TikTok, which has swept the world, also has its own troubles: one is the regulation of governments, and the other is e-commerce.
Relying on the "three-board axe" of shop windows, live broadcast goods, and shopping malls, Douyin has achieved trillions of GMV in China in only two years, and Ali (20 years), Jingdong (14 years), and even Pinduoduo (5 years) are difficult to match. TikTok has traffic beyond Douyin, and Byte has also touched the development path of content e-commerce, and it seems that TikTok's e-commerce road is destined to be a smooth road.
TikTok's speed is not unfast, TikTok, which only began to test the waters of e-commerce in 2021, has reached a GMV target of $23 billion in 2023, while Southeast Asian e-commerce boss Shopee only had a GMV of $73.5 billion last year. For most Chinese cross-border trade merchants, TikTok is also the most important money-making opportunity in recent years. On Zhihu, Instant, and even Xiaohongshu, more and more "Xiaobai" are posting to ask how to open a store on TikTok to make money.
But it's far from that simple. Last year, the high-hopes TikTok live streaming expansion plan collapsed in the UK; Chinese sellers who follow TikTok overseas are also plagued by problems such as low conversion rates, and it is the norm to earn money at a loss.
For the merchants and service providers in it, although TikTok has huge traffic, in overseas markets that have not yet cultivated the habit of "live shopping", especially in the European and American markets, TikTok is still only in the "green growth period" like Douyin e-commerce in 2018 and 2019.
Perhaps in order to reverse the momentum and complete the set goals, TikTok has made frequent moves in the e-commerce field in the past quarter. First, at the beginning of the year, the incentive plan of "professional operation" and "word-of-mouth management" was released, and then it was announced in February that Southeast Asia would fully open the mall function, followed by the update of the cross-border UK market commodity entry model in March.
Behind a series of eager actions, there may be hidden growth anxiety of the platform.
One "mall", two logics
Among the recent series of moves by TikTok, the most concerned is the "TikTok Shop Mall".
In fact, as early as October last year, TikTok Shop's mall model has been "tested" in the Indonesian market, after the test of double 10 and double 11 promotions. In February this year, TikTok officially decided to expand the coverage of the mall function, announcing that it was officially launched in Thailand and the Philippines, and will cover more Southeast Asian countries.
Nowadays, after opening TikTok, users can see the entrance to the mall in the function bar below, and click the "window" of the Internet celebrity homepage to enter the TikTok Shop mall, and the mall interface includes modules such as "Lightning Deal", "Newcomer Zone" and "Category Recommendation".
TikTok Mall Portal | Image source: TikTok
This move is not unusual in the eyes of outsiders - "Isn't it just to open the entrance to the mall, Douyin has long been available, and TikTok has followed suit."
But in the eyes of industry insiders, the promotion of the mall at this point in time is actually somewhat unexpected: "Douyin proposed global interest e-commerce last year, and this year's focus will be tilted towards the mall." The commercialization of TikTok is not as mature as Douyin, and we originally expected its progress to be slower, but we did not expect that the TikTok Mall would be launched in February, and the rhythm at home and abroad is somewhat consistent."
Let's review TikTok's e-commerce journey first.
Initially, many cross-border sellers just regarded TikTok as a new source of traffic: "When there is no commercial carrier such as TikTok Shop, we can only hang the link of our website in the introduction column of the account homepage, and someone who is interested in your products can go to the independent website to buy it through the link."
But soon, TikTok officially began to experiment in the e-commerce field, and in 2020, TikTok and Shopify cooperated, merchants can place ads in the information stream, and are allowed to attach links to ads for independent site traffic.
But this model cannot build TikTok's own e-commerce ecology, so like Douyin, TikTok launched its own small store, TikTok Shop.
