TikTok is reportedly planning to quadruple its global ecommerce operations, with the goal of selling $20 billion in merchandise.
The ByteDance-owned social media app will rely heavily on rapid growth in Southeast Asia to reach its optimistic target. TikTok also hopes to also boost sales in the U.S. and Europe, Bloomberg reported.
Why we care: TikTok had the highest app store spend across the U.S., UK, France, Germany and Indonesia in the first quarter of 2023, according to Data.ai. Teaming up with the social media giant could not only help advertisers reach a huge audience on the most addictive social app in the world, but also a consumer base who are more likely to spend, which could result in higher conversions.
How does it work? TikTok Shop shows ads to users on its main social media app while they scroll through a never-ending feed of short video clips and livestreams. The business model, which combines entertainment with impulse buying, has already helped Douyin (TikTok’s sister app) establish itself as a major ecommerce player in China, competing against the likes of Amazon and Shopee – an achievement it hopes to repeat in the U.S.
Why now. Revenue from TikTok’s advertising business, which has historically been its primary source of income, is reportedly falling due to a worldwide slowdown in ad sales. So the app is now focusing its efforts on making the $17 trillion online ecommerce arena its main revenue driver instead.
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Is TikTok banned in the U.S.? The state of Montana is imposing a ban on TikTok downloads from next year. Lawmakers in other states have also proposed similar bills for a nationwide ban across the U.S. – but a final decision is yet to be made by President Joe Biden.
TikTok fighting a potential U.S. ban. TikTok has 150 million U.S. users and is actively taking steps to prevent the ban, including introducing a range of security measures to address national security concerns raised by American politicians. It is giving partners like Oracle Corp. the right to review its technology and cordoning off American TikTokers’ data.
What TikTok has said. TikTok has declined to comment on its ecommerce plans. However, the social media did release a statement about its future in the U.S.:
“A US ban on TikTok is a ban on the export of American culture and values to the billion-plus people who use our service worldwide. We’re disappointed to see this rushed piece of legislation move forward, despite its considerable negative impact on the free speech rights of millions of Americans who use and love TikTok.”