TikTok Ventures into eCommerce with a US Shop! But Challenges Await
TikTok has made headlines with its plan to launch a dedicated Shop in the United States, and rumors suggest that inventory acquisition is also on the table. However, let's cut to the chase: this ambitious venture will face significant hurdles.
Historically, social media platforms integrating eCommerce have operated under a simple premise:
They already boast massive traffic.
Purchasing a product usually involves multiple clicks, hindering conversion.
Why can't we add the conversion part to the discovery part?
The perennial challenge lies in user intent. TikTok primarily serves as a place to indulge in bite-sized entertainment, fostering a culture of short-lived engagement. Unless users have the right mindset to purchase, conversion rates will disappoint.
Once a creator scales, another issue Tiktok will have is that setting up an eCommerce storefront is a breeze. When operating at scale, it becomes crucial to maintain control over the brand's online presence—preferably on an owned platform, not a third-party site. (This may not be as critical during the early stages since building an audience takes precedence.)
TikTok is banking on a single game-changing innovation: the belief that Meta (formerly known as Facebook) stumbled due to inadequate control over the overall user experience. Like Amazon, TikTok plans to establish warehouses and take direct possession of inventory to ensure availability and prompt delivery.
Here's what TikTok is likely to encounter:
Less than 1% of creators will excel in this format, garnering immense success. The news, however, may exaggerate and create the impression that everyone thrives.
The rest will sell products sporadically, with only a select few emerging as winners who might eventually migrate toward direct-to-consumer (DTC) strategies.
Consequently, TikTok's approach might prove more fruitful than Meta's, which heavily relied on social commerce over several years. But ultimately will fall short of expectations.
To increase the odds of success, TikTok should consider the following strategies:
1 - Organize weekly events that foster engagement and excitement.
2 - Offer compelling time-limited discounts, enticing users to take action promptly.
3 - Introduce a subscription model for buyers, granting them exclusive product access. This solves the user intent problem. If you subscribe to millions of creator drops, you demonstrate intent.
4 - If TikTok intends to purchase inventory, it should adopt the successful approaches of Shein and Temu: provide creators with valuable data insights and facilitate small-batch creation. Don't attempt to do much forecasting.
TikTok's initiative also gives you some idea why Shopify's Shop App is in a never-ending no man's land: it's both not a marketplace and not an efficient scaled discovery and rewards engine relative to alternatives.