Merchants live streaming through TikTok Shop | Image source: TikTok
In 2021, TikTok Shop was launched in the UK and Indonesia, and gradually expanded to Thailand, Vietnam, the Philippines, Singapore and other countries in the next two years. TikTok Shop integrates advertising and sales, and after merchants place ads on the platform, consumers who see video content can directly complete follow-up behaviors such as ordering, payment, and after-sales service within the TikTok platform. TikTok's closed loop of e-commerce was formed.
Until this point, TikTok and TikTok have remained in step with Douyin. Both are gradually building their own internal e-commerce systems after a short period of drainage for third parties. But then, from the launch of live streaming e-commerce to the decision to launch the "mall", TikTok's rhythm changed.
Although Douyin has begun to layout the mall in 2021, it was not until May last year that Douyin Mall had a first-level traffic entrance on the homepage. The corresponding background is that Douyin e-commerce's GMV (total e-commerce transactions) in 2021 is 730 billion, and the GMV in 2022 is more than one trillion, although the amount is increasing year by year, but the growth rate is facing a slowdown.
Therefore, the launch of the entrance of "Douyin Mall" is based on the fact that Douyin e-commerce has formed a large transaction scale, users have cultivated the mind of shopping on Douyin, and the shelf mall as a long-tail channel can further enhance the GMV of Douyin.
The logic of TikTok Shop's launch of the mall entrance is clearly not the case.
TikTok's GMV in Southeast Asia was $4.4 billion in 2022, and Indonesia's GMV increased by 493%. At the same time, according to eMarketer statistics, in the TOP10 list of global e-commerce scale growth in 2022, 5 countries in Southeast Asia are on the list. Industry insiders generally believe that TikTok Shop is still in the early stages of development.
One is already a cash cow, and the other is still a potential stock. Therefore, in the eyes of relevant practitioners, TikTok's launch of the mall is fundamentally different from Douyin in those years. It is precisely because TikTok has encountered problems in expanding e-commerce overseas, and the launch of the shelf mall is in the hope of cultivating users' consumption habits through this model that overseas consumers are more familiar with, in order to open up a larger market space in the future.
Just copy the strategy, and 90% of players will lose money
An implicit clue is that although the growth rate of Southeast Asia is still reasonable on the surface, and the development space of TikTok e-commerce is undoubted, whether for the platform or the seller, the current TikTok Shop has not yet met their expectations.
Especially in the European and American markets, the model of TikTok Shop has encountered great challenges. TikTok Shop's average monthly GMV in the first UK market was only $24 million, while in Southeast Asia, Indonesia, the figure has reached $200 million.
According to data from GoodsFox, a global consumer brand marketing data research platform, in the TikTok Shop product sales list in the past 2 months, the top 50 products in sales are all from Southeast Asian countries, and other regions (the United Kingdom) are not on the list. Wu Jingyi, product director of global digital marketing DaaS Youmiyun, told Geek Park that this is because: "The European and American e-commerce markets are very mature compared to Southeast Asia, and their purchasing behavior is also very fixed. The e-commerce market in Southeast Asia is still developing, and the purchasing power of young people in Southeast Asia is increasing, so TikTok's user portraits match the main consumers in the market, so the sales data in Southeast Asia will be better." Data shows that more than half of European and American consumers will choose official websites, independent websites or Amazon when shopping online.
Some insiders believe: "Southeast Asia has entered the live broadcast e-commerce race, and their culture is closer to us, so the acceptance will be higher than that of Europe and the United States." But overall, they still see TikTok more as a social and entertainment tool than a trusted shopping platform."
"From PC Taobao, JD.com, TV shopping, to mobile app shopping, to Douyin live broadcast and video shopping, domestic consumers have been educated and cultivated by various e-commerce models, so they are willing to accept the innovation of consumption patterns; But for overseas consumers, they still need more time to adapt."
The problem arises, whether in the European and American markets that are already stretched, or in the Southeast Asian market, many TikTok Shop merchants are plagued by conversion rates.
