ByteDance Ltd.’s TikTok is setting its sights on a massive expansion in the U.S. e-commerce sector, with an internal target to multiply the size of its American operations to around $17.5 billion in 2024. This goal was outlined during recent internal meetings and hinges on the progress of the venture, according to sources wishing to remain anonymous. If achieved, this would position TikTok as a formidable competitor to Amazon.com Inc. and intensify the battle for e-commerce dominance.
The strategy behind the U.S. version of TikTok Shop centers on blending online entertainment with convenient shopping experiences, encouraging users to make purchases on impulse. This approach is different from the strategies employed by Chinese peers Temu and Shein, who have gained popularity in the U.S., particularly among the youth. TikTok hopes to leverage its social media prowess and the power of viral content to attract and retain customers.
In 2023, TikTok was on a trajectory to hit approximately $20 billion in global gross merchandise value, with the lion’s share of sales coming from Southeast Asia. The company is now eyeing expansion not only in the United States but also in Latin America, aiming to initiate its e-commerce operations in those regions within the next few months. However, following a Bloomberg News report on speculated U.S. sales figures, TikTok issued a statement labeling those figures as inaccurate.
Founded by Zhang Yiming and Liang Rubo, ByteDance has flourished into a leading internet company valued at upwards of $200 billion. TikTok Shop is quickly becoming one of ByteDance’s most rapidly expanding offerings as the company seeks to diversify beyond typical social media advertising revenue streams. In the last year, ByteDance enjoyed a revenue surge of around 30% to top $110 billion, outshining growth forecasts of established social media giants like Meta Platforms Inc. and Tencent Holdings Ltd.
Through TikTok Shop, users can seamlessly purchase products while browsing a continual stream of short videos and live broadcasts. The platform’s shopping experience aims to rival that of Sea Ltd.’s Shopee and Amazon, blending the convenience of traditional online shopping with the discovery element found in apps like Instagram. This model has already gained traction in China via Douyin, TikTok’s sister app, capturing a significant market share from e-commerce leaders Alibaba Group Holding Ltd. and JD.com Inc., especially amid the pandemic’s push for increased online activity.
Setting its sights on a global scale, ByteDance is adapting its e-commerce model to markets worldwide, including the U.S. Incentives such as free shipping and bonuses for influencers are being leveraged to promote products ranging from tech gadgets to cosmetics on TikTok. Notably, in the U.S., TikTok enticed over 5 million newcomers to make a purchase during November’s Black Friday and Cyber Monday events. Currently, the platform boasts approximately 150 million American users.
As of Wednesday, TikTok had announced an upcoming spike in fees for merchants on its platform, incrementing to 6% in April and eventually reaching 8% in July for most product categories. While these rates are still considerably lower than Amazon’s typical 15% seller fees, it’s a clear signal that TikTok is transitioning towards monetizing its e-commerce features.
The American audience is gradually becoming more receptive to shopping on international e-commerce platforms such as Shein and PDD Holdings Inc.’s Temu, with the latter gaining rapid fame following its Super Bowl commercial. Despite the clarity on U.S. targets, TikTok Shop’s objectives for the global market and other specific regions have not been disclosed. In Indonesia, TikTok has taken a big step by acquiring GoTo Group’s e-commerce division Tokopedia in a $1.5 billion transaction, which will revitalize its retail services after a period of strict regulatory oversight.
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