Indonesia’s social commerce boom comes with an unexpected casualty – struggling shopping malls

Even after the government declared the COVID-19 pandemic over and removed all remaining restrictions, shopping mall occupancy in Jakarta has not gone back to the way it was before the pandemic.

Indonesia's social commerce boom comes with an unexpected casualty - struggling shopping malls
Shopkeeper Hariyanti showcasing a shoe she is selling during a livestream on social media and e-commerce platforms from her store in a Jakarta shopping mall. (Photo: CNA/Wisnu Agung Prasetyo)

JAKARTA: There were hardly any customers roaming around the dimly lit hallways of this desolate Jakarta shopping mall.

The rows of vacant and shuttered shops were evidence of the impact of the COVID-19 pandemic, which caused a massive economic downturn and destroyed their previous owners’ businesses.

But amid the silence and the gloom, there were signs of activity. Enthusiastic voices could be heard as shopkeepers armed with smartphones and ring lights greeted virtual customers from all over Indonesia.

They were enthusiastically making their sales pitches in front of a live audience on e-commerce and social media platforms like TikTok, Shopee and Instagram.

“It’s a good way to introduce our products, their quality and craftsmanship to a wide audience,” shopkeeper Hariyanti told CNA.

Hariyanti, who like many Indonesians goes by one name, said that her store could sell a daily average of 100 pairs of shoes online. “Offline, we can only sell 20 or 30 pairs on a good day,” she said.

For some retailers, selling their products online may have started as a survival tactic to weather the effects of the pandemic when mobility and social activities were heavily restricted.

But some shops are seeing the benefits of e-commerce in the form of a wider market and bigger revenues and have continued the practice even after these restrictions were lifted.

“It is no surprise that we see shops today catering to a mix of physical and virtual customers while others decided to focus on selling online entirely,” Bhima Yudhistira Adhinegara, the executive director of the Center of Economic and Law Studies (CELIOS) think-tank, told CNA.

But the phenomenon comes at a cost.

The pandemic proved to be the final nail in the coffin for some of Indonesia’s biggest department stores and supermarket chains, whose businesses have long been eroded by the presence of e-commerce platforms.

Supermarket chain Giant closed all 395 of its outlets in 2021. That same year, department store Centro filed for bankruptcy and closed all 12 of its outlets.

A woman strolls inside a desolate shopping mall in Jakarta, Indonesia. (Photo: CNA/Wisnu Agung Prasetyo)

Meanwhile, some shopping malls in Jakarta appeared to be on the verge of collapsing with just a handful of tenants remaining, despite the fact that a number of them are strategically located.

Amid a shifting retail landscape, some malls in Jakarta are increasingly becoming storage spaces where tenants ship their products, frequented not by customers but by couriers.

“No one really needs to shop at the mall anymore when you can buy stuff at the convenience of your own home,” Adhinegara said.


Widya Kusuma used to sell headscarves from a tiny stall inside a shopping mall in the southern suburbs of Jakarta, but the pandemic forced her to sell her goods online from home.

“Things were tough. I had to let people go. I thought about giving up,” she told CNA, adding that despite her best efforts, she could only make a fraction of what she used to before the pandemic.

Kusuma’s luck changed after the arrival of so-called “social commerce” – which involves social media platforms accommodating the buying and selling of goods and services – in April 2021 when TikTok picked Indonesia to test its new commerce feature: TikTok Shop.

The feature allows users to buy items while scrolling through the platform’s endless feed of short videos and livestreams.

“In a short amount of time, I was selling more headscarves than I did before the pandemic,” Kusuma said, adding that she eventually decided to focus on selling her products online. She did not bother to renew the lease for her stall, which expired in 2022.

Last year, TikTok had a transaction volume of US$4.4 billion across Southeast Asia, up from US$600 million in 2021, according to consultancy firm Momentum Works.

TikTok said last month that there were five million Indonesian businesses on the platform, the majority of which are small and medium enterprises (SMEs). The company also said that it will be investing billions of dollars in the region over the next few years as it hopes to triple its transaction to US$12 billion by the end of 2023.

A shopkeeper showcasing a product from her shoe store in Jakarta, Indonesia during a livestream on TikTok. (Photo: CNA/Indonesia)

Transactions from TikTok Shop were modest compared to those recorded by more established players like Shopee and Lazada, which respectively had transactions of US$47.9 billion and US$20.1 billion in 2022.

However, Momentum Works noted that growth appeared to have plateaued for Shopee and declined for Lazada as restrictions were eased and people became less worried about shopping offline. In 2021, the two firms had transactions of US$42.5 billion and US$21 billion, respectively.

In response to TikTok Shop’s growing popularity, more established e-commerce companies have begun experimenting with short videos and livestreams on their respective platforms.

