in March, The US House of Representatives overwhelmingly approved a bill that could force ByteDance to do so Take down TikTok or face a ban in US app stores. MLots of discussion and debate related Centered on America Data security and rights of expressionBut the potential move also highlights something else: TikTok is increasing its focus on e-commerce, but the interplay between the tech giants and geopolitics is putting pressure on small merchants.
Over the past few months, merchants – many of them from China – looking for an alternative to Amazon, have flocked to TikTok to sell clothing, cosmetics, electronics and a variety of other products to American buyers, via the TikTok Store. In interviews with TechCrunch, sellers from Shenzhen — the Chinese megacity that is a major hub for Amazon merchants — said they felt a collective sense of frustration over rising geopolitical tensions and “helplessness” over a potential TikTok ban.
“The situation is not under our control,” a retailer specializing in maternity and baby products told TechCrunch. “It's hard to know how things will develop.” While existing supply chains are difficult to change, “we just have to listen to them.” (The sellers requested that their names not be used due to political sensitivities.)
TikTok Shop officially launched in September 2023 with 200,000 merchants already on board. But since then it hasn't provided any updated numbers on how many merchants are currently on the platform, nor how much they're selling there, nor how many sellers are selling elsewhere (and where that might be).
research However, Jungle Scout, one of Amazon's data intelligence providers, offers an idea of TikTok's impact on e-commerce. It found that 20% of sellers, brands, and businesses on Amazon have plans to expand into the TikTok store this year. Before the current political backlash, ByteDance predicted it had the potential to grow its US e-commerce business tenfold to $17.5 billion this year.
TikTok isn't the only platform on the list for merchants looking for more channels outside of Amazon to expand their customer bases. Its rise is part of a larger shift we've seen around alternative marketplaces like Temu receiving more attention not just from shoppers, but from Chinese e-commerce exporters and merchants. Amazon is said to be taking notice, which is another sign that alternatives are gaining traction.
TikTok did not immediately respond to a request for comment.
A new way to buy and sell
TikTok has been trying to boost its e-commerce business since launching in the US last September.
The app is famous — or infamous, depending on who you talk to — for how tightly it controls what content is shown and to whom. TikTok Shop also has a strong dose of regulation.
Unlike Temu, known for its seas of cheap, white-label products from Chinese factories sold directly to American consumers, TikTok's strategy has been to include and highlight more branded goods, making it a direct competitor to Amazon.
TikTok is also looking to attract sellers through more traditional sponsorships. According to reports, to encourage merchants to sell goods at a deep discount during the recent Black Friday sales period, TikTok provided subsidies to these merchants to reduce their prices by up to 50%.
Incentives and algorithms aside, traders were interested in selling on the app simply because TikTok's short-video platform generates massive engagement. According to a survey conducted by Tabcut, a Chinese company tracking TikTok Shop performance, nearly 70% of sellers reported a year-over-year sales increase during the first eleven months of 2023.
This is also confirmed by consumer behaviour, as products endorsed by influencers continue to make gains, especially with younger consumers.
According to Jungle Scout, nearly 20% of consumers began their product searches on TikTok in the first quarter of 2023, up 44% from last year. While 56% of all consumers still prefer to start their product research on Amazon, 40% of the Gen Z demographic prefers TikTok for search rather than Google.
The high concentration of young shoppers is not surprising, given that 52% of TikTok users in the United States are between the ages of 18 and 34, according to Pew Research Center research. TikTok has the opportunity to reshape how America's younger generations shop online.
Far from relying on its dynamics, TikTok has been doing some very overt media to push its message.
Earlier this month, business research firm Oxford Economics published a report on TikTok's impact on the US SME sector. It was funded by TikTok, and perhaps not surprisingly, this report made a strong endorsement of TikTok's economic impact: it estimated that TikTok's presence on the platform (through advertising or just marketing themselves via accounts) generated $14.7 billion in revenue for 7 million businesses. Small and medium sized companies in the United States use them.
Amazon competitor?
TikTok seems to be serious about making inroads into e-commerce, but it's still in a state of flux. On the one hand, the company — even as it faces a potential U.S. ban or forced sale — continues to roll out new e-commerce features, like the new video shopping format it previewed at a conference this month. On the other hand, she seemingly adjusts or enforces vendor policies while trying to navigate how to grow under particularly harsh lights.
“Tik Tok [Shop]The internal management is a bit chaotic at the moment. “It's a new platform, so it hasn't started to pressure sellers, but their policies are still changing,” said a merchant who sells the lamps, who has been selling on Amazon since the mid-2000s.
One of these policies appears to be related to what its algorithms show consumers. In recent months, TikTok's U.S. store has stepped up efforts to prioritize U.S.-based stores over foreign stores, merchants outside China say. Sellers told TechCrunch that this led to the emergence of black market “agents” — parties that mediate deals between foreign sellers and US residents, who in turn set up TikTok stores that appear to be US-owned but are actually operated by foreign merchants.
Merchants are willing to overcome these hurdles to grow their touchpoints with users, and diversify their channels as one giant after another emerges.
“The margins on Amazon are getting smaller and the competition is increasingly fierce because of Temu, so TikTok gives us another option,” the lamp seller said.
To measure TikTok's impact on Amazon, “we need to understand the overall retail market in the US,” said Richard Xu, a partner at Starting Gate Fund, which invests in cross-border retail solutions between China and the US.
E-commerce only makes up about 15% of U.S. retail, according to the Commerce Department, so “If we talk about the small share of the online e-commerce sector alone, there is not much to discuss,” suggested Xu.
But if TikTok Shop's strategy is primarily focused on bringing offline businesses online for the first time, it could be a very big step. “[Using] Live broadcast e-commerce to allow offline shops and small stores to participate, the potential is very great.
However, while 15% sounds small, the number is still large — $285.2 billion — so the potential for TikTok Shop is huge even if it only gets a small slice of the current e-commerce pie.
Juzas Kaziukinas, founder of Marketplace Pulse, an e-commerce intelligence firm, doubts TikTok will ever replace Amazon. “It doesn't have the breadth of choice and gratification that shoppers in the West are used to with search-based e-commerce,” he said. “But a lot of people spend many hours using TikTok every day, and therefore, sometimes they buy things on it.”
“In the United States and other countries in the West, shopping apps have developed in parallel with apps that provide entertainment or communication such as social media,” he added. “We have become accustomed to getting different things from different apps, rather than going to one place to get everything.” “.
“Today, social apps like TikTok are trying to discover shopping before retailers like Amazon discover social media (like Amazon Inspire). But the status quo of different apps serving different needs still remains.
