TikTok plans to ban links to outside e-commerce websites, such as Amazon, in a move designed to drive people to use its own e-commerce platform, TikTok Shop according to a new report from The Information. However, the report also indicates that TikTok Shop is expected to lose more than $500 million in the U.S. this year. If TikTok banning e-commerce links will impact the industry.
The company incurred a $500 million loss due to their extensive hiring, establishment of a delivery network, and subsidization of merchants that offer discounts and free shipping. To prevent creators from advertising items such as kitchen items and furniture from their Amazon storefronts, TikTok would prohibit outside e-commerce links. When someone purchases an item listed on an influencer’s Amazon storefront, the influencer earns a commission.
TikTok has yet to respond to us request for comment on TikTok banning e-commerce links. When the ban goes into effect, however, users will only be able to purchase items promoted by creators through TikTok Shop. These links allow users to buy products directly from videos, and some creators even have their own TikTok Shop storefronts embedded in their profiles. Consequently, creators will no longer be able to do so.
From now on, this will be the only way to link products for purchase in the app. This transition is intended to increase sales on TikTok Shop, which has not been gaining much traction. Currently, consumers in the U.S. are spending around $3 million to $4 million a day on TikTok Shop, an increase from the $500,000 to $1 million a day reported in June. According to TikTok staff, they anticipate this number to exceed $10 million by the end of the year.
TikTok Shop has been thriving in Southeast Asia since 2021, with a daily gross merchandise volume of $50 million to $60 million. ByteDance aims to boost TikTok’s success even further, hoping to reach a merchandise volume of $90 million by the end of the year. This would match the success of Douyin, which reported a merchandise volume of over $200 billion last year.
The company hopes that TikTok will reach similar levels of $200 billion in revenue by 2028, of which ByteDance expects to generate around $40 billion to $60 billion from the U.S. To attract merchants to its platform, TikTok employees actively search for bestselling items on Amazon, and then contact the merchants to join TikTok Shop with no commissions for the first three months.
TikTok is expanding its e-commerce offerings beyond TikTok Shop with a new in-app shopping section called “Trendy Beat.” ByteDance subsidiary will handle the shipping and selling of products. The feature is being tested in the U.K., and TikTok has filed a trademark application in the U.S. for Trendy Beat, indicating that it will likely be introduced in the U.S. soon.
market, ByteDance has been working on “Project S” for some time. Internally known as “Project S,” ByteDance plans to sell their own products in the video app. They are leveraging TikTok’s knowledge of products that are gaining popularity on the app, allowing them to either acquire or manufacture those products. ByteDance has established a network of suppliers to produce these items. For some time, ByteDance has been working on “Project S” to expand their e-commerce efforts in the U.S. market.
TikTok has had a significant impact on users’ shopping habits, evidenced by the popular phrase “TikTok made me buy it”. This term has earned 7.4 billion views on TikTok, while the hashtag has 67 billion. In order to strengthen its e-commerce offering, TikTok banning e-commerce announced that it will be discontinuing its Shopify storefronts on September 12, 2021 – just a few months after the storefronts first launched earlier in the year.
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TikTok no longer requires storefronts since the launch of TikTok Shop.
