What Does TikTok Shop Mean for Ecommerce?

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Brands currently spend $78.45 billion in video ads each year. The short-form video hosting service, TikTok, is making strides to secure its slice of the pie. This isn’t without irony, as TikTok was founded with the goal of escaping the ad-heavy experience on other platforms. It could be that last month’s TikTok Shop rollout was always planned. Or maybe platform leaders couldn’t resist monetizing the over 60 billion views that the #TikTokMadeMeBuyIt hashtag brings in.

Despite the fact that TikTok Shop is an incredibly new feature, and critics say TikTok Shop is diametrically opposed to the platform’s ad-free founding principle, a record 92 percent of SMB owners plan to use TikTok Shop in 2023.

Will TikTok’s new retail experience create the next social commerce behemoth? Or will it mirror Meta’s recently rescinded live shopping rollouts and we’ll have ­just one more launch failure situation on our hands? Let’s take a look at how TikTok is competing with Amazon Prime Days, how it’s contending with critics and regional bans, and how e-commerce retailers can prepare for what might come next.

TikTok faces a challenge in advertising to Gen Z that’s shared by most brands and retailers hoping to tap into this powerful consumer base: How can you advertise authentically, at scale? The video-sharing platform hasn’t yet mastered this balancing act, so each new advertising initiative is greeted by thousands of young users choosing to leave the platform for good.

Will TikTok Succeed Where Meta Failed?

Just as shopping features on other popular live social platforms are slowing down, TikTok is doubling down on social shopping. Meta recently scaled back social shopping features on both of its heavy-hitting social media platforms: In March, Instagram killed livestream product tagging and shopping, even getting rid of the shopping tab on users’ navigation bar. Facebook followed suit in October, canceling live shopping in its entirety.

This doesn’t mean that TikTok Shop is ill-advised. Quite the contrary. Meta’s official reason for the live shopping rollback was that “consumers\’ viewing behaviors are shifting to short-form video.” The behemoth’s intention is to focus on Reels on Instagram and Facebook, which is exactly the type of short-form video that’s already popular on TikTok. With that said, even TikTok had to halt the U.S. and Europe expansion of TikTok Shop last year after a bevy of influencers dropped out of the TikTok Shop launch project in the UK.

TikTok Subsidizes Black Friday Discounts

It’s no secret that most of a company’s sales take place during the holiday season. The definition of “holiday season,” however, has changed substantially in recent years. Take Amazon Prime Days, for instance. Although not a real holiday, Digital Commerce 360 suggests that this year’s 48-hour event raked in $12.09 billion in global sales. It makes sense, then, that TikTok is taking Black Friday sales so seriously with plans to subsidize its sellers with Black Friday discounts up to 50 percent this year.

It’s important to note here that TikTok and e-commerce marketplaces don’t exist in a vacuum. TikTok may have gotten the idea to subsidize Black Friday sales from Temu since the marketplace is chipping in up to $30 a sale in an attempt to break into the U.S. market. In the coming years, we’ll see more collaborations between e-commerce behemoths and TikTok. Amazon, for example, is already taking advantage of the virality of #TikTokMadeMeBuyIt by featuring products that have gone viral on TikTok with Amazon Finds.

Regional TikTok Bans Complicate Rollout

Few things make a course of action so compelling to consumers as when the government tries to prohibit it. With that said American consumers are still recovering from the Meta and Cambridge Analytica scandal, which resulted in the social media giant settling a class-action lawsuit for $725 million last year.

Security concerns about TikTok center around its Chinese parent company, ByteDance, which is under investigation by both U.S. lawmakers and international government officials. The question at hand is whether TikTok is really owned by Chinese entrepreneurs, or if it’s being used to gain “supreme access” to data for the Chinese Communist Party. Other concerns include whether the platform is being used to spy on journalists and/or spread propaganda for the CCP.

Many countries where TikTok isn’t banned outright have enacted laws to prevent the use of the platform by government officials. At present, the app is completely banned in India, Afghanistan, and Somalia, with many U.S. officials urging for an outright ban of the app. While the U.S. government could face more pushback from citizens if it tries to enact a total TikTok ban, it’s worth noting that the Governor of Montana already signed a TikTok ban that will go into effect in January 2024.

Will Advertising Threaten TikTok’s Declining Popularity?

TikTok faces a challenge in advertising to Gen Z that’s shared by most brands and retailers hoping to tap into this powerful consumer base: How can you advertise authentically, at scale? The video-sharing platform hasn’t yet mastered this balancing act, so each new advertising initiative is greeted by thousands of young users choosing to leave the platform for good.

Yes, TikTok reached new heights in 2022. But, since then, there’s been a “steep decline” in usage from younger generations. CivicScience reports, “Usage fell from 18 to 11 percent among Gen Z (18-24) and from 10  to 5 percent among young millennials (25-34) from August 2022 to June 2023.”

Some users are leaving due to regional bans. Others take umbrage with the proliferation of advertising on the platform. Others still are in awe that ByteDance hasn’t sold the platform to a more trustworthy parent company.

A Path Forward

Regardless of TikTok’s long-term trajectory, it is a great time for brands and retailers to invest a portion of their advertising budget into TikTok Shop. When else will a hot next-gen social commerce platform subsidize discounts by up to 50 percent? While similar subsidies aren’t unheard of for newer platforms hoping to achieve market dominance, they’re usually only available for a limited time. The discount isn’t sustainable. So, now is the time for brands that have been considering short-form video content to test and learn what works with a younger audience.

TikTok is still a trending platform that’s proving to be incredibly lucrative for a diverse range of e-commerce brands. It’s a great time to dip your toes in and test the water on the platform. Just don’t build a home there… a hurricane may be brewing.

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