TikTok Shop and Southeast Asian SMEs: The Next Revolution in E-Commerce Expansion

Over the past five years, Southeast Asia’s e-commerce landscape has transformed at breakneck speed. At the heart of this evolution lies TikTok Shop, a platform that has not only disrupted traditional purchasing behaviors but also rewritten the playbook for small and medium enterprises (SMEs) seeking regional and global growth. From its 2020 launch in Indonesia to commanding a staggering $32 billion GMV in 2024, TikTok Shop’s ascent illustrates both the promise and complexity facing ambitious businesses. This exposé delves into the nuances of TikTok Shop’s market impact, the strategic decisions shaping SME success, and the innovation imperative that will define future leaders in Southeast Asian commerce.

The Rapid Rise: TikTok Shop’s Transformative Journey in Southeast Asia

Market Disruption and New Opportunity:
Southeast Asian SMEs find themselves at the intersection of digital adoption and consumer trendsetting. TikTok Shop’s rollout across Indonesia, Thailand, Vietnam, the Philippines, Malaysia, and Singapore mirrors the region’s mobile-first, video-driven culture, rapidly amassing 460 million monthly active users by 2024. Within the first five years, the platform weathered regulatory storms—an Indonesian temporary ban in late 2023, ongoing scrutiny in Vietnam—without losing momentum, as evidenced by its Q1 2025 surge: Thailand’s GMV tripled year-over-year, with Indonesia and Vietnam both surging over 150% [source].

The Numbers Behind the Shift:
By June 2025, TikTok Shop was projected to generate $140 million daily in sales in the region, with Thailand claiming the lion’s share at $38 million per day. Behind these statistics lies a revolution in how buyers discover, evaluate, and engage with products—one driven not by static product listings, but by interactive video and livestream content that blurs the line between entertainment and commerce.

Thailand: The Beacon of TikTok Shop’s Success

Unprecedented Growth and Strategic Investment:
No market illustrates TikTok Shop’s impact better than Thailand. In 2024 alone, Thai consumers drove $5.9 billion in annual sales, with over 3 million local sellers participating—a scale that positions Thailand as the platform’s global flagship. Quarter-over-quarter growth hit an extraordinary 217% in early 2025, outpacing not only regional peers but also TikTok Shop’s performance in the United States.
This dominance is no accident. TikTok’s announced $8.8 billion, five-year investment in digital infrastructure—including local data centers and content hubs—signals a deep commitment to Thailand as its regional nerve center. Here, SMEs benefit not only from sheer market volume but also from the technical backbone necessary to scale content production and real-time commerce.

Category Leadership and Seller Ecosystem:
Thailand’s winning formula centers on high-engagement categories. Beauty, health, and personal care dominate, with women’s fashion not far behind—segments inherently suited to TikTok’s short-form, visual storytelling. Sellers are thriving by embracing video-centric sales tactics, leveraging local creators, and harnessing “shoppertainment” to convert engagement into transactions.

Strategic Implications:
For SMEs, Thailand is the regional launchpad of choice. Its combination of explosive growth, mature seller infrastructure, and platform investment yields a uniquely favorable climate for both domestic and international firms. For businesses with Southeast Asian ambitions, prioritizing Thai market entry is not just advisable—it is imperative.

Vietnam: Opportunity and Regulatory Risk

Market Promise Amid Uncertainty:
Vietnam stands as Southeast Asia’s second-tier TikTok Shop market, but its story is one of both promise and caution. In 2024, Vietnamese consumers generated $930 million in GMV—a figure that belies the market’s regulatory volatility. With 70 million monthly active users, Vietnam’s digital economy is immense and driven by a population eager for lifestyle and wellness goods.
Yet, the specter of government intervention remains ever-present. TikTok Shop has navigated threats of restrictions and ongoing scrutiny, meaning only SMEs with regulatory expertise or flexible compliance infrastructure can truly capitalize on the market’s growth.

Consumer Behavior and Platform Fit:
Vietnamese shoppers are especially responsive to livestream selling. Here, the “shoppertainment” model hits its stride, with beauty and personal care products leading GMV. SMEs that can master real-time video commerce and stay ahead of policy changes gain a formidable edge.

SME Pathways:
Vietnam ranks as a high-reward, high-risk expansion target. Established sellers with regulatory savvy can secure market share shielded from rapid saturation, while newcomers face hurdles. For most, Thailand and the Philippines offer more stable initial entry points, with Vietnam reserved for those equipped to navigate complexity.

