It is reported that TikTok has set a target for its e-commerce Gross Merchandise Volume (GMV) at USD 50 billion this year, about 360 billion RMB, more than doubling the previous year’s 20 billion USD. Douyin’s GMV has surpassed 2 trillion RMB, and TikTok is replicating the same model, starting with monetizing through advertising and then powering up e-commerce to build a B2B commercial ecosystem.
TikTok is gaining strong momentum, and with substantial opportunities overseas, many sellers are eagerly rushing to join this platform.
Growing Quietly
In September last year, TikTok Shop was quietly launched in the United States, allowing users to directly purchase products tagged in videos and live streams from their “For You” page.
To aid sellers in setting up their shops more effectively on the platform, TikTok introduced the “shop partner” program. Unlike Amazon’s approach, this program involves Shop paying third-party agencies to guide sellers in opening their shops on TikTok instead of charging the sellers.
TikTok Shop has attracted many Chinese sellers who are familiar with the U.S. market. Thanks to their fluency in the language and familiarity with the American business environment, TikTok’s staffing matches that of Amazon.
Many Chinese sellers have opened shops on TikTok Shop and are optimistic about their profit prospects. It is calculated that an item costing 10 Chinese yuan can be sold for 30 U.S. dollars on TikTok Shop, and even after deducting shipping and storage costs, the gross profit is around 13 dollars, three to four times what it is domestically.
TikTok is set to introduce a new service called “FBT,” modelled after Amazon’s “FBA.” This program lets sellers deposit their merchandise in a unified warehouse, where TikTok will manage the distribution and profit sharing with vendors post-logistics cost deductions.
TikTok also plans to gradually adjust its in-app sales commission structure from 2% to 8% in the coming months. Moreover, TikTok has launched the “TikTok Fulfillment Program” to assist merchants with storing, selecting, packing, and shipping goods, primarily targeting a consumer base under 30 years old and recommending that merchants list products priced between 20 to 60 dollars.
Additionally, TikTok has developed a secure payment system with third parties. The company emphasizes on its official website that all U.S. user data and payment information are stored within the country and managed by the U.S. Data Security Team (USDS), ensuring a safe and reliable shopping environment for users.
Strict Requirements
The U.S. Shop marketplace imposes stringent demands on sellers.
The platform operates on an invitation-only basis, exclusively open to U.S. citizens, green card holders, and significant sellers on Amazon, with annual sales exceeding $2 million. Each legal entity is allowed to open a maximum of five stores.
During the application process, sellers must submit utility bills, tax records, and U.S. warehouse lease agreements, among other documents, and undergo multiple video verifications. Any non-compliance will lead to the closure of the store.
Post-launch, the requirements for sellers remain strict. For example, once a product sells out, the seller must immediately remove the listing. The store will be penalized if a product is not shipped within 72 hours of placing an order. Additionally, if a store does not engage in sales activities within two months of opening, it may be shut down by the platform.
To prevent sellers from shipping products from abroad after receiving orders, Shop mandates a concise shipping timeframe. This high-pressure policy puts sellers in a dilemma: if a product sells well, restocking issues can lead to wasted traffic; if sales are poor, pre-stocked goods may become dead stock, increasing financial risks.
Despite numerous challenges, many sellers are eager to open stores on Shop. Some domestic sellers even seek help from friends with legal status in the U.S. to establish their stores. The success of Shop in the U.S. market is eagerly anticipated and is described as a “high-stakes venture.”
Globally, TikTok has a substantial user base, with over 150 million users in the U.S. alone, nearly 45% of the total U.S. population. Therefore, any misstep by Shop in the U.S. could potentially impact TikTok’s operations in other countries.
Before officially entering the U.S. market, management opted to test the waters in Southeast Asia, gaining sufficient experience in several countries. In 2021, TikTok Shop opened to local merchants and consumers in Indonesia, later expanding the model to Singapore, Malaysia, Indonesia, the Philippines, Vietnam, and Thailand. According to data from The Information, TikTok Shop’s GMV in the Southeast Asian market reached $4.4 billion in 2022, with a target of $12 billion set for 2023.
Live Streaming
Since the beginning of this year, China’s top live-streaming rooms have been collaborating with TikTok to advance their overseas broadcasting plans.
The live streaming market in Southeast Asia has achieved significant success, primarily focusing on 3C products (computers, communications, and consumer electronics) and beauty products. Numerous Multi-Channel Networks (MCNs) have emerged rapidly in the region.
Since last year, Chinese inspection teams have frequently visited Thailand, focusing on product compliance and deeply understanding local consumer habits and competitive conditions. TikTok maintains a positive outlook on this emerging market, supporting filming, editing, and traffic assistance.
Additionally, TikTok supports the growth of MCNs and influencers by issuing traffic coupons and conducting training sessions. These policies tend to support local merchants, with a high degree of localization within the Thai TikTok team.
Although the Southeast Asian market is expected to continue to grow, the promotion of live-streaming models in the United States faces more significant challenges. U.S. consumers have not yet developed the habit of shopping through live streaming, making it difficult to replicate this model in the U.S.
American media consumption is mainly allocated to YouTube, Twitter, and other entertainment activities, leaving limited time for live streaming. Moreover, U.S. hosts generally are not skilled in improvisation and are reluctant to be restricted by MCN styles, making it difficult for live streaming to succeed in the short term in the U.S.
Therefore, while live streaming has been successful in the Southeast Asian market, TikTok’s expansion into the U.S. market needs to be more cautious, considering cultural and consumer habit differences.
Summary
TikTok’s push into e-commerce, marked by ambitious GMV targets and the introduction of features like TikTok Shop and live streaming, underscores its determination to become a significant player in online retail.
While finding success in Southeast Asia, particularly with TikTok Shop, penetrating the U.S. market poses unique challenges, especially regarding cultural differences and consumer habits around live streaming.
Despite these hurdles, TikTok’s adaptability and strategic initiatives position it as a formidable force in shaping the future of e-commerce globally.