Is TikTok's E-Commerce Dream Turning Sour? Commission Hikes Raise Concerns Among Sellers

As TikTok's e-commerce platform gains traction in Southeast Asia, sellers are facing an increasingly challenging landscape. Recent commission increases across the region have sparked concerns about profitability, raising the question: is TikTok’s Shop still a viable revenue stream for small and medium-sized sellers?

Rising Commissions: A Tough Pill to Swallow

Effective September 16, 2024, TikTok’s Indonesian e-commerce platform, now known as TikTok | Tokopedia, announced new commission rates that range from 1% to 10% for electronic products, up to 10% for fashion and FMCG items, and 1% to 10% for other categories. This adjustment is part of a broader trend affecting nearly all Southeast Asian TikTok Shop markets, with many sites experiencing commission hikes of over 10% within the last three years.

A Closer Look at Commission Rates

• Indonesia: The highest commission rate is now 10%, with previous rates climbing up to 8.5%. Discounts of 20% are available, effectively lowering the actual rate to 8%.
• Malaysia: Sellers now face rates as high as 14.58% for FMCG, making it one of the highest in the region.
• Philippines: Initial increases saw rates reach 5.2% for fashion.
• Thailand and Singapore: Commission increases have been more modest, hovering between 4% and 5.35%.

These changes have left sellers reeling, especially those who had settled into the platform under the promise of lower fees.

Increased Costs: A Multilayered Challenge

Beyond rising commissions, sellers are grappling with higher operational costs, including advertising and live-streaming fees. For example, one Indonesian seller, Hazel, reported a total commission burden of 15.5% when factoring in shipping and cashback incentives.

Sellers are also facing increased transaction fees across various markets:

• Malaysia: Increased from 2.16% to 3.78%
• Thailand: Increased from 3% to 3.21%
• Singapore: Increased from 2% to 2.18%

With these heightened expenses, maintaining competitive pricing becomes increasingly difficult.

The Impact of New Regulations

Southeast Asia's evolving e-commerce landscape has seen tightening tax laws and new trade regulations, further complicating operations for sellers. For instance, Thailand recently introduced a 7% VAT on low-priced imported goods sold online, with similar policies expected in Vietnam.

As platforms increase their fees, sellers are left questioning their profitability. Many believe the rising costs are part of a broader "conspiracy" against small businesses, pushing them towards a difficult decision: how to adapt without sacrificing margins.

What’s Next for Sellers?

The stark reality for many sellers is that they may have to absorb the rising costs or find innovative ways to streamline operations. Some are already strategizing to enhance supply chain efficiency and maximize their input-output ratios. However, the challenges remain daunting.

As Hazel aptly puts it, "We can only lower costs on the supply chain side and improve operational efficiency." Will TikTok’s e-commerce platform continue to thrive, or are we witnessing the beginning of a challenging chapter for sellers in Southeast Asia?

Join the Discussion

What are your thoughts on the rising commissions at TikTok Shop? Are you a seller facing these challenges? Share your insights in the comments below!