TikTok ban could hurt Amazon sellers looking for alternatives | Tech Crunch

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In March, the The US House of Representatives overwhelmingly passed a bill to force ByteDance Get off TikTok or face ban from US app stores. MRelated discussion and debates Centered around American Data security and speech rightsBut the potential move also highlights something else: TikTok is increasing its focus on e-commerce, but the interplay of tech giants and geopolitics is crippling small businesses.

Over the past few months, merchants — many of them from China — have flocked to TikTok looking for an Amazon alternative to sell clothes, cosmetics, electronics and a variety of other products to US buyers through TikTok Shop. In interviews with TechCrunch, sellers from Shenzhen — the Chinese megacity that is a major hub for Amazon merchants — said they felt collective frustration over rising geopolitical tensions and “helplessness” about a potential TikTok ban.

“The situation is out of our control,” the retailer, which specializes in maternity and baby products, told TechCrunch. “It's hard to know how things will develop.” Because existing supply chains are difficult to change, “we have to play it by ear.” (The sellers asked not to be named due to political sensitivities.)

TikTok Shop officially launched in September 2023 with 200,000 merchants already. But since then, it hasn't provided any updated numbers on how many merchants are currently on the platform, or how much they're selling there, or how many are selling elsewhere (and where that might be).

Research From Jungle Scout, an Amazon data intelligence provider, provides some idea of ​​TikTok's e-commerce impact. It found that 20% of Amazon sellers, brands and businesses have plans to expand to the TikTok Shop this year. Before the current political backlash began, ByteDance projected that its US e-commerce business would grow tenfold to $17.5 billion this year.

TikTok isn't the only platform on the list for merchants looking for more channels beyond Amazon to expand their customer bases. Its growth is part of a larger shift we're seeing around alternative marketplaces like Temu, attracting more attention not just from shoppers, but also from Chinese e-commerce exporters and merchants. And Amazon is taking notice, another sign that alternatives are picking up traction.

TikTok did not immediately reply to a request for comment.

A new way to sell and buy

TikTok has been trying to grow its e-commerce business since its US launch last September.

The app is famous — or infamous, depending on who you talk to — for how tightly it controls what content is displayed for whom. The TikTok Shop also has a strong dose of curation.

Unlike Temu, known for its seas of cheap, white-label products sold directly from Chinese factories to US consumers, TikTok's strategy is to onboard and highlight more branded goods, making it a direct competitor to Amazon.

TikTok is looking to attract sellers with more traditional subsidies. According to reports, to encourage merchants to sell items at deep discounts during the recent Black Friday sales period, TikTok offered subsidies to those merchants to reduce their prices by up to 50%.

Incentives and algorithms aside, merchants are interested in selling on the app because TikTok's short video platform generates massive engagement. According to a survey from Tabcut, a Chinese firm that tracks TikTok shop performance, nearly 70% of sellers reported year-over-year sales growth in the first 11 months of 2023.

This is also manifested through consumer behavior, where products endorsed by influencers continue to gain traction, particularly with respectable younger consumers.

According to Jungle Scout, nearly 20% of users started their search for products on TikTok in the first quarter of 2023, a 44% increase from a year ago. While 56% of all consumers still prefer to start their product search on Amazon, 40% of the Gen Z population prefers TikTok over Google for search.

Not surprisingly, 52% of TikTok's US users are mostly 18-34 year olds, according to Pew Research. TikTok has the potential to reshape how America's younger generations shop online.

Instead of relying on its dynamics, TikTok is spinning some pretty bald media to push its message.

Earlier this month, trade research firm Oxford Economics published a report on TikTok's impact on the SMB sector in the US, funded by TikTok, and perhaps surprisingly, it gave a ringing endorsement of TikTok's economic impact: it measured presence. 7 million SMBs in the US using the platform (through ads or marketing themselves through accounts) have generated $14.7 billion in revenue.

An Amazon challenger?

TikTok seems serious about entering e-commerce, but it's still in flux. On the one hand, the company — despite facing a potential US ban or forced sale — continues to roll out new e-commerce features, such as a new video shopping format previewed at a conference this month. On the other hand, it's especially revising or implementing vendor policies that seem to fly by while trying to navigate how to thrive in the shining spotlight.

“The internal management of TikTok (shop) is a bit chaotic right now. It's a new platform, so it hasn't started squeezing sellers, but its policies are still changing,” said a trader who has been selling lamps on Amazon since the mid-2010s.

One of those policies is what its algorithms look like for which users. In recent months, TikTok Shop in the U.S. has stepped up efforts to prioritize U.S.-based stores over foreign ones, Chinese-based merchants say. Vendors told TechCrunch that this has led to the rise of black market “agents” — parties who broker deals between foreign sellers and American residents, who set up TikTok shops that appear to be US-owned but are really run by foreign traders.

Marketers are willing to jump through these hoops to increase their touchpoints with consumers and diversify their channels as one giant emerges after another.

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

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

According to the Department of Commerce, e-commerce accounts for only 15% of US retail, so “If we only talk about a small share of the online e-commerce sector, there is not much to discuss,” Xu suggested.

But if TikTok Shop's strategy is primarily focused on bringing offline businesses online for the first time, that could be a big move. “(Using) live streaming e-commerce to allow offline small shops and stores to participate, the potential is significant.”

However, while 15% may seem small, the number is still significant — $285.2 billion — so even if the TikTok shop gets a small piece of the current e-commerce pie, its potential is enormous.

Zoozas Kaziukenas, founder of e-commerce intelligence firm Marketplace Pulse, doubts that TikTok will ever replace Amazon. “It lacks wide selection and fulfillment, and shoppers in the West are used to search-based e-commerce,” he said. “But many people spend many hours using TikTok every day, so, sometimes they buy things on it.”

“In the US and other countries in the West, shopping apps have developed in parallel with apps that provide entertainment or connection, such as social media. We're used to getting different things from different apps as opposed to going to one place for everything,” he added.

“Today, social apps like TikTok are trying to figure out shopping before retailers like Amazon figure out social (via Amazon Inspire). But the status quo remains the same with different apps catering to different needs.

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