TikTok is reportedly gearing up to enforce a ban on external e-commerce links, including platforms like Amazon, as per a recent report by The Information. This strategic move is widely interpreted as a means to encourage users to engage with TikTok Shop, the company’s proprietary shopping feature, for making in-app purchases.
The report also reveals that TikTok Shop is expected to incur losses exceeding $500 million within the U.S. this year. This financial setback mirrors the company’s substantial investments in recruitment, establishing a delivery network, and subsidizing merchants who offer discounts and free shipping.
By eliminating the option to include external e-commerce links, TikTok aims to halt creators from endorsing products like kitchen items and furniture available on their Amazon stores. The existing setup allows influencers to earn a minor commission on items purchased through their Amazon stores. However, the proposed changes would dismantle this mechanism.
As of now, TikTok has yet to respond to inquiries from TechCrunch seeking comment.
Although the timeline for the implementation of this ban remains unknown, once enacted, users will be confined to purchasing items only through TikTok Shop, as promoted by content creators. Some TikTok Shop links facilitate direct purchasing from videos, while others embed TikTok Shop storefronts within creator profiles. Henceforth, this would be the sole method for linking products available for purchase within the app.
This alleged move is believed to be a strategic maneuver to drive sales within TikTok Shop, which currently struggles to gain substantial traction. Presently, U.S. consumers contribute approximately $3 million to $4 million daily to TikTok Shop’s revenue, a noteworthy surge from the $500,000 to $1 million reported in June. The report forecasts this number to surpass $10 million by year-end.
TikTok Shop has found greater success in Southeast Asia since its launch in 2021. The region witnesses a daily gross merchandise volume ranging from $50 million to $60 million. TikTok aims to boost this figure to around $90 million by year-end.
ByteDance, TikTok’s parent company, envisions the platform as a global online shopping hub akin to Douyin, which achieved a merchandise volume surpassing $200 billion last year. The Information discloses ByteDance’s goal to achieve similar levels of success by 2028, with an anticipated $40 billion to $60 billion in U.S. revenue from this endeavor.
The report sheds light on TikTok’s initiatives to attract merchants to its platform. Employees identify top-selling Amazon items and reach out to these vendors, offering a three-month commission-free period as an incentive to join TikTok Shop.
Beyond TikTok Shop, the company’s e-commerce ambitions are further evidenced by the testing of an in-app “Trendy Beat” shopping section. This feature offers products for sale, managed by a ByteDance subsidiary. While currently being tested in the U.K., the report suggests its introduction to the U.S., supported by TikTok’s May trademark application for Trendy Beat.
Internally referred to as “Project S,” ByteDance’s strategy includes selling its own products within the app. This approach leverages TikTok’s insights into trending products, enabling ByteDance to acquire or manufacture these items. The company reportedly employs a network of suppliers for production.
Though TikTok’s e-commerce ventures are relatively new in the U.S., the platform already wields significant influence over user shopping behaviors. The phrase “TikTok made me buy it” has become synonymous with the app’s capacity to trigger impulsive sales. This expression has amassed 7.4 billion views and 67 billion hashtag uses on TikTok.
As TikTok amplifies TikTok Shop, the platform has announced the discontinuation of its Shopify storefronts, effective September 12. Launched in 2021 in response to the limited e-commerce offerings on TikTok at the time, these storefronts are now rendered redundant with the evolution of TikTok Shop.