Shopkeeper Hariyanti said she and her colleagues go live for two hours every day between 12pm and 2pm, displaying one item after another using three smartphones to capture audiences from three different platforms: TikTok Shop, Shopee and Instagram.

So far, she said, the store generates more sales from TikTok Shop compared to the other two platforms.

“Maybe (TikTok Shop) is more suited to our demographics. Maybe because (TikTok Shop) has more promos like discounts and free delivery. I don’t know for sure,” she said.


Miranti Amelia, who owns a clothing shop at a mall in West Jakarta, said although her store still welcomes physical customers from time to time, their numbers are dwindling.

“They usually saw us on social media but insisted on coming to the store to try our clothes for themselves. They buy one or two clothes and once they are confident with our products, their next purchase will be done online,” she told CNA.

“I even had one customer who came to the shop, tried our products and bought the same items at our online store while she was still at my physical shop. When I asked her why, she said: ‘There are many promos online’.”

Amelia said with offline sales dwindling, her physical store now acts more like window dressing to her online store and a backdrop for her daily livestreams.

“I plan on moving everything to a two-storey store. It’s hard to operate an online store from inside a mall. There’s not enough space for my workers to pack our shipment. Our couriers have to go up and down the stairs and elevators,” she said.

But moving away from a shopping mall is not for everyone.

Shop owner Josh Sulistyo said although his store’s online sales are starting to catch up with its offline transactions, he will continue to operate from Tanah Abang shopping complex, which has a reputation for being a magnet for wholesalers from across Indonesia.

“We need this shop to show (wholesalers) that we mean business, give them extra confidence that we have ample stock and we can deliver no matter the size of their order,” he said.

Shoe store owner, Josh Sulistyo inside of his store at Tanah Abang shopping complex in Jakarta, Indonesia. (Photo: CNA/Wisnu Agung Prasetyo)

But Sulistyo may be the exception to the rule.

In its April report, real estate company Colliers said that despite the government declaring the COVID-19 pandemic over and removing all remaining restrictions, shopping mall occupancy in Jakarta has not gone back to the way it was before the pandemic.

For the first three months of 2023, shopping malls in the city had an occupancy rate of 69 per cent, compared with 79.8 per cent in the last quarter of 2019, before the pandemic hit.

Malls catering to luxury and premium brands have fared better, the company noted. In the first quarter of 2023, they were 84.5 per cent occupied.

The same cannot be said for shopping centres catering to the middle and lower markets. During the same period, these malls on average had an occupancy rate of 47 per cent.

A desolate shopping mall in Jakarta, Indonesia. (Photo: CNA/Wisnu Agung Prasetyo)


Adhinegara of think-tank firm CELIOS said the future looks bleak for shopping malls targeting lower-income households since most of the goods sold at these places are widely available online.

“Many of their tenants were greatly impacted by the pandemic. Some closed down, some had to drastically cut down their spending and look for cheaper alternatives, others decided it no longer makes sense to operate a physical store altogether,” he said.

“In other parts of Indonesia where internet penetration is low and shipping costs are high, these types of malls might still have their place, but not in Jakarta.”

In a bid to boost spending, President Joko Widodo recently declared two days around the Idul Adha holiday, which fell on Jun 29, as collective leave days, effectively giving Indonesians a five-day weekend.

“The holiday break should encourage the economy, especially in the regions and local tourism areas, to be better,” Mr Widodo, popularly known as Jokowi, said.

The decision did have an effect with some shopping malls in Jakarta reporting increased activities over the five-day holiday. However, the policy’s effect was short-lived and everything went back to the way they were by Jul 3, according to vendors interviewed by CNA.

Shuttered shops at a desolate section of Indonesia’s biggest shopping complex Tanah Abang in Jakarta, Indonesia. (Photo: CNA/Wisnu Agung Prasetyo)

Alphonzus Widjaja, chairman of the Indonesia Shopping Centre Association (APPBI) acknowledged that some shopping malls have been struggling to attract customers and tenants.

“Malls should no longer be just about shopping because they will directly compete with e-commerce,” he told CNA.

“Instead, malls should be a place where social interactions are formed. It needs to be a centre for activities. These are the things that people long for after they emerge from the pandemic and these are things that no e-commerce platform can offer.”

Widjaja highlighted the success of Indonesia’s first shopping mall Sarinah in transforming itself from an outdated and desolate facility into a modern and hip establishment for people to eat, shop and hang out.

The 56-year-old state-owned shopping centre underwent a major facelift and concept overhaul in 2020. The two-year renovation project cost the government 700 billion rupiah (US$46 million).

“Our association has been communicating with these struggling malls that they need to transform themselves. They all agree that they need to change their concept but it takes money that they don’t necessarily have,” he said.

“But it is possible for an ailing shopping mall to have a new lease on life.”

Source: CNA/ni(as)