TikTok owned by ByteDance hopes to increase the size of its worldwide e-commerce business to as much as $20 billion in merchandise sales this year, mostly depending on its growth in Southeast Asia, as per Bloomberg News report. This development comes as the TikTok faces scrutiny from governments and regulators due to concerns that China could use the app to harvest user data or advance its interests.
Ambitious e-commerce expansion plan
In comparison to TikTok e-commerce business gross merchandise value of 4.4 billion last year, $20 billion is a meteoric increase. This represents worth of total goods sold through its online marketplace TikTok Shop, citing people familiar with this.
TikTok is betting on markets such as Indonesia were the influencers sell just about anything from denim jeans to lipstick by showing them off in live streamed videos. TikTok’s e-commerce platform lets customers purchase goods through links on the app during live broadcasts.
TikTok is working on ways to expand sales in the US and Europe too, though a very small percentage of the US $20 billion goal, as per the insider people. TikTok is trying to grab a bigger slice of a US $17 trillion online commerce space as its main revenue driver, as its advertising business slows during an economic downturn.
US market setback
TikTok e-commerce challenge is expansion in US. Given the threats by American politicians to ban the app altogether owing to national security concerns, TikTok’s efforts to expand its e-commerce operation in the US now may seem counterintuitive. Not denying that forming profitable ties with US brands could help TikTok gain allies, just as it begins to fight back against critics in Washington and in the courts.
TikTok is intent on exporting its commerce model to the US and its 150 million users there. It has proposed a range of measures to address national security concerns in the US, including cordoning off American users’ data and allowing partners like Oracle Corp to review its technology. Still, the state of Montana imposed a prohibition on the app’s download starting in 2024 and lawmakers have proposed similar bills for a nationwide ban.
TikTok livestreams shopping
Founded more than a decade ago by Zhang Yiming and Liang Rubo, ByteDance, grew into an internet leader worth more than US $200 billion, mostly due to the viral short video platforms TikTok and Douyin. Though live shopping hasn’t caught on in the US and Europe despite attempts by Instagram and others, TikTok is basing its projections on the success its Chinese cousin Douyin has enjoyed at home.
TikTok Shop let users buy items while scrolling through an endless feed of short videos and livestreams within its main social media application, hoping consumers use it as an alternative to Amazon.com Inc or Sea Ltd’s Shopee. This format which blends entertainment with impulse buying has helped Douyin bite into a big portion of Chinese consumer spending from Alibaba Group Holding Ltd and JD.com Inc, especially during lockdown. If TikTok shop succeeds then it could be challenging for Amazon,
TikTok Shop remains a sliver of ByteDance’s US$80 billion revenue. By comparison, Sea, Southeast Asia’s largest internet company, grew e-commerce GMV by 18% to US$73.5 billion last year.
GMV on Indonesia’s TikTok Shop alone surpassed US$2.5 billion and topped US$1 billion in just the first 3 months of 2023, according to e-commerce research firm Cube Asia. At the same time, TikTok slashed about US$2 billion off its 2022 target for ad sales, illustrating the slowdown to its core business.
Point to note
If it’s aggressive strategy works this could help demonstrate that live stream commerce can transcend a niche audience and potentially begin to eat into traditional online shopping beyond Asia.