"Take Vietnam, for example, a few friends I know, their conversion rate for a live broadcast is only 0.5% to 1.2%, almost no money can only make a flow, when the character breaks out, maybe only 5%." A cross-border merchant told Geek Park, "Although the popularity of TikTok live streaming is very high, there are very few orders that can really convert into sales, and most (almost 90%) merchants are still losing money."
Another Southeast Asian cross-border seller who also runs stores on Shopee, Lazada, and TikTok compares the conversion rate of TikTok Shop to other platforms: "Our conversion rate on other platforms is usually between 2% and 2.5%, and TikTok has a conversion rate ten times lower. Imagine a video with one or two million views, and maybe only a dozen people will pay for the product in the end."
But some insiders believe that the actual conversion rate is not so bad, and it is more accurate to say: "Take a set of so-called strategies to do TikTok, 90% of merchants will inevitably lose money."
The logic behind this is: whether it is Amazon or independent websites, China's cross-border merchants used to rely too much on doing business with "strategies", but when cross-border e-commerce enters a new era, the previous strategies may not be effective. Merchants who are anxious to find a breakthrough enter TikTok, hoping to quickly grow from TikTok, but in fact, TikTok itself does not have a practical and effective "strategy".
"The platform is too anxious, and the sellers are also in a hurry, and they will go out of shape in a hurry. Previously, Douyin put a lot of effort into content improvement before the mall went online, tilting high-quality content traffic, and there were various interactive functions and private domain functions in the live broadcast room, but these are things that TikTok has not yet done thoroughly." The above industry insiders summarized.
In addition to the merchant side also needs to explore experience, the platform itself also has problems. TikTok does not lack traffic, but TikTok lacks precise traffic.
Domestic Douyin can achieve interest e-commerce close to the ceiling in a short period of time, because Douyin has accumulated enough user behavior data in China, while overseas, due to relevant policies and regulations, user privacy awareness, etc., it is difficult for TikTok to collect data of the same magnitude as domestic Douyin in the short term and accurately push it.
TikTok is in turmoil overseas | Image source: Visual China
On the issue of data, TikTok has been criticized by Western countries since its establishment, in 2020, former US President Trump twice ordered TikTok to be blocked, in 2021 TikTok was accused of violating EU data protection laws, until today in 2023, European and American countries are still attacking TikTok again. This means that TikTok wants to promote interest e-commerce overseas, and it is difficult to solve the data problem in the short term.
Cross-border merchants also have a strong sense of uncertainty about the platform. In the early days, TikTok's management of cross-border e-commerce was very chaotic and unconventional.
"Official policies are adjusted at every turn, for example, the delivery time assessment is often chaotic, while other platforms like Shopee have a unified delivery time. In February this year, TikTok Shop's reform of small British stores required that only one category be retained, and the notice said that the category with the most orders or links would be retained, but then the platform deleted the category that I had orders and did the best." On one social media, a seller at a small TikTok Shop store in the UK complained about it.
Some practitioners believe: "At present, there are no sellers with special heads on TikTok, so the platform does not have enough data and maturity to screen which are real high-quality sellers and which are malicious merchants." That's why the rules of the platform are blurred, and sometimes they get hurt by mistake when they ban stores."
The low conversion rate and poor management of the platform make it difficult for merchants who really want to do business to continue, but it provides opportunities for "people who exploit loopholes" who just want to eat a wave of dividends.
Although TikTok has begun to crack down on video portability and plagiarism, according to a cross-border merchant who just joined TikTok Shop last year, "At present, the vast majority of the entire platform is not original content. We have not set up a dedicated content team so far, because the investment in original content is too high, and we can only lose money in the current situation." In his opinion, there is almost no cost to move videos, even if the conversion rate is low, it is acceptable, "We mainly try new platforms during the bonus period."
