Two weeks ago, TikTok officially launched its in-app ecommerce platform TikTok Shop in the US after 10 months of testing, targeting its over 150 million monthly active users (MAU) in the country. This is how the Shop looks like. Use Beachwaver as an example, a curling iron brand constantly among the top selling brands on TikTok for the past few months.
US ecommerce has historically been one of the least competitive markets compared to other regions given Amazon’s nearly 40% market share, but I believe TikTok Shop will carve out its own space and position itself in some very smart ways. Here’s how:
Applying previous successes to the US
TikTok's sister app in China, Douyin, both owned by Beijing-HQ ByteDance, launched its shopping feature in 2018 and grew gross merchandise volume (GMV) to a whopping $208 billion in just four years. TikTok Shop followed in Indonesia and the U.K. in 2021 and then other five countries in Southeast Asia. Now, GMV in these markets excluding China are expected to reach $20 billion in 2023. In Southeast Asia alone, TikTok Shop’s target to triple its GMV this year will place it on par with Lazada and Tokopedia (if it doesn’t get banned by Indonesia government), two ecommerce platforms that have been around for more than a decade.
While each region has its own competitive landscape and consumer behavior, TikTok Shop has been able to generate this growth for two key reasons:
TikTok, while it does monetize through advertising mainly, has often leaned on other channels for revenue generation because its younger audience and video format don’t offer the same level of conversion as, say, Facebook ads.
As a result, TikTok understands the complexities of online commerce, which involve logistics, fulfillment, payment, sourcing, and a lot more. In short, TikTok does ecommerce well.
Now, TikTok is applying that expertise to the US, and it’s paying off. During its testing phase, TikTok Shop US saw impressive growth, going from $1 million in daily GMV in the summer to $5 million today. It is projected to reach $15 million to $20 million daily GMV during the coming holiday season. There’s every indication that TikTok is becoming another viable channel for both sales and marketing for US merchants. But considering its 150 million MAU and an average usage time of about 53 minutes per user per day in the US, TikTok Shop’s current GMV in the US is still at a very early stage.
A play on US small businesses
TikTok’s expansion to commerce in the US is not just about monetization—it’s also political. Given its ever-present risk of shutdown given anti-China sentiment in Washington, TikTok has been actively trying to show its commitment to the US. One way of doing so has been to seek out deep connections (and integrations) with US small businesses. The goal is to become so valuable to these businesses as to be unbannable by politicians in D.C.
For example, TikTok Shop US has strict rules that allow only domestic merchants to register. These rules generally require the store owner to be a US citizen, the business to be registered in the US, and foreign IP addresses to be restricted. Additionally, TikTok enforces a strict seven-day fulfillment requirement, ensuring that products are already stocked domestically in the US. This is near impossible if shipped from overseas (unless either buyer or seller is willing to pay a lot for express shipping or stocking inventory domestically upfront). Not having to compete with the Chinese sellers so prevalent on Amazon and eBay is a significant advantage for US merchants and makes TikTok more attractive.
Virality preinstalled
While most ecommerce marketplaces have to acquire users on other platforms, TikTok benefits from already owning consumer demand and time spent. Additionally, TikTok has emerged as the epicenter for viral content, thanks to its algorithms. Unlike Facebook or Instagram, which prioritize content from a user’s friends and contacts, keeping users in their own closed loop, over half of the content in TikTok’s feeds under “For You” comes from new creators or new categories. These two factors together make it easy to disseminate products to the masses.
Of course, not everyone’s a social media marketing guru, so TikTok provides toolkits for its creators to easily generate and distribute content for merchants and brands through creator affiliate programs.
I am particularly excited about the launch of TikTok Shop in the US. While living in China, I witnessed Douyin’s souring growth up close. And while living in the US, I sensed the potential for video shopping given its prevalence on American TV, the ever-growing creators community, and brands constantly looking for innovative (and cheaper) ways to generate traffic. In a true entrepreneur fashion, I am building my own TikTok Shop which I will share more learnings in my future posts (Subscribe here). And I am always looking to connect with others in the TikTok ecosystem!