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The ban on TikTok might adversely affect Amazon merchants seeking other options.

ByYasmeeta Oon

Apr 9, 2024
The ban on TikTok might adversely affect Amazon merchants seeking other options.

The ban on TikTok might adversely affect Amazon merchants seeking other options.

In a significant legislative move, the US House of Representatives, in March, overwhelmingly passed a bill targeting ByteDance‘s TikTok, potentially requiring the company to divest the app or face a ban in US app stores. The bill’s overwhelming support underscores growing concerns over American data security and freedom of speech. Yet, it also casts a spotlight on a lesser-discussed issue: TikTok’s expanding e-commerce ambitions, now threatened by the intricate web of technology, commerce, and geopolitics—a development leaving smaller merchants, particularly those from China, in a state of uncertainty and frustration.

For months, merchants, many from China, have been turning to TikTok, seeking an alternative to Amazon for selling a range of products—from apparel and cosmetics to electronics to US consumers—via TikTok Shop. Interviews conducted with sellers based in Shenzhen, a key hub for Amazon merchants, revealed a palpable sense of frustration over escalating geopolitical tensions. One retailer, specializing in maternity and baby products, expressed a feeling of “helplessness” concerning the potential TikTok ban, highlighting the challenges in pivoting existing supply chains and the overarching uncertainty about the future.

TikTok Shop, which officially launched in September 2023, boasted an initial roster of 200,000 merchants. However, the platform has since remained tight-lipped about its current merchant count, sales volume, or distribution of sellers across other platforms. Data from Jungle Scout, a provider of Amazon market intelligence, suggests that 20% of Amazon sellers plan to expand to TikTok Shop this year, indicating the platform’s growing appeal. Prior to the political backlash, ByteDance had ambitious projections for its US e-commerce business, eyeing a tenfold increase to $17.5 billion in 2023.

TikTok’s e-commerce strategy significantly diverges from platforms like Temu, which focus on direct-to-consumer sales of unbranded goods. Instead, TikTok aims to attract branded merchandise, positioning itself as a direct Amazon competitor. Reports indicate that TikTok has been offering substantial subsidies to merchants for discount sales, coupled with the app’s algorithmically-driven content curation, to foster a unique shopping experience.

Merchants are drawn to TikTok not just for financial incentives but for the platform’s massive engagement potential. A survey from Tabcut reported nearly 70% of sellers witnessing year-over-year sales growth in the first 11 months of 2023. Moreover, TikTok is reshaping consumer search behavior, with Jungle Scout data showing a significant portion of consumers, especially Gen Z, starting their product searches on TikTok instead of traditional engines like Google.

Despite these strides, TikTok’s e-commerce venture faces challenges, including policy fluctuations and efforts to prioritize US-based shops over foreign ones. This has led to the emergence of “black market agents” facilitating sales for foreign merchants under the guise of US ownership.

A report by Oxford Economics, funded by TikTok, touted the platform’s substantial economic impact on the US SMB sector, claiming a $14.7 billion revenue generation for 7 million SMBs utilizing TikTok for marketing and sales. However, the e-commerce landscape remains competitive and dynamic, with TikTok and Amazon representing just a fraction of the broader retail and online commerce ecosystem in the US.

E-commerce, constituting about 15% of US retail, suggests ample growth opportunities for platforms like TikTok Shop, particularly in bringing offline businesses online. Experts remain skeptical about TikTok replacing Amazon due to differences in selection, fulfillment, and consumer habits. Yet, TikTok’s pervasive daily use among consumers indicates a potential shift in shopping behaviors, with the platform carving out its niche in the e-commerce domain.

Key Insights:

  • Legislative Actions: The US House’s bill poses a significant challenge to TikTok’s operational and e-commerce ambitions in the US, reflecting broader data security and free speech concerns.
  • Merchant Dilemma: Chinese merchants express frustration and uncertainty amid geopolitical tensions, highlighting difficulties in adapting to potential market exits.
  • E-Commerce Strategy: Unlike direct-to-consumer platforms, TikTok aims to attract branded goods, offering financial incentives and leveraging its algorithmic content curation to compete with Amazon.
  • Consumer Behavior: TikTok’s impact on consumer search and purchase habits, especially among Gen Z, underscores the platform’s potential to redefine e-commerce engagement.
  • Economic Contribution: Despite challenges, TikTok’s role in the US SMB sector suggests a significant economic impact, with potential to further penetrate the e-commerce market.

TikTok’s venture into e-commerce represents a fascinating blend of technology, commerce, and geopolitics. While legislative challenges pose significant hurdles, the platform’s unique approach to online retail—emphasizing branded goods, merchant incentives, and algorithmic curation—offers a compelling alternative to traditional e-commerce giants like Amazon. As TikTok navigates these turbulent waters, its ability to adapt, innovate, and engage both merchants and consumers will be crucial in defining its place in the evolving landscape of global e-commerce.

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Featured Image courtesy of TCNJ Signal

Yasmeeta Oon

Just a girl trying to break into the world of journalism, constantly on the hunt for the next big story to share.

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