TRD Issue 52 - Briefing: TikTok-Tokopedia Merger, Brands Fault Temu & Shein for Slump, Google’s Gemini

Hello Subscribers,

In the past few days, the retail and e-commerce sectors have been abuzz with a groundbreaking development: TikTok announced a deal with Indonesia's GoTo Group. In a significant move, TikTok Shop will merge with Tokopedia, Indonesia's largest e-commerce platform and a subsidiary of GoTo. Post-merger, TikTok will hold a 75% stake and plans to invest $1.5 billion in Tokopedia over the coming years, bolstering future business growth. This merger marks TikTok's rapid return to the Indonesian market, just two months after being banned in October.

Initially, in early October, the Indonesian government shut down TikTok's social e-commerce operations to protect local retail markets and MSMEs. However, this merger has received government backing. As reported by the Jakarta Globe, Indonesia's Trade Minister commented, "Our arrangement aims to support Indonesia's economic growth through social e-commerce, with TikTok Shop becoming a supporter of MSMEs." In this issue, we feature an insightful article from Momentum Works, analyzing the winners and losers of this merger.

In other news, Pinduoduo's earnings call revealed impressive results. Its subsidiary, Temu, has been making significant inroads into the low-end customer segments in Europe and America. Meanwhile, Shein, gearing up for its IPO in the US, continues to expand aggressively with its affordable fast fashion, marketplace model, and low-priced products. We've previously covered how Shein is venturing into physical retail through investments and acquisitions. Both Temu and Shein are impacting local e-commerce brands and marketplaces and putting pressure on their Chinese e-commerce veterans, Alibaba and its founder, Jack Ma.

Lastly, we saw new developments from tech giants in AI news last week. Google introduced the Gemini to upgrade its Bard AI chatbot and expand into mobile on-device AI, leveraging its Android ecosystem. Meta released a series of AI products and a tool for generating images. xAI's Grok announced its US launch this week, available to X's Premium+ subscribers, using its user base for initial growth and aiming to compete with OpenAI's ChatGPT in the consumer AI product market.

There's more to catch up on in this week’s TRD Issue 52. So grab your coffee and take 5 minutes to get up to speed with the week's major happenings in the industry. Enjoy your read!

The Retail Direct

About 91APP

Founded in 2013, 91APP is the premier OMO (online-merge-offline) SaaS company, providing one-stop omnichannel retail solutions in Taiwan, Hong Kong, and Malaysia. It offers advanced Commerce Solutions and Marketing Solutions that enable retail brands to penetrate the D2C (Direct-to-Consumer) e-commerce market and drive operational benefits to their full potential. In 2021, 91APP became the first SaaS company to be listed in Taiwan and has been named one of Taiwan's "NEXT BIG" companies by Startup Island TAIWAN.

For more information about 91APP (TWO: 6741), visit www.91app.com.

e-Commerce

Winners and Losers of the TikTok-GoTo Deal

Why it is important

• The TikTok-GoTo deal reshapes Indonesia's e-commerce landscape, impacting major players like Shopee and Sea Group and signaling strategic shifts in the region's digital economy.
• This deal will bring TikTok Shop back to Indonesia after its October ban and save Tokopedia from a decline.

What happened

• TikTok and GoTo announced a partnership, merging TikTok Shop Indonesia with Tokopedia.
• By taking over Tokopedia at no cost (75.01% ownership), TikTok Shop will gain complete operational control, legitimacy of operating e-commerce, and some valuable local allies.

Source: Momentum

Jack Ma’s Biggest E-Commerce Rival is Coming for Amazon

Why it is important

• Pinduoduo's rise challenges Alibaba's dominance in e-commerce, introducing innovative, social, and game-like shopping experiences and reshaping consumer behavior and the global e-commerce landscape.

What happened

• Jack Ma acknowledged Pinduoduo's success over Alibaba, highlighting its unique approach to e-commerce.
• Pinduoduo's Temu app competes with Amazon and Walmart in the US, gaining rapid popularity.

Source: Bloomberg

Amazon Briefing: The Case For and Against Selling Through 1P

Why it is important

• Deciding between Amazon's 1P and 3P selling models is crucial for brands, impacting control over pricing, profit margins, and operational responsibilities in a significant e-commerce platform.

