Despite the potential U.S. ban, Amazon sellers and retailers are increasingly turning to TikTok Shop for their e-commerce needs.

• Through e-commerce, TikTok Shop is attempting to establish another revenue stream, solidifying its position as an advertising powerhouse.
• Amazon sellers are being enticed to use TikTok Shop with promises of low fees and discounted product costs, which are being covered by the company. Additionally, Amazon has recruited talent from the platform.
• Despite the looming January 19th ban, retailers and brands are still investing in TikTok Shop.

Sarah Potempa, adorned in a glittery dress and a Santa hat on top of her vibrant pink hair, posed in front of her smartphone at her haircare company's warehouse in Waukegan, Illinois. It was time to begin work.

Potempa, a renowned hairstylist, frequently goes live on TikTok to showcase her packing process for orders of her popular Beachwaver curling iron, which lasts for six to eight hours.

On Nov. 20, Potempa's stream had a festive vibe, with him occasionally dancing to "In da Club" by 50 Cent while fulfilling orders. For the over 1,000 TikTok viewers who regularly watch Potempa's shows, this was a combination of entertainment and shopping.

TikTok Shop, the video app's shopping service, has attracted a growing number of retailers, including Beachwaver, since its launch in September 2023. The China-owned app offers a convenient way for users to purchase products without leaving the app, making it an attractive option for retailers looking to expand their e-commerce business beyond traditional platforms.

Retailers of all sizes promote a wide range of products on TikTok through a dedicated Shop tab, including eyeshadow palettes, phone chargers, detox teas, treadmills, and more. TikTok offers generous coupons and free delivery within a few days. Shoppable posts, which look like normal videos but are ads for products sold in TikTok Shop, frequently appear in the main video feed, known as the "For You" page. These posts allow users to purchase products without exiting their For You feed.

Potempa's show offers a 50% discount on Beachwaver products and free add-ons, as well as the opportunity to have your username read aloud while she packs your order on screen.

"When TikTok Shop was new, people would ask if it was available on Amazon. Now, after a year of use, the platform has completed 1.2 million orders."

TikTok, owned by ByteDance, has established itself as a formidable advertising platform and is now attempting to generate additional revenue through e-commerce with TikTok Shop. Several retailers, including PacSun and others, have expressed interest in leveraging the app's more than 170 million American users who engage in impulse shopping while scrolling through videos.

They aren't the only ones.

TikTok is enticing Amazon sellers to use its service by offering low fees and discounts on products. In addition to sellers, the company has recruited talent from Amazon to fill key positions for TikTok Shop, including marketing, creator relationships, brand safety, category managers, and operations.

TikTok Shop has become a "massive e-commerce machine" in the 15 months since its launch, predicts ecommerceDB, a market research firm. The firm forecasts that TikTok Shop will more than double its gross merchandise volume to $50 billion this year, despite being a fraction of Amazon's 2024 expected GMV of $757 billion. Nonetheless, TikTok Shop is making strides.

Caila Schwartz, director of consumer insights and strategy for retail and consumer goods, stated that every scroll on the app leads to an increase in Shop posts, which has resulted in a significant investment to promote in-app conversions.

Amazon's services for sellers are optional, such as fulfillment, which costs "an average of 70% less" than comparable two-day shipping alternatives, according to Mira Dix, an Amazon spokesperson who told CNBC in a statement that sellers are engaging with its store "more than ever before" and seeing greater success.

Dix stated that Amazon values its selling partners greatly and works diligently to develop new innovations to aid their growth and success across all sales channels.

Looming deadline

TikTok's e-commerce push comes at a precarious moment for the company.

In April, President Biden signed a law that mandates ByteDance to sell TikTok by January 19. If TikTok does not sever ties with its parent company, app stores and internet hosting services would be prohibited from providing the app, resulting in a nationwide ban in the US. TikTok has filed a lawsuit to halt the measure.

TikTok could be saved from a possible US ban by President-elect Donald Trump. Trump had previously attempted to implement a ban on the app during his first term, but later reversed his stance, stating in a March interview with CNBC's "Squawk Box" that there were both good and bad aspects of the app. This change in position occurred around the time that Trump met with billionaire Jeff Yass, a major investor in ByteDance.

TikTok has mostly continued with its usual operations as the January deadline approaches.

TikTok Shop's marketplace was pitched as a holiday shopping destination during an October event in Manhattan, attended by business owners and social media influencers. Since its launch in September 2023, users have shopped hundreds of millions of units on its e-commerce platform. Nico Le Bourgeois, TikTok Shop's head of U.S. operations, shared this information at the event. Le Bourgeois, who joined TikTok in August 2023, previously spent nearly 9 years at Amazon in various divisions, including its third-party marketplace.

