Social Media: Why Tiktok is now opening its own online shop

The first influencers are already warming up to Tiktok.

Social Media: Why Tiktok is now opening its own online shop

The first influencers are already warming up to Tiktok. It really doesn't get any easier, explains one, and decorates his video with numerous banknote emojis. Soon products could be sold directly via Tiktok. For example, if you want to advertise a pair of pants or a perfume, you can set a link and sell the product in the app. Tiktok only wants a small commission of up to five percent for this. Significantly less than on Amazon

The reason for the gold rush mood is the so-called Tiktok Shop. This is being launched in more and more countries - most recently in the USA - and will apparently soon come to Germany. It's not yet clear when - but according to Bytedance, the company behind Tiktok, it probably won't take too long. Because Bytedance wants to do nothing less than revolutionize online trading.

The concept is not new, however. It's called social shopping and is based on selling live and with direct customer contact. A bit like TV shopping in modern times - except that customers can do everything in one medium. The influencer arouses interest in the live stream, marks the advertised product with a link, and the users buy it within the app. This is intended to reduce the so-called bounce rates - i.e. the proportion of users who abandon the purchase process when switching from Tiktok to the seller's website.

However, it can at least be questioned whether it will be as successful as Bytedance imagines. TV shopping has lost its former importance and its major competitor Meta has also failed with similar ideas. It was only in February that Instagram said goodbye to its shopping tab - a concept that worked very similarly to Tiktok's. A few months earlier, the function was switched off on Facebook. However, users were still directed via the seller's website. Things are going a little better with the streaming service Twitch, which has entered into a cooperation with Amazon.

Bytedance is taking a different approach and wants to create a mix of Instagram shopping and platform concepts like Amazon or Alibaba. This has already worked well in Asia. According to Goldman Sachs, the market for live e-commerce there grew by 18 percent, which is why the expansion has now taken place. In 2022, Bytedance sold goods worth five billion dollars via Tiktok and its Chinese counterpart Douyin, and by 2023, according to the Wall Street Journal, it will already be 20 billion dollars. The biggest driver should be your own shop.

But it's not just the examples from Instagram or Facebook that show that the forecast could have been very optimistic in the long term. On the one hand, success in Asia does not automatically mean success in other parts of the world. On the other hand, regulators could pull the plug on the Chinese company worldwide. In Indonesia, for example, one of Bytedance's most important countries, the government banned e-commerce via social media platforms in September.

In the USA, Tiktok has been the focus of the authorities for several years. The list of allegations is long and ranges from data protection gaps to psychological problems among the predominantly young users. Tiktok has so far expanded its reach and popularity so quickly that regulation would have been extremely unpopular. But it doesn't have to stay that way either.

And thirdly, a platform offering is not a sure-fire success either. Especially when your own logistics come into play, as recently happened in Great Britain. According to media reports, Tiktok initially only charges a low single-digit commission from its content creators, which later increases to five percent. This is significantly less than at Amazon, where the commission is between 8 and 15 percent depending on the product. In addition, Amazon retailers de facto have to place advertising in order to be even remotely visible in the shop. Advertising is also possible on Tiktok, but the content is much more important for reach. All of this potentially puts pressure on sales and margins.

In fact, the Tiktok Shop also had startup problems. According to the “Financial Times”, the rollout in Germany and other European countries should take place as early as summer 2022. But the project was put on hold for the time being after several internal goals were missed and influencers dropped out. But now that the Tiktok Shop has been well received in Asia, Bytedance is likely to enter other markets with tailwind - 167 billion views on videos with the hashtag

Note: This article first appeared on Capital.de

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