Small and medium-sized businesses find it difficult to provide TikTok with more high-quality original content; Big brands are still on the sidelines, or just see TikTok as a promotional medium rather than a full-fledged sales channel. Therefore, the TikTok Shop merchants and platforms have not laid a foundation for long-term mutual benefit in the past two years, and there are still many inferior merchants and products on TikTok.
Farewell to the "Barbaric Era"
"Recently, several Southeast Asian countries are vigorously investigating e-commerce platforms such as Shopee and Lazada, and relevant departments have imposed fines, taxes and other penalties on counterfeit and shoddy goods, and criticized them on official media." A veteran practitioner told Geek Park: "The problem of counterfeit goods in Southeast Asia, especially Vietnam, has always been serious, and it is time for TikTok to act."
Improving the quality of goods and standardizing management are the most important things in front of TikTok. In January this year, TikTok released the "professional operation" initiative to encourage platform merchants to conduct professional operations, reducing the number of competent categories to one, and the commodity platform for non-main categories will not be approved. Immediately afterwards, TikTok announced the "word-of-mouth operation" incentive plan, the "Polaris Premium Merchant Program", aiming to attract more high-quality merchants to enter TikTok e-commerce.
TikTok e-commerce development focus in 2023 | Image source: TikTok
Compared with the above slightly empty plans and initiatives, the launch of the TikTok Shop mall function can be described as a multiplicity, which can not only raise the entry threshold, standardize the business ecology, but also provide a new solution to the problem of low conversion rate of live streaming.
Industry insiders told Geek Park: "First of all, the entry threshold for entering the mall is higher than opening a small store, and merchants need to provide more comprehensive qualification reports and pay higher deposits; Secondly, the mall function directly puts the goods and prices on the mall page for consumers to choose freely, which is actually more similar to the shelf e-commerce familiar to overseas consumers, which can increase sales on the one hand, and on the other hand, it can reduce the content operation threshold of merchants, solve the conversion rate problem, and help merchants make profits."
The contribution of TikTok Marketplace features to merchant sales is proven.
As early as October last year, TikTok quietly tested the mall function in Indonesia, and official data shows that during last year's Double 10 promotion, the merchant Dunia Fashion88 accumulated more than 5 million views on the TikTok Shop mall, and the mall contributed 34.4% to its store sales.
In this regard, some practitioners said: "For TikTok, the e-commerce ecology is inseparable from merchants. Once the fact that the mall can increase sales is verified, merchants who once wanted to leave may stay, and the platform can also attract more high-quality merchants who are still waiting to settle in."
Looking back, in fact, in the early days of TikTok's e-commerce process, it was not too urgent to attract merchants.
2020 After the outbreak of the epidemic, with the explosion of cross-border trade, a large number of cross-border sellers emerged in China. Taking the established e-commerce platform Amazon as an example, according to relevant media reports, an average of 3,500 sellers entered Amazon in 2020, and cross-border sellers increased by 1.3 million in one year.
But the good times did not last long, in 2021, Amazon carried out a wave of store closures for domestic cross-border e-commerce sellers, and it was reported that more than 50,000 Chinese sellers were blocked, and the industry lost more than 100 billion yuan. Small and medium-sized sellers have weak ability to resist risks, and once blocked, they are very easy to fall into the dangerous situation of commodity backlog and broken capital chain.
As a result, the limelight TikTok has become a lifesaver for many blocked merchants, and has also become the direction of speculators, platforms and merchants are too eager to catch up with the progress of domestic Douyin, but various overseas conditions are not ripe, so it will cause sellers and platforms to "two-way anxiety" after the "two-way disappointment".
Today, TikTok's frequent actions are more like make-up lessons. "Which platform can really change people's consumption habits, who will belong to in the future" is true, but before changing overseas consumers, what TikTok needs to do is to improve the quality of merchants, improve hard power such as goods control and logistics. Compared with the "blindfolded run" of the previous two years, today's TikTok is trying to get rid of the early barbaric state and move to the next stage.