TikTok Shop is not aiming to sell everything to everyone, as Le Bourgeois stated in October. Instead, it is a platform for product discovery that highlights "new, cool, interesting" items from various brands.

"You spot it, you're drawn to it, and you purchase it. This isn't a search; it's a unique shopping approach."

TikTok Shop is not slowing down, but Le Bourgeois declined to comment on the TikTok ban.

"The spokesperson stated that the sellers at this location are creators who rely on TikTok for their livelihoods. They plan to continue supporting this trend, as there is a significant opportunity to do so."

"Enjoying it while it's hot"

This holiday shopping season, it is predicted that more Americans will use TikTok and other apps associated with China for their gift purchases.

During the season, 63% of Western consumers plan to buy from Chinese shopping apps such as TikTok, AliExpress, Shein, Temu, and Cider, according to Salesforce.

On Saturday, TikTok announced that its U.S. Black Friday sales surpassed $100 million, with home goods, fashion, and beauty products being the most popular categories. Meanwhile, Canvas Beauty, a leading seller of haircare and beauty products on TikTok Shop, achieved $1 million in sales within just two hours of launching on the app.

Despite the possibility that TikTok could disappear, retailers and sellers who rely heavily on the platform for online sales are staying with it.

As a brand that heavily relies on TikTok, Yay's Snacks COO and co-founder Rachel Cheng is not convinced that the platform will be banned in the U.S. under the Trump administration because it doesn't seem to be the president-elect's main focus.

Yay's Snacks, a company that produces crispy Cambodian beef jerky, was one of the first to join TikTok Shop when it launched. Marlin Chan, the CEO and founder of Yay's, frequently posts humorous TikTok videos promoting his snacks, which are based on his grandmother's original recipe. One of the videos parodies the show "Undercover Boss." These videos helped Yay's gain tens of thousands of TikTok followers, who continue to purchase the jerky, according to Cheng.

TikTok sales made up almost 90% of Yay's revenue, with monthly sales reaching $75,000 in November, according to Cheng. If TikTok is banned, Yay is ready to shift its focus to Amazon and its own website. However, as long as TikTok remains available, Yay plans to continue using it to maintain its position.

"We wouldn't have gotten on TikTok Shop if we were sitting here worrying about what's next, according to Cheng," he said. "We're enjoying it while it's hot."

Competing with Amazon

During the Covid pandemic, Scrub Daddy gained popularity on TikTok with its smiley face-shaped sponges. The brand has over 4 million followers on the app, and its top video, showcasing the Damp Duster sponge, has 30 million views. Additionally, its best-selling product on TikTok Shop has been purchased nearly 76,000 times, although this figure does not include items that have been returned after purchase.

In 2012, Scrub Daddy CEO Aaron Krause expressed his lack of confidence in conventional marketing strategies following his debut on "Shark Tank."

"Krause stated, "We created a TV ad, placed outdoor ads on billboards, and did some radio advertising. However, my findings revealed that all my efforts were essentially a waste of money.""

Scrub Daddy's success on TikTok came from partnering with influencers, particularly Vanessa Amaro, who promoted the brand's products to her large following. As a result, Scrub Daddy sold 30,000 units in just one weekend, Krause stated.

"With one hysterically crazy video, TikTok's algorithm enables you to reach millions and millions of views," he stated.

TikTok has been promoting live streaming sessions for retailers and sellers to engage with customers. Several brands have established their own studios or hired hosts for these shows.

In 2023, QVC laid off longtime host Dan Hughes, but Scrub Daddy later hired him as their on-screen talent. Similarly, Beachwaver turned their CEOs into QVC hosts.

The TikTok Shop was a major topic at an Amazon seller conference in New York in October. A session on "how to scale your brand" with TikTok Shop attracted a packed room of sellers who listened to e-commerce strategist Rafay MH discuss the potential for brands to generate $8 million to $10 million in sales from TikTok in under a year.

""TikTok presents a chance for free exposure and revenue," MH stated."

Michelle Barnum Smith, who offers consulting services to online businesses, stated that many Amazon sellers have recently started using TikTok, despite initially being hesitant to join the platform.

""As soon as people saw their competition or friends on the platform, they were motivated to join," said Barnum Smith."

Amazon sellers are experiencing "extreme FOMO" to join TikTok, even if it is no longer available in the U.S. next year, according to Barnum Smith.

Barnum Smith stated that TikTok Shop is content with accepting money now, regardless of what the future holds for them.

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