In March, the The US House of Representatives has overwhelmingly passed a bill that could force ByteDance to divest TikTok or face a ban in US app stores. Mr.much of the related discussion and debate focused on America data security and expression rightsbut a potential move also highlights something else: TikTok is increasingly focused on e-commerce, but the interplay of tech giants and geopolitics is crushing small merchants.
In recent months, merchants – many 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 shoppers, via TikTok Shop. In interviews with TechCrunch, sellers in 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 » in the face of a possible ban on TikTok.
“The situation is not in our control,” a retailer specializing in maternity and baby products told TechCrunch. “It’s just hard to know how things will develop.” Because existing supply chains are difficult to change, “we just have to play it by ear.” (The sellers asked not to be named due to political sensitivities.)
TikTok Shop officially launched in September 2023 with 200,000 merchants on board already. But since then, it has provided no updated figures on how many merchants are currently on the platform, nor how many they sell there, nor how many sell elsewhere (and where that might be).
Research from Jungle Scout, an Amazon data provider, however, provides some insight into TikTok’s impact on e-commerce. It revealed that 20% of Amazon sellers, brands and businesses plan to expand to TikTok Shop this year. Before the current political backlash kicked in, ByteDance reportedly projected that it had the potential to grow its U.S. e-commerce business tenfold to $17.5 billion this year.
TikTok isn’t the only platform on the list for marketers looking for more channels beyond Amazon to expand their customer base. Its rise is part of a larger shift we’ve seen around alternative marketplaces like Temu, which are attracting more attention not only from buyers, but also from exporters and Chinese e-commerce traders. And Amazon has reportedly taken note, another sign that alternatives are gaining ground.
TikTok did not immediately respond to a request for comment.
A new way to sell and buy
TikTok has been trying to grow its e-commerce business since launching in the United States last September.
The app is famous – or infamous, depending on who you talk to – for the way it tightly controls what content is served to whom. TikTok Shop also contains a heavy dose of curation.
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 integrate and promote more branded products, making it a direct competitor to Amazon.
TikTok is also looking to attract sellers with more traditional subsidies. Reportedly, to encourage merchants to sell products at a heavily discounted price during the latest Black Friday sales period, TikTok distributed subsidies to these merchants to reduce their prices by up to 50%.
Incentives and algorithms aside, marketers want to sell on the app simply because TikTok’s short-video platform generates massive engagement. According to a survey by Tabcut, a Chinese company that tracks TikTok Shop performance, nearly 70% of sellers reported a year-over-year increase in sales during the first 11 months of 2023.
This is also reflected in consumer behavior, where influencer-backed products continue to gain traction, particularly among coveted younger consumers.
According to Jungle Scout, nearly 20% of consumers began their product search on TikTok in the first quarter of 2023, an increase of 44% from a year ago. While 56% of all consumers still preferred to start their product search on Amazon, 40% of Gen Z preferred TikTok for search over Google.
The high concentration of young buyers is not surprising, given that 52% of U.S. TikTok users are aged 18 to 34, according to Pew Research. TikTok has the opportunity to reshape the way America’s younger generations shop online.
In addition to building on its momentum, TikTok has taken a fairly bald media ride to get its message across.
Earlier this month, business research firm Oxford Economics released a report on TikTok’s impact on the U.S. SMB sector. This report was funded by TikTok and, unsurprisingly, it provided a ringing endorsement of TikTok’s economic impact: it estimated that a presence on the platform (through advertising or simply marketing itself through accounts) generated $14.7 billion in revenue for the 7 million American SMEs that use it.
A challenger to Amazon?
TikTok appears to be serious about making inroads into e-commerce, but it is still evolving. For one thing, the company — even as it faces a potential U.S. ban or forced sale — continues to roll out new e-commerce features, like a new video shopping format that it previewed -first at a conference this month. On the other hand, it changes or enforces seller policies seemingly on the fly as it tries to figure out how to expand under a particularly blatant spotlight.
“The internal management of TikTok (Shop) is a bit chaotic at the moment. It’s a new platform, so it hasn’t started to squeeze sellers, but its policies keep changing,” said a merchant selling lamps, who has been selling on Amazon since the mid-2010s.
One of these policies appears to be related to what its algorithms show to which consumers. Chinese merchants say that in recent months, TikTok Shop in the United States has stepped up efforts to prioritize U.S.-based stores over foreign stores. Sellers tell TechCrunch that this has led to the rise of black market “agents” – parties who broker deals between foreign sellers and US residents, who in turn have created TikTok shops that appear to be US-owned. United but are in reality managed by foreign traders.
Marketers are ready to overcome these hurdles to expand their user touchpoints and diversify their channels as one giant after another emerges.
“Margins on Amazon are shrinking and competition is getting fiercer because of Temu, so TikTok gives us another option,” said the lamp seller.
To assess TikTok’s impact on Amazon, “we need to understand the overall retail market in the United States,” said Richard Xu, a partner at Starting Gate Fund, which invests in cross-border retail solutions between China and United States.
E-commerce accounts for about 15% of retail commerce in the United States, according to the Department of Commerce.if we only talk about the small share of the online e-commerce sector, there is not much to discuss,” Xu suggested.
But if TikTok Shop’s strategy focuses primarily on bringing offline businesses online for the first time, this could be a very big step forward. “(Using) live streaming e-commerce to allow small stores and offline stores to participate, the potential is quite large.”
In any case, even if 15% seems low, this figure is nonetheless substantial – $285.2 billion – so the potential of TikTok Shop is enormous, even if it only represents a small slice of the existing e-commerce pie.
Juozas Kaziukenas, founder of Marketplace Pulse, an e-commerce intelligence company, doubts TikTok will ever replace Amazon. “It does not offer a wide choice and range of services, and Western buyers are used to search-based e-commerce,” he said. “But many people spend many hours using TikTok every day, so sometimes they buy things on it.”
“In the United States and other Western countries, shopping apps have grown in parallel with apps offering entertainment or connection like social media. We’ve gotten used to getting different things from different apps, instead of going to one place for it all,” he added.
“Today, social apps like TikTok are trying to understand shopping before retailers like Amazon understand social (like through Amazon Inspire). But the status quo of different apps meeting different needs remains.
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