TikTok Shop Wants to Beat Amazon at Its Own Game
(Bloomberg) -- Earlier this year, Scott McIntosh was invited to peddle his combination phone/cup holder on TikTok, the social-media app that has attracted 150 million US users.
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TikTok was offering to pay for shipping and to cover discounts of up to 30% even though it would pay him full price on each sale. It seemed too good to be true, especially when compared with the fees McIntosh pays to sell his wares on Amazon.com and Walmart.com. The catch: He’d have to make product videos—lots and lots of product videos—and post them to the platform.
McIntosh was floored by the results. His $30 Cell Phone Seats racked up 50 million views, and orders have been gushing in. He generated a record $10,000 in sales on the day after Cyber Monday, has ordered more inventory for the holidays and expects the momentum to continue into 2024.
“TikTok is basically giving people money to shop,” said McIntosh, a digital advertising executive who started the Cell Phone Seat business in his Franklin, Tennessee, garage. “It’s new and still has a stigma around it, but it’s so much fun that everyone is on it.”
Since starting out as a venue for short, silly lip-syncing videos, TikTok has emerged as an incubator for consumer trends, with millions of people trying on clothes and reviewing products. E-commerce is a natural step for TikTok, which has already opened online marketplaces in Southeast Asia and the UK. In September, the company launched the US version of TikTok Shop—an effort to combine the ease of shopping on Amazon.com Inc. with the product discovery afforded by social-media sites like Instagram.
It’s a goal that has long eluded the incumbents. Meta Platforms Inc. can’t get users to buy much on Facebook and Instagram, which serve mostly as digital billboards. Amazon has tried various strategies to persuade shoppers to hang out and seek inspiration, including clumsy attempts to copy the Home Shopping Network. But most shoppers search for a product, buy it and leave.
TikTok brings considerable assets to its e-commerce effort. The average US TikTok user spends 33 hours a month on the site, compared with 1.4 hours for Amazon, according to Data.ai measurements of app use on Android devices. In November, which included Black Friday and Cyber Monday, more than 5 million new customers bought something, a TikTok spokesperson says.
It’s an impressive debut, but Amazon need not panic just yet. For starters, many shoppers see something on TikTok and then buy it somewhere else. Often that’s Amazon, which in many cases benefits not just from the sale but the fees it charges merchants to store and ship their orders. TikTok is a sticky app, but Amazon has 173 million US Prime subscribers living in three of four households, according to Consumer Intelligence Research Partners, and those customers have proved unflaggingly loyal over the years. Moreover, Amazon shoppers typically get their purchases in two days or less, while TikTok orders can take a week or more to arrive.
An Amazon spokesperson said the online retailer continues to innovate with things like shoppable videos and photos to meet the latest consumer demands. “What was true when Amazon was founded remains true today: Customers want vast selection, low prices and fast delivery,” the company said in an emailed statement.
TikTok’s US expansion has already attracted the attention of politicians and regulators, who fret about the company’s growing influence over its audience. Because TikTok is owned by Chinese tech giant, ByteDance Ltd., government officials say it could share data with Beijing—something the company has insisted it doesn’t do. Now TikTok harvests information on both users’ social-media and shopping habits.
TikTok has launched its US store at a potentially auspicious moment. This holiday season, mobile shopping is expected to overtake desktop e-commerce in the US for the first time, a boon for a site most users access via smartphone. Americans are increasingly comfortable shopping on Chinese e-commerce apps, including the popular fashion site Shein and PDD Holdings Inc.’s Temu, which has exploded since airing a Super Bowl ad in February.
Meanwhile, though Amazon is by far the dominant e-commerce player, its US market share has plateaued at roughly 38%, giving rivals an opening to snatch customers and hobble its growth. In a sign of how seriously Amazon is taking TikTok, the company cut deals with Pinterest, Meta and Snapchat that let their users buy products via Amazon ads without leaving the apps.
“The holidays are an opportunity for TikTok to show it has staying power and compel more merchants to come onboard,” said Jenny Woo, co-chief executive officer at the Ghost Agency, which helps brands devise social-media advertising campaigns.
For the uninitiated, shopping on TikTok can be a somewhat chaotic experience. On the designated shopping tab, users can search or scroll an endless stream of products with no obvious mentions of brands. Designer goods are sometimes wedged between cheap or potentially counterfeit products. Merchandise appears in video snippets, usually featuring a demonstration—someone cleaning a tub with an electric scrub brush, say, or illuminating a room with a rechargeable headlamp. Shoppable posts also pop up as users watch their regular video feed, curated to surface topics of interest. Someone who likes watching mechanics work on cars might see a video tagged with a ratchet set; a beauty aficionado might see one tagged with eye shadow.
In interviews, TikTok customers say the site’s algorithms have an uncanny ability to divine what they want. Some liken TikTok Shop to a digital farmers’ market or craft fair, a shopping experience they can’t find on Amazon or even Etsy. Carmel DeAmicis, 35, made her first TikTok purchase in November after watching videos on the app for years. She got two crop tops for less than $10 each and was surprised how smoothly the transaction went. The San Francisco writing coach finds herself more prone to making impulse buys on TikTok since she sees products recommended by people she trusts and can assess how garments fit on women with different figures.
