TikTok targets e-commerce with proposed new strategy

TikTok has proposed banning links to other e-commerce websites to help drive adoption of its own shopping platform, which is set to lose around half a billion dollars in the US this year, according to new reports. 

Why the TikTok Shop strategy matters

TikTok’s video platform is a critical avenue for creators and marketers, whether through influencers or through direct media buys, but with so much traffic and the experience of enormous success with its strategy in China, TikTok appears to be done watching so much potential business pass through the platform.

But adding a shopping destination to a media platform isn’t easy, and the investment has been heavy for the company. With some signs of growth, reports suggest that the company is now thinking about how to move beyond costly incentives and toward some new rules.

Cutting external links

Tech news site The Information reports that the short video platform – which has invested over $500m in building out a costly e-commerce operation, including a delivery network and a suite of incentives for merchants – plans to limit the ability of influencers to link to Amazon or other shopping sites. There is, as yet, no known timeframe for the ban to come into effect.

• In doing so, TikTok will see its many influencers – whose popularity and therefore livelihood is closely tied to the platform’s recommendation algorithm – having to switch to promoting items on TikTok’s own platform if they are to win their commission. 
• While the move targets influencers, the success of the policy will depend on whether it is able to shift the behaviour of the big and small brands that pay for its services.

The TikTok Shop strategy

TikTok’s shop service, which is strongest in Asia, particularly in the Southeast, hasn’t quite mirrored the success of its core short-form video product across Europe and the Americas, but there are signs that the amount spent through the platform (gross merchandise value) is increasing rapidly in the US. 

The aim is for TikTok’s platform to process as much transaction value as Douyin, the Chinese version of the app, by 2028: a target of $200 billion annually. 

Lightening heavy costs

The story underlines the heavy costs associated with providing an at-home service for e-commerce customers as outlined in JP Castlin and James Hankins’ Gravity of e-commerce report. 

Even for profitable operations, the rise of e-commerce has left many brands exposed to high variable costs, which in the inflationary economic climate have become difficult to bear.

An advertising behemoth in the making

But there are signals that TikTok’s commerce strategy is sound, given that already 70% of advertisers sell directly on social platforms.

Elsewhere, TikTok has plenty of other strong avenues for marketing spend. 

• WARC’s Global Ad Forecast, released this week, places TikTok owner ByteDance among the five major tech firms expected to attract more than half of worldwide advertising spend this year. 
• The company currently enjoys around 3.6% of all spending. 

Sourced from The Information, WARC