What happened

• Brands face a strategic choice on Amazon: sell as a 1P vendor, where Amazon handles logistics and sales but controls pricing, or as a 3P seller, maintaining more control but managing more responsibilities.

Source: Modern Retail

The New Scapegoats: Brands are Blaming Temu & Shein for Poor Business Performance

Why it is important

• Brands attribute their challenges to Temu and Shein's disruptive influence in the fashion industry, highlighting the impact of ultra-low pricing and rapid product turnover on traditional retail models.
• Retailers must develop new strategies to compete with budget-conscious customers attracted by Temu and Shein.

What happened

• Fashion retailers and e-commerce platforms, facing competitive pressure, blame Temu and Shein for their business struggles, citing these companies' low pricing and aggressive marketing strategies.
• Some retailers have tried to catch up with Shein and Temu by creating new products, styles, and colors.

Source: Modern Retail

Marketing

X Is Working to Lure Smaller Advertisers as Elon Musk Keeps Alienating Big Brands

Why it is important

• X's shift to attract small and midsize advertisers marks a significant strategy change, driven by the need to compensate for lost revenue from major brands alienated by Elon Musk's actions.

What happened

• X (formerly Twitter) is exploring partnerships with Amazon and other ad platforms to target SMBs for advertising following major brands' withdrawal due to Elon Musk's controversial actions.

Source: WSJ

Unpacked: How the FTC’s New Guidelines Could Impact Influencer Marketing

Why it is important

• The FTC's new guidelines for influencer marketing demand greater transparency in sponsored content.

What happened

• The FTC issued guidelines requiring influencers to disclose brand sponsorships, including financial and personal relationships, affecting content engagement and the influencer marketing industry's dynamics.
• The guideline has also addressed several issues since the last update in 2009, such as introducing artificial-intelligence-powered virtual personalities.

Source: Modern Retail

AI

Google’s AI Chatbot Bard Gets a Big Upgrade with Gemini, Google’s Next-Gen AI Model

Why it is important

• Google's introduction of Gemini to power Bard, its AI chatbot, shows the effort to catch up with its competitors in the AI race. 
• The potential of Gemini Nano, the most efficient model built for on-device tasks, can run directly on mobile silicon, opening support for various use cases with the Android ecosystem. 

What happened

• Google updated Bard, its AI chatbot, with Gemini, its latest AI model.
• Gemini enhances Bard's abilities in reasoning and understanding and will eventually support multimodal interactions, including text, images, and code.

Source: TechCrunch

Meta Launches a Standalone AI-Powered Image Generator

Why it is important

• Meta's launch of an AI-powered image generator signifies a significant step in creative AI applications.
• Although the initial test results are disappointing, they could be the first in a series of experiments that Meta could conduct to launch more consumer AI products.

What happened

• Meta introduced "Imagine with Meta," a web-based generative AI tool for creating images from prompts (text descriptions).
• It's free in the US, generating four images per prompt, and plans to add invisible watermarks for transparency.

Source: TechCrunch

X’s AI Chatbot Grok Now ‘Rolled Out to All’ US Premium+ Subscribers, English Language Users are Next

Why it is important

• Grok rollout for X's Premium+ subscribers is a smart growth strategy, as OpenAI's ChatGPT already leads the space.
• When the overall cost of X's Premium+ is lower than ChatGPT and offers two services, subscribing to it might be a better option for users.

What happened

• X (formerly Twitter) has completed rolling out Grok, an AI chatbot developed by Elon Musk's xAI startup, to all US Premium+ subscribers, with plans to expand to English language users globally by early 2024.

Source: TechCrunch

Asia

Philippines Digital Finance: Traditional and Emerging Forces Compete for Customers

Why it is important

• Traditional banks and digital finance players compete in the Philippines' growing market due to rising incomes and smartphone usage.

What happened

• Traditional banks and new digital finance entities in the Philippines vie for market share, with a financial account ownership rate below 50%.
• Players include digital bank GoTyme Bank and mobile wallet services GCash and Maya.

Source: NIKKEI