Social Commerce will be in the Spotlight in the Renewal of the Ministry of Trade's E-commerce Rules
Social commerce will be regulated as Trade Actors Through the Electronic System (PMSE); transactions therein are also subject to tax
The Minister of Trade Zulkifli Hasan (Zulhas) revealed four main points in the revision of the Minister of Trade Regulation Number 50 of 2020 which will be issued in the near future. Some of them will regulate transaction matters on the platform social commerce and prohibition E-commerce become a producer.
This was conveyed by Zulhas at the Ministry of Trade (Kemendag) on Tuesday (1/8). "The latest policy is in the process of harmonization at the Ministry of Law and Human Rights (HAM) since August 1, 2023. [Revised] Permendag No. 50/2020, we have taken the initiative from the start, but the discussions are between ministries," he said as reported by Bisnis.com.
It should be noted that Regulation of the Minister of Trade Number 50 of 2020 contains Provisions for Business Licensing, Advertising, Guidance and Supervision of Business Players in Trading Through Electronic Systems. One of the reasons for this revision is to protect domestic MSMEs.
Here are the four main points of the revision:
- Prohibition E-commerce be a producer. The government will prohibit trade actors through electronic systems (PMSE), either E-commerce nor social commerce, to sell the product yourself or as wholesaler. Zulhas believes that this regulation will create fairness and fair market competition for MSME players.
- Policy social commerce. Shopping transaction trends online through social media platforms encourage the government to include it as one of the PMSEs. Later, this new rule will contain a definition of social commerce. Meanwhile, platforms social commerce in question, for example TikTok Shop, Instagram, and Facebook Marketplace.
- Transaction tax social commerce. Besides defining social commerce, the government will also impose a tax on every transaction on this platform. The introduction of the tax was triggered by the large number of products that are selling very cheaply on platforms like TikTok, and these products are not yet taxed.
- Prohibition of selling cheap imported products. Finally, the government will prohibit imported products under IDR 1,5 million per unit from being traded and sent directly to Indonesia by sellers from abroad (cross border).
Attention to social commerce
According to data compiled by The report of Statista, gross merchandise value (GMV) recorded by the business social commerce in Indonesia in 2023 will reach $8,22 billion. It is projected that it will continue to grow to reach $22,13 billion in 2028.
This great opportunity is motivated by the considerable penetration of social media in Indonesia. In addition, platform developers are now adding more integrated buying and selling features (including payment systems and logistics), making it easier for end consumers and merchant to transact.
This new regulation also comes shortly after the buzz about Project S from TikTok. In essence, through this project TikTok will maximize its platform to sell self-produced (or managed) goods to its users.
Instead of acting as an intermediary, here TikTok will act to sell self-supplied goods. It is considered a threat to MSMEs, because with the database they have (from TikTok Shop transaction data), they can get insight important information about market trends and needs (to support the production process). For information, throughout 2022 the TikTok Shop is successful recorded $4,4 billion in transactions, up 4x from the previous year.
One of the highlights of the new rules E-commerce is a prohibition for platform owners to participate in selling. Platform owners here include developers social commerce, online marketplace, and its kind.
In this case, including TikTok or other companies that facilitate activities E-commerce and social commerce, may not sell their own production. Indeed, no details have been conveyed, so we do not know what kind of limitations are given.
apart social commerce, currently there is also a trend direct-to-consumer. This business model allows consumer product developers to sell their products directly through digital channels—including through channels E-commerce self-developed.
Although it has not been conveyed in depth, the four main points that have been conveyed by the Minister of Trade show that this candidate for a new regulation is indeed based on protecting the MSME ecosystem in Indonesia.
Train social commerce
Indonesian people who are very connected with social media have also driven the trend of online shopping through platforms social commerce. As of January 2023, the population of social media users in Indonesia reached 167 million people or represented 78% of the total internet users which reached 212,9 million.
Train social commerce In fact, it has been popularized through the Facebook and Instagram platforms. However, TikTok reported start to lead the trend social commerce because it offers convenience for transactions in just one application.
In different reports by Populix, TikTok Shop (45%) is the platform most frequently used by users for online shopping, followed by WhatsApp (21%), Facebook Shop (10%), and Instagram Shop (10%).
*Randi Eka Yonida was involved in writing this article