A TikTok ban could hurt Amazon sellers looking for alternatives

In March The US House of Representatives overwhelmingly passed a bill that could force ByteDance to achieve this eliminate TikTok or face a ban from US app stores. Ma lot of the discussions and debates surrounding it centered around America data security and the fitting to speechhowever the potential move also highlights something else: TikTok is increasingly focused on e-commerce, however the interplay of tech giants and geopolitics is putting pressure on smaller sellers.

Over the past few months, buyers – many from China – have been looking out Amazon alternatives have began coming to TikTok to sell clothes, cosmetics, electronics and plenty of other products to US buyers via TikTok Shop. In interviews with TechCrunch, sellers in Shenzhen – a Chinese megacity that could be a major trading hub for Amazon sellers – said they felt a collective sense of frustration over rising geopolitical tensions and “helplessness” over a possible TikTok ban.

“The situation is not under our control,” a retailer specializing in maternity and kids’s products told TechCrunch. “It’s just hard to know how the situation will develop.” Because existing supply chains are difficult to shift, “we just have to play it by ear.” (The sellers asked to stay anonymous resulting from political sensitivity.)

The TikTok Store officially launched in September 2023 and already serves 200,000 sellers. However, since then, no updated data has been released on what number of sellers are currently on the platform, how much products are sold there, or how much is being sold elsewhere (and where else that could be).

Tests from Jungle Scout, an information analytics provider for Amazon, nonetheless, gives some idea of ​​TikTok’s impact on e-commerce. It found that 20% of Amazon sellers, brands and corporations plan to expand to TikTok Shop this yr. Before the present political backlash, ByteDance supposedly projected that it had the potential to grow its U.S. e-commerce business tenfold this yr to $17.5 billion.

TikTok is not the only platform on the list of shops looking for more channels beyond Amazon to expand their customer base. Its growth is a component of a bigger shift we’re seeing in alternative marketplaces like Temu, attracting more attention not only from buyers but additionally from Chinese exporters and e-commerce sellers. And Amazon is there apparently I listen to itwhich is one other sign that alternative solutions are gaining popularity.

TikTok didn’t immediately reply to a request for comment.

A latest approach to sell and buy

TikTok has been attempting to grow its e-commerce business since its U.S. launch last September.

The app is thought — or infamous, depending on who you consult with — for how tightly it controls what content is shared with whom. The TikTok store also has a heavy dose of curation.

Unlike Temu, known for its seas of low-cost white-label products sourced from Chinese factories and sold on to U.S. consumers, TikTok’s strategy is to advertise and highlight more branded goods, making it a more direct competitor to Amazon.

TikTok can be attempting to attract sellers with more traditional grants. According to reports, with a view to encourage sellers to sell goods at a major discount through the recent Black Friday sale, TikTok gave grants to those sellers to cut back their prices by as much as 50%.

Incentives and algorithms aside, sellers were focused on selling through the app just because TikTok’s short-video platform generates massive engagement. According to a survey conducted by TabcutChinese performance monitoring company TikTok Shop, almost 70% of sellers reported year-over-year sales growth in the primary 11 months of 2023.

This can be borne out by consumer behavior, where influencer-recommended products proceed to grow in popularity, particularly amongst desirable younger consumers.

According to Jungle Scout, nearly 20% of consumers began searching for products on TikTok in the primary quarter of 2023, up 44% from the previous yr. While 56% of all consumers still preferred to start out their product search on Amazon, 40% of Gen Zers preferred TikTok search engine over Google.

The high concentration of young buyers will not be surprising considering that data shows that 52% of TikTok users within the U.S. are between the ages of 18-34 Pew research. TikTok has the potential to vary the best way younger generations of Americans shop online.

In addition to counting on its momentum, TikTok revolves across the media to convey its message.

Earlier this month, business research firm Oxford Economics published a report report on TikTok’s impact on the U.S. small and medium-sized business sector It was funded by TikTok and, perhaps unsurprisingly, provided clear support for TikTok’s economic impact: it was estimated that presence on the platform (either through promoting or just marketing through accounts ) generated $14.7 billion in revenue for the 7 million U.S. small and medium-sized businesses that used it.

Amazon competition?

TikTok appears to be serious about entering e-commerce, however the situation continues to be in flux. On the one hand, the corporate – even within the face of a possible U.S. sales ban or forced sale – continues to introduce latest e-commerce features resembling latest video shopping format it was presented at a conference this month. On the opposite hand, it modifies or enforces seller policies seemingly on the fly, trying to seek out a approach to thrive in a very glaring highlight.

“The internal management of TikTok (the shop) is a bit chaotic in the mean time. It’s a brand new platform, so it hasn’t began oppressing sellers, but the principles are still changing,” said a lamp seller who has been selling on Amazon since mid-2010.

One of those principles appears to be related to what algorithms reach to consumers. Sellers outside China say TikTok’s U.S. store has stepped up efforts in recent months to prioritize U.S. stores over foreign ones. Sellers tell TechCrunch this has led to the creation of black market “agents” — parties that intermediate transactions between foreign sellers and U.S. residents, who in turn arrange TikTok stores that appear U.S.-owned but are literally run by foreign merchants.

Retailers are wanting to hop over these hurdles to grow their user touchpoints and diversify their channels as one giant emerges after one other.

“Margins are shrinking on Amazon and competition is getting fiercer because of Temu, so TikTok gives us another option,” the lamp seller said.

To assess TikTok’s impact on Amazon, “we need to understand the entire U.S. retail market,” said Richard Xu, a partner at Starting Gate Fund, which invests in cross-border retail solutions between China and the U.S.

E-commerce covers approx 15% in line with the US Department of Commerce, subsequently “If we’re talking about just the small share of the e-commerce sector on the Internet, there’s not much to discuss,” Xu suggested.

However, in case your TikTok Shop strategy is primarily focused on bringing offline businesses online for the primary time, this could be a really big move. “(Using) live e-commerce to enable small shops and offline stores to participate, the potential is quite significant.”

In any case, while 15% seems small, the number continues to be significant – $285.2 billion – so the potential for TikTok Shop is big, even when it only captures a small slice of the present e-commerce pie.

Juozas Kaziukenas, founding father of Marketplace Pulse, an e-commerce analytics company, doubts that TikTok will ever replace Amazon. “It does not provide a wide range of choice and fulfillment, and buyers in the West are accustomed to search engine-driven e-commerce,” he said. “But many people use TikTok for hours every day, so they sometimes make purchases on it.”

“In the United States and other Western countries, shopping apps have developed in parallel with entertainment or connectivity apps such as social media. We are used to downloading different things from different applications rather than doing everything in one place,” he added.

“Today, social media apps like TikTok are trying to get a handle on shopping before retailers like Amazon embrace social media (e.g. through Amazon Inspire). However, the status quo of different apps serving different needs remains.”