Indonesia: The Giant Facing Growing Pains

Market Size Versus Profitability Challenges:
Indonesia commands Southeast Asia’s largest digital audience—160 million monthly users—and contributes 35–40% of TikTok Shop’s total revenue. Yet, competitive intensity and fee escalation are reshaping the landscape. TikTok’s integration with Tokopedia has stabilized post-ban performance, but rising platform fees have narrowed margins for new and existing SMEs.

Platform Economics and Margin Compression:
Where early adopters slashed costs via heavy subsidies, today’s sellers operate in a reality of 25–30% total fees, comparable to Shopee and other e-commerce giants. For incumbents, operational efficiency and customer retention strategies take precedence over brute-force customer acquisition.
Indonesia’s e-commerce market share, once dominant at 52%, has slipped to 44% by 2024, reflecting a maturing ecosystem and rising competitive stakes. As a result, Indonesia is best suited for SMEs with established infrastructure and loyal customer bases; for new entrants, the margin landscape is less inviting.

Strategic Readiness:
SMEs with historical presence in Indonesia should focus on optimizing logistics and nurturing repeat business. For others, alternative markets offer more favorable entry points until conditions shift.

Philippines and Malaysia: Emerging Frontiers for Ambitious SMEs

Growth Trajectory and Market Dynamics:
As secondary markets, the Philippines and Malaysia present compelling growth narratives. The Philippines notched $500.51 million in TikTok Shop sales in 2024, accounting for more than a quarter of regional transactions. Malaysia, meanwhile, achieved $311.03 million and shows similar upward momentum.
Both countries are characterized by rapid mobile adoption, strong payment infrastructure, and a consumer base open to social-driven commerce. For SMEs, these are markets where competitive saturation remains manageable, and the seller ecosystem is still in formation.

Strategic Considerations:
After establishing Thai operations, regional SMEs should look to the Philippines and Malaysia as next-stage expansion targets. Their favorable conditions and growth-stage status allow ambitious businesses to build market share ahead of inevitable consolidation.

Singapore: A Premium, Niche Landscape

Market Characteristics and Limitations:
Singapore’s TikTok Shop presence is relatively modest, with daily sales of $1.15–$1.2 million and less than 5% of regional volume. The market’s premium orientation and sophisticated consumer base create high barriers to entry for SMEs focused on volume-based strategies.
Here, success is shaped by category selection—health and beauty dominate—and a willingness to cater to elevated consumer expectations. For most SMEs, Singapore remains a tertiary market, best approached after regional strength is established elsewhere.

Platform Economics: The New Reality for SME Profitability

Fee Structure Transformation and Financial Modeling:
One of the most consequential shifts for Southeast Asian SMEs has been the dramatic increase in TikTok Shop’s fee structure. The platform’s journey from aggressive subsidies to sustainable economics means sellers now face fee loads on par with Shopee—25–30%, up from historical 10–15%. This has profound implications for pricing, product selection, and strategic planning.

SMEs entering TikTok Shop today must factor these costs into all financial models, prioritizing premium product categories and content-driven conversion strategies to offset the squeeze. It is no longer viable to rely on subsidized rates as a buffer; sustainable margin generation requires disciplined portfolio management and operational excellence.

Live Commerce Premium:
Live video commerce has emerged as a primary lever for profitability, driving 20% of TikTok Shop’s GMV and offering conversion rates that eclipse traditional e-commerce channels. SMEs that can master livestream selling, influencer partnerships, and short-form video content (15–60 seconds is the sweet spot) stand to gain competitive differentiation and above-average returns [source].

Comparative Perspectives: TikTok Shop vs. Incumbent Platforms

Market Leadership and Growth Dynamics:
Despite TikTok Shop’s meteoric rise, it remains number two in Southeast Asia’s e-commerce hierarchy. Shopee commands $66.8 billion GMV (62% regional share), TikTok Shop/Tokopedia holds 28–35% ($22–23 billion GMV), and Lazada trails with sub-20% share [source].
Yet, TikTok Shop’s growth velocity, especially in Thailand, far exceeds that of its established rivals, indicating the platform is not just a viable alternative but a strategic necessity for SMEs with regional ambitions. New entrants must weigh the higher cost structures against the unparalleled demand-generation capability TikTok Shop offers—especially for visually distinctive, lifestyle-oriented brands.

Contrasts in Seller Strategy:
Shopee remains the platform of choice for highly price-sensitive, logistical-heavy sellers. TikTok Shop, by contrast, rewards content-driven, brand-focused operators capable of leveraging shopper entertainment for conversion. The divergence will only widen as regional consumer behavior matures.

