Short-form video giant TikTok is setting its sights on significantly expanding its US e-commerce business, targeting a tenfold increase to as much as $17.5 billion in gross merchandise value this year.
The goal was discussed in internal meetings in recent weeks, although it is still subject to change, depending on how the business develops, Bloomberg reported Thursday (January 4), citing people familiar with the matter.
The ambitious goal puts TikTok on a collision course not only with e-commerce giant Amazon.com, but also with fellow fast-growing Chinese players like Temu and Shein, which have proven popular among younger American shoppers.
Its unique format blends the ease of Amazon with the discovery power of platforms like Instagram, a model that has proven successful in China, the home market of parent company ByteDance.
Unlike its discount rivals, TikTok aims to hook buyers through its engaging video content and live streams, blurring the lines between entertainment and impulse purchases.
TikTok has forayed into e-commerce with a series of experiments in recent years. Even before the platform introduced its e-commerce features, creators were driving sales by organically showcasing products, leading users to external purchase channels.
Brand partnerships started using hashtags like #TikTokMadeMeBuyIt, highlighting the power of the platform in influencing purchase decisions.
In 2020, TikTok started testing a “Shop Now” button for influencer videos and, the same year, it partnered with e-commerce platform Shopify to start offering in-app shopping features.
Since then, TikTok’s e-commerce services have expanded to features like livestreams with product links. China saw the early boom in livestreaming e-commerce through TikTok’s sister app Douyin, which pioneered livestream shopping with influencer endorsements and real-time purchases.
In 2019, The New Yorker journalist Jia Tolentino wrote, “Though it remains broadly similar to TikTok, Douyin has become more advanced than its global counterpart, particularly with respect to e-commerce.”
“With three taps on Douyin, you can buy a product featured in a video; you can book a stay at a hotel after watching a video shot there; you can take virtual tours of a city’s stores and restaurants, get coupons for those establishments, and later post geo-tagged video reviews.”
In China, Douyin has captured a significant market share from Alibaba and JD.com.
TikTok launched its TikTok Shop in select markets including in Southeast Asia and the UK in December 2021. In June 2023, TikTok hinted at plans to invest billions in Southeast Asia, where it has become an e-commerce powerhouse in addition to being a popular social media app.
In September 2023, TikTok launched its shopping feature in the US following months of testing. The feature now enables brands, merchants and creators to sell directly through shoppable content on the TikTok app.
“TikTok Shop empowers brands and creators to connect with highly-engaged customers based on their interests, and it combines the power of community, creativity, and commerce to deliver a seamless shopping experience,” TikTok said at the time.
Most recently, Bloomberg reported that TikTok is seeking to further grow its sales in the US and launch its e-commerce business in Latin America in the coming months. Last year, TikTok was on track to generate around $20 billion in global gross merchandise volume, with Southeast Asia accounting for the lion’s share of sales.
However, TIkTok told Bloomberg in a statement: “The speculated US merchandise sales figures represented by Bloomberg are inaccurate.”
TikTok is reportedly set to hike its seller fees from 2% to 6% staring April 1. The Information reports that the platform will further raise the fees on many items to 8%, effective July 1.
In certain categories, TikTok’s recently revised fees are still lower than those of Amazon, whose fees are decreasing due to competition from platforms such as Shein and Temu. The report also mentions a source indicating that TikTok Shop’s seller subsidies are being reduced following a roughly $500 million loss it incurred last year.
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