On Amazon, she mostly ignores the ads and recommendations, buys what she came for and moves on. “With TikTok, I get sucked in,” she said. “It’s very dangerous for my bank account.” Patricia Jones, a 38-year-old from Indianapolis who has bought kitchen utensils, eyelashes, lip gloss and a swimsuit on TikTok, echoed DeAmicis. “It’s like a baby Amazon, and they’re taking over,” she said. “Their technology just seems to know what you’d purchase. It sucks you in.”
The app US merchants use to open a TikTok account has been downloaded more than 500,000 times, according to Data.ai, and the variety of products sold there increases daily. You can buy gardening tools, cosmetics, espresso machines, video cameras, cordless vacuums, dog toys, telescopes—the list goes on and on.
So far, TikTok has mostly attracted smaller brands selling inexpensive products that Gen Z shoppers can easily afford. But big names are tiptoeing onto the site, too.
Packaged food giant Mondelez International Inc. is in the “early stages of testing” demand for Oreos and Sour Patch kids. Benefit Cosmetics, owned by luxury titan LVMH, launched its new Fan Fest mascara on TikTok in July with a 24-hour live stream and has since sold more than 40,000 tubes. “It’s such a rocket ship, we’re trying to just keep up with the demand,” said Toto Haba, Benefit’s senior vice president of global omni-marketing.
TikTok has set up shop in Amazon’s very backyard, basing most of its e-commerce operations in the Seattle suburb of Bellevue, and has recruited hundreds of former Amazon employees, according to a Bloomberg review of LinkedIn profiles. It’s aggressively targeting Amazon merchants, many of whom have become disenchanted with the hefty fees and advertising rates they pay to stand out on its cluttered web store. The Ghost Agency’s Woo says finding a new customer on TikTok can cost a fifth of what it does on Amazon. For some merchants, TikTok is what Amazon was for small businesses a decade ago: an affordable place to put new products in front of millions of people.
Selling on TikTok is a decidedly different experience from setting up an account on Amazon, which essentially inserts itself between sellers and customers. On TikTok, shoppers can interact with brands during live video streams. McIntosh, who sells the cellphone-cup holders, was encouraged to produce camouflage versions during one of his live shopping events, and now he’s experimenting with American flags and cows.
Merchants acknowledge a substantial learning curve. Figuring out how to shoot effective video and finding influencers who suit their brand and target customer takes time and effort. Seattle-based Wyze Labs, which makes low-cost video cameras and other devices, posts two videos a day and does a live shopping feature four times a week. That eats up a lot of hours, but the effort has paid off. Wyze, which now has 100,000 followers, held an eight-day sale at the end of October that generated 16,000 orders. “This isn’t another Target or Walmart just copying Amazon online,” said Logan Dunn, Wyze’s e-commerce chief. “TikTok is a fundamental shift in how we purchase things and it’s going to bring a tidal wave of sales.”
Educational Insights, which owns the popular Kanoodle puzzle game, has been using TikTok videos for several years to market its products. The company joined TikTok Shop last year as part of an early test. “I don’t think any of us were expecting this to be a real revenue source and it just exploded,” said Alyssa Weiss, Educational Insights’ senior marketing manager. Sales of the $15 pocket version of the game tripled each month on TikTok, but also climbed on Amazon as more people became aware of the game.
Educational Insights says an influencer known as the Kanoodle Queen has helped it connect with shoppers. In real life, she’s Arlene Resendiz, a 30-year-old math tutor who began teaching on Instagram during pandemic lockdowns. After amassing 70,000 followers there, she moved to TikTok using the handle “silentmath” and watched her audience mushroom to 1.6 million followers. Resendiz now livestreams herself playing Kanoodle and earns commissions on sales tied to her promotions. “A lot of people haven’t seen the game before, so there’s intrigue,” she said. “I ask the audience to help me, like which color piece should I use. I helped make Kanoodle popular.”
To truly compete with Amazon on its home turf, TikTok will need to persuade many more merchants to sign up and then keep them there. For now, TikTok is essentially buying their loyalty by subsidizing discounts and shipping. That can’t last forever. TikTok will also have to take care not to alienate users, many of whom show up to be entertained not bombarded with product placements. In November alone, according to the company spokesperson, 150,000 creators and sellers posted shoppable content. TikTok Shop has been officially open for less than four months, and users are already complaining. Some are sharing how-tos that explain how users can block posts with the #tiktokshop hashtag.
“Is anybody else just absolutely fed up of their entire for you page just being TikTok shop advertisements,” asked user shopska4 in a video with more than 50,000 views. “I dont go on there to buy things on TikTok — I come on here to watch funny videos before i go to bed. Its completely taken over my videos.”
(Updates with Amazon statement in ninth paragraph.)
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