Alibaba’s Lazada is courting sellers affected by Indonesia’s e-commerce ban on social media

Lazada, a Southeast Asian e-commerce marketplace owned by Alibaba, is courting sellers affected by Indonesia’s latest e-commerce regulation, its Indonesia CEO James Chang told employees in a town hall meeting on Friday.

Since Tuesday, the company has waived fees for all sellers in Indonesia specifically doing livestream sales on Lazada, Chang said, according to a memo sent to employees after the town hall meeting seen by CNBC.

“For micro-, small and medium-sized enterprises impacted by the recent regulatory changes, we are supporting them by onboarding them to Lazada,” he added.

In recent weeks, Indonesia has cracked down on social media platforms facilitating e-commerce, such as TikTok, in a bid to protect domestic businesses. President Joko Widodo recently said that an influx of foreign imports, made available by such platforms, contributed to a sales decline for domestic businesses.

Indonesia banned social media purchases and set a one-week deadline last week for TikTok to become a standalone app, without any e-commerce feature, or face closure.

In response, TikTok Indonesia said Tuesday that it will comply with local laws and stop facilitating e-commerce purchases.

In the townhall meeting addressing Indonesian employees, Chang said the recent regulatory changes led to “a more positive, healthy competitive landscape for our industry’s long-term growth.”

He added that new sellers who sign up on their own will enjoy zero seller commission for 3 months, zero free shipping fee for 2 months and 300,000 Indonesian rupiah ($19.19) worth of seller solutions credit.

TikTok is a rising threat to e-commerce players such as Lazada and Sea Limited‘s Shopee in Indonesia and the rest of the region, recording a $2.5 billion gross merchandize volume in Indonesia in 2022, according to tech research firm Momentum Works. Sachin Mittal of DBS Bank said that impulse buying from watching content is an advantage TikTok has.

Lazada is the third-largest player in Indonesia with a market share of 10%, trailing behind Shopee (36%) and GoTo’s Tokopedia (35%), according to Momentum Works. Indonesia was the largest e-commerce market in Southeast Asia last year, contributing 52% of the region’s total gross merchandize volume, according to Momentum Works.

Under the new regulation, the Indonesian government requires e-commerce platforms in the country to implement a minimum price of $100 for certain items that are directly purchased from overseas. All products offered should meet local standards.

“While the immediate closure is positive for other existing players in the space (including Tokopedia, Shopee, Lazada, and others), we view the recently amended regulation to ultimately limit the dominance of foreign e-commerce in Indonesia along with their imported goods,” said Citi in a Wednesday report.

“In the medium-to-longer-term, we believe that the government will continue to protect the local champion, by reflecting the policies being made in China, U.S. and India,” said Citi analysts.

A Lazada spokesperson told CNBC that “local businesses and sellers form the majority” on the e-commerce platform, selling their goods to Indonesian shoppers.