- US brands are testing TikTok’s shopping feature that competes with Amazon.
- TikTok Shops charges lower fees than Amazon, but it requires too many resources from brands.
- Small businesses are more willing to sell on TikTok.
As TikTok brings its Shop feature to the US, it’s been trying to convince advertisers to use it by making big claims that it will drive sales and by offering cheaper fees than Amazon, according to multiple ad industry sources.
Like Amazon, marketers say that TikTok is pitching its ability to own all parts of the e-commerce sale.
“TikTok is trying to build a direct-to-consumer channel — that makes them a competitor to all other retailers,” Rachel Tipograph, founder and CEO of e-commerce analytics firm MikMak.
TikTok is trying to entice merchants by offering low fees to sell on TikTok. Many retail platforms charge seller fees as a percentage of sales. One technology executive said TikTok is offering sellers 2% fees compared to Amazon’s 15% fees.
A TikTok spokesperson declined to comment on specifics of the Shop program but pointed to the big brand Benefit Cosmetics and the smaller company Lion Latch as examples of companies using Shop.
Even though TikTok is pitching itself as an Amazon competitor, some e-commerce advertisers are hesitant to join the program because they’ve had bad experiences when they used commerce offerings on other social media platforms.
Vic Drabicky, founder and CEO of agency January Digital, said that brands got burned after Instagram launced Shops in 2020, which offers a way for people to discover and buy products directly from the app but didn’t generate significant sales for brands. That bad experience could make TikTok’s pitch tough, Drabicky said.
Advertisers are also hesitant to devote resources to manage something that’s unproven.
“This is another thing to manage for .5% or 1% increase in revenue — that’s a big ask for brands,” he said. “A lot of resources are thin this year.”
Tipograph said that big brands prefer to put money and resources into areas proven to drive sales — like partnerships with big retailers or their own e-commerce site.
Carly Carlson, head of integrated media at ad agency PMG, said that TikTok Shop requires heavy engineering and integrations with big e-commerce platforms like Shopify and Salesforce.
Many big brands are also investing in loyalty programs that don’t connect well with social commerce features, she said.
“We’re finding that some of the end-to-end social commerce solutions don’t integrate very well with those,” she said. “I think it’ll be important for platforms to find ways to ensure that shopping provides all of the same benefits that someone would get if they were shopping directly with the merchant on their site.”
While big brands aren’t ready to buy in, January Digital’s Drabicky said that TikTok Shop will appeal to small businesses and entrepreneurs, because they handle their own e-commerce fulfillment and shipping strategies.
David Dweck, SVP of paid media at performance ad agency WPromote, works with such small and midsize brands. He said that his agency has 25 clients that plan to use TikTok Shop, and half of those brands are already live. He said TikTok has also brought new clients to WPromote to help with making the creative that appears in videos for Shop.
WPromote’s early results show that running TikTok Shop ads are driving sales, Dweck said, though he did not provide specifics.
He said TikTok’s rollout of Shop has been quicker and includes more adtech integrations than shopping features on platforms like Instagram or Pinterest.
“Our teams have been so much more leaned in on TikTok’s solution the past 9 months,” he said. “They’ve done a good job of closing the adtech gaps.”
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