Innovative Practices Shaping Next-Generation SME Success

Content Creation as Core Competency:
Unlike legacy e-commerce, TikTok Shop demands that SMEs master the art of video content. Success hinges on the ability to produce compelling 15–60 second clips, execute seamless livestreams, and optimize for mobile algorithms that favor engagement over static listings.

Operational Infrastructure Investments:
SMEs must build capabilities in three key areas:

• Content and livestream production—professionalize teams or outsource to creators
• Payment and logistics integration—ensure compatibility with regional wallets and third-party delivery solutions
• Compliance monitoring—allocate resources for policy adaptation, especially in regulatory hotspots like Vietnam

Category Selection and Product Strategy:
The data reveal consistent patterns across all markets: beauty, health, personal care, and women’s fashion dominate GMV. SMEs should align their product portfolios with these high-engagement categories and leverage rapid content cycles to surface trending goods.

Real-World Impacts: SMEs Redefining Boundaries

Storytelling in Practice:
Consider a Thai beauty brand that, prior to TikTok Shop, struggled for cross-border recognition. By investing in short-form videos and interactive livestreams, it quadrupled sales in 18 months, not only capturing local demand but also reaching markets in Vietnam and the Philippines. Similarly, an Indonesian lifestyle SME, faced with surging platform fees, shifted strategy to focus on existing customer retention and micro-influencer partnerships—driving repeat purchases and maintaining profitability despite margin pressure.

Tactical Shifts for Regional Expansion:
The most successful SMEs are those willing to:

• Pilot new market entries with disciplined resource allocation (Thailand first, Philippines/Malaysia next)
• Develop robust content pipelines and invest in creator partnerships
• Embrace payment and logistics innovation to match consumer convenience expectations
• Stay agile and informed on regulatory frameworks, pivoting when necessary

Risk Factors and Forward-Thinking Mitigation

Regulatory Uncertainty:
Indonesia and Vietnam have proven the e-commerce environment can turn volatile quickly. SMEs must avoid over-concentration, diversifying operations across multiple countries and platforms to weather policy-driven disruptions.

Fee Escalation and Competitive Saturation:
With platform fees rising, SMEs are wise to shift away from low-margin, high-volume strategies. Emphasizing category differentiation and leveraging content quality are vital to stand out.

“In the era of shoppertainment, the ability to adapt operations toward content-centric sales and agile market entry is no longer optional—it is the strategic imperative for SMEs seeking sustainable value in Southeast Asian e-commerce.”

Mitigation Strategies:

• Diversify seller presence across TikTok Shop, Shopee, and Lazada
• Optimize product mix for premium categories with naturally higher margins
• Invest in logistics partnerships to control fulfillment costs
• Commit to continuous learning in platform trends and regulatory updates

The Future Trajectory: Strategic Imperatives for SMEs and Industry Stakeholders

Window of Opportunity—But Not Indefinitely:
TikTok Shop’s explosive growth has created an unprecedented window for SMEs, but the open field is narrowing as fee structures normalize and market saturation approaches. Thailand, Philippines, and Malaysia remain the best bets for new entrants, provided they marshal the operational discipline and creative resources the platform demands.

Strategic Recommendations:

• Prioritize entry into high-growth markets (Thailand first) with full commitment to video and livestream infrastructure.
• Sequence expansion into secondary markets (Vietnam, Philippines, Malaysia), with regulatory readiness as a precondition for Vietnam.
• Revise financial models to reflect contemporary fee structures, ensuring realistic profitability projections.
• Build strategic partnerships with creators and invest in category innovation aligned with TikTok Shop’s strengths.
• Maintain agile operations to respond to regulatory changes, competitive movements, and platform innovations.

Conclusion: TikTok Shop and the Next Evolution of Southeast Asian SME Growth

Southeast Asian SMEs stand at a pivotal crossroads. The rise of TikTok Shop signals a massive redistribution of opportunity—one defined by content-driven commerce, platform agility, and relentless adaptation. While risks persist, especially in regulatory hotspots, the platform’s scale and momentum leave little doubt: the future belongs to those who can blend creativity, operational excellence, and cross-border ambition.

For industry stakeholders and business decision makers, the message is clear. TikTok Shop is no longer just an alternative or adjunct channel—it is a regional foundation for the next generation of digital commerce. SMEs who seize the moment, invest in the operational capacities the platform requires, and expand in line with market sequencing will shape not just their own trajectories but the very future of Southeast Asian retail.

The window for outsized gains is open—but as competitive intensity escalates, the time to act is now.