decline due to the lack of a strong gaming line and the continued ban of its flagship game Free Fire in India. national security threats. Shopee is expanding its footprint in Malaysia and continues to develop its Brazilian operations after exiting several European and Latin American markets. TikTok is currently spending an incredible amount of money promoting buyers and sellers, and that may not be sustainable. Jonathan Woo Senior analyst, Phillip Securities Research A survey conducted by online retail insights company Cube Asia revealed that consumers who spend on TikTok Shop reduce their spending on Shopee , Lazada , Offline in Indonesia, Thailand and the Philippines. Shopee and Lazada declined to comment on TikTok Shop's competition. Data from web analytics firmBenerweb shows Shopee is currently the largest online marketplace in Southeast Asia, with a 30% to 50% traffic share across the region in the last three months, while Lazada has a 10% to 30% traffic share. proved to be in second place. . Review on TikTok The TikTok Shop's push came as it was being scrutinized in the app's largest market, the US, amid heightened geopolitical tensions and tech rivalry between China and the US. Last week, the US state of Montana banned TikTok, which could prompt other states to take action. TikTok has challenged Montana in a lawsuit Monday to roll back the ban, claiming that the Chinese government "has access to data about TikTok users and that TikTok exposes minors to harmful online content." watch now TikTok CEO Shou Zi Chew's testimony before Congress in March did not alleviate lawmakers' concerns about the app's links to China or equacy of Project Texas, the contingency plan to store US data on American soil. TikTok has been banned in India since 2020, along with other apps said to originate in China. Its Chinese version, Douyin, is not accessible in China, although it is widely used by over 750 million daily active users. not sustainable But TikTok is spending money to grow, which is a tested strategy to gain market share. "TikTok is currently spending an incredible amount of money to encourage buyers and sellers, and that may not be sustainable," said Jonathan Woo, senior analyst at Phillip Securities Research. Woo said he estimates incentives will be between $600 million and $800 million per year, or between 6% and 8% of a $10 billion GMV in 2023. To encourage merchants to join the platform, TikTok Shop waived commission fees when it launched in Singapore. August. Merchants were only required to pay a 1% payment fee. Data from Apptopia, an app analytics company, showed that the TikTok Shop Seller Center app has attracted an increasing number of downloads in Indonesia over the past year. Meanwhile, Shopee charges over 5% commission, transaction and service fees. A CNBC check revealed that Nomieo's four-ply toilet paper was selling on TikTok at Singapore$5.80 for twenty-seven rolls. In contrast, the same items are sold at Shopee for around SGD 16.80. Woo noted that TikTok Shop is "still very young" and "in the cash-burning stage to grow, and this may not bode well in today's market given the higher cost of financing." TikTok Shop also said it's "a platform that doesn't just have end-to-end capabilities," unlike Shopee and Lazada, which have invested heavily in improving logistics for faster deliveries and returns, increasing the overall user experience and trust for sellers and buyers. Overall, I think TikTok Shop has the potential to be as big as Shopee or Lazada, but that could take quite a few years. Jonathan Woo Senior analyst, Phillip Securities Research Gotopnews.com