TikTok Sets Sights on $17.5bn Shopping Business, Takes on Amazon, Temu, and Shein
Internal meetings at TikTok have revealed the company’s ambitious goal to achieve a merchandise volume of $17.5 billion for its US version of TikTok Shop by 2024, according to anonymous sources. With its unique combination of online entertainment and impulse buying, TikTok aims to compete not only with e-commerce giant Amazon but also with Chinese-owned rivals Temu and Shein, who have gained popularity among younger American consumers. Unlike its competitors, TikTok plans to leverage its massive social media reach and the appeal of viral videos to attract buyers.
While Bloomberg News had reported that TikTok was on track to reach $20 billion in global gross merchandise value last year, mainly thanks to its success in Southeast Asia, the company is now looking to expand its sales in the US and Latin America. TikTok is planning to launch its e-commerce operation in these regions in the coming months as it seeks to tap into new markets.
Responding to Bloomberg’s merchandise sales figures, TikTok denied their accuracy, stating that they were speculative. However, TikTok’s parent company, ByteDance, founded by Zhang Yiming and Liang Rubo, has seen exponential growth, establishing itself as an internet leader valued at over $200 billion. ByteDance aims to find new sources of growth beyond social media advertising, and TikTok Shop is seen as one of its fastest-growing features. In 2023, ByteDance’s revenue surged by approximately 30% to over $110 billion, outpacing the projected growth of more established social media competitors like Meta Platforms and Tencent Holdings.
TikTok Shop offers a unique shopping experience to users, allowing them to purchase products while browsing through a continuous feed of short videos and live streams within the main app. By blending the convenience of Amazon’s shopping platform with the product discovery element found on apps like Meta’s Instagram, TikTok hopes to capture a significant portion of consumer spending, much like its Chinese counterpart Douyin did with Alibaba and JD.com.
ByteDance is eager to export its successful e-commerce model worldwide. In the US, TikTok is incentivizing influencers with free shipping and subsidies to promote and sell a range of products, including gadgets, clothing, and makeup through videos and live streams. During Black Friday and Cyber Monday in November, over 5 million new US customers made purchases on TikTok. The platform boasts around 150 million users in the country.
To generate revenue from its e-commerce platform, TikTok recently announced fee increases for merchants, with commission rates set to rise to 6% of each sale in April and 8% in July for most product categories. While these rates are still significantly lower than Amazon’s typical seller fees of around 15%, the move demonstrates TikTok’s eagerness to generate substantial income from its growing e-commerce venture.
American consumers are increasingly comfortable using Chinese e-commerce apps, with platforms like Shein and Temu gaining popularity. Shein, a fashion site, and Temu, which gained notoriety after airing a Super Bowl ad in February, have attracted a significant user base.
While TikTok Shop’s global sales targets remain unknown, the recent acquisition of Tokopedia, an e-commerce unit of GoTo Group in Indonesia, for $1.5 billion suggests TikTok’s intention to expand its online retail presence further.
As a result of these developments, TikTok’s foray into the e-commerce landscape is set to intensify its competition with top industry players such as Amazon, while also contending with the growing influence of Chinese e-commerce platforms. The company’s unique approach, leveraging its vast user base and viral content, could prove to be a winning formula, positioning TikTok as a significant player in the global shopping arena.
