What Happened: TikTok is launching itself onto the e-commerce battleground. According to news sources, the short-video platform plans to introduce an online retail store to the US later this month, which will offer made-in-China goods to American shoppers.
TikTok will reportedly sell a wide array of items, from kitchen gadgets to toys, while handling marketing, sales, shipping and post-sales services on behalf of Chinese merchants. The new store will be distinct from TikTok’s existing TikTok Shop feature, which enables brands to sell their products on the app for a small commission fee.
The Jing Take: Short-video platforms have become formidable e-commerce players, putting pressure on traditional online marketplaces like Amazon and Tmall. In 2022, TikTok’s sister app Douyin grew its gross merchandise value (GMV) by 80 percent, and in the first quarter of 2023, it surpassed Tmall in sales of clothing, bags and accessories, according to data from BigOne Lab.
Having a social media infrastructure, including livestreaming capabilities and a community of creators, allows content-first apps to facilitate a more seamless shopping experience — to enable what TikTok calls the “infinite loop.”
As the company wrote in a blog post, “Today’s consumers rarely go from the top to the bottom of the traditional funnel to make a purchase. They often enter, exit, and re-enter at different stages of the purchase journey based on their needs and wants.”
As such, TikTok runs “hyper-relevant, personalized content” to bring “commerce that entertains,” influencing consumers’ discovery, consideration, and purchasing journey. This makes TikTokers 1.5 times more likely to immediately go out and buy something they’ve discovered on the platform compared to other platforms’ users.
“Today’s consumers rarely go from the top to the bottom of the traditional funnel to make a purchase. They often enter, exit, and re-enter at different stages of the purchase journey based on their needs and wants.”
However, there are a lot of hurdles to overcome. First, e-commerce competition in the US is fierce. Looking at Chinese rivals alone, Temu and Shein have both ramped up their expansion in the states in recent years. Known for its steep discounts, Temu has garnered over 50 million downloads and grown its estimated valuation to over $100 billion since launching in the market last September.
Meanwhile, Shein achieved record profits in the first half of 2023, boosted by its marketing campaigns on TikTok. This comes amid backlash around its influencer trip and ongoing lawsuit with — surprise, surprise — Temu, the latter suing the fast fashion giant for monopolizing suppliers.
In addition to being potentially dragged into a contentious e-tail battle, there is also the matter of TikTok’s reputation in the US. American leaders already see the app as a national security threat and have prohibited its use on government phones; its growing access to consumer information could spark more cries of Chinese surveillance.
And finally, there’s a bigger issue at hand: Do Americans even want social commerce? Nearly 80 percent of American adults did not participate in a shoppable livestream in 2022, according to Morning Consult, while three-quarters of US Gen Z shoppers said they prefer to buy products on a brand site than on social media, per a 2022 SimplicityDX study.
Nearly 80 percent of American adults did not participate in a shoppable livestream in 2022, while three-quarters of American Gen Z shoppers said they prefer to buy products on a brand site than on social media.
“The prevalence of scams, fake news, and inauthentic influencer endorsements has conditioned Gen Z to be wary and to seek out authenticity,” said Charles Nicholls, co-founder of SimplicityDX, in a press release as to one reason why consumers choose to buy from brand sites.
Perhaps if any platform can shake up America’s e-commerce landscape and shape consumer behavior, it’s TikTok. With 150 million American users, the app is well-loved and deeply embedded in people’s daily lives — and could soon be integrated into their shopping routines as well. Watch this space.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.