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Business News/ Companies / News/  TikTok to take on Amazon on home ground aims for $17.5 billion US e-commerce business
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TikTok to take on Amazon on home ground aims for $17.5 billion US e-commerce business

The expansion plans set TikTok on course to encroach on the home ground of US retail giant Amazon, besides fellow Chinese seller platforms such as Shein and Temu. But TikTok is banking on its extensive social media outreach and viral allure to capture the market.

The 2024 merchandise volume goal for the US version of TikTok Shop — which melds online entertainment with impulse buying — was discussed in internal meetings in recent weeks (Reuters)Premium
The 2024 merchandise volume goal for the US version of TikTok Shop — which melds online entertainment with impulse buying — was discussed in internal meetings in recent weeks (Reuters)

Social media platform TikTok's parent company Bytedance has set its sights on the $17.5 billion strong US e-commerce market, Bloomberg reported citing sources. And plan for a US version of the TikTok shop is under review by the company, it added.

The expansion plans set TikTok on course to encroach on the home ground of US retail giant Amazon, besides fellow Chinese seller platforms such as Shein and Temu. And while the latter two platforms have made significant inroads among younger American consumers, TikTok is banking on its extensive social media outreach and the allure of viral content to capture the market.

Also Read: Will live streaming be TikTok's Amazon killer?

Shifting Focus and Global Expansion Plans

Initially forecasted to amass approximately $20 billion in global merchandise value last year, primarily driven by Southeast Asia, TikTok is now redirecting its efforts towards bolstering sales in the US and Latin America, the report added. Sources further told the publication that the plan is to kickstart the e-commerce arm in Latin America in the upcoming months.

The moves they said reflect the company's strategic intent to diversify and expand its revenue streams.

Also Read | Amazon confronts a new rival: Tiktok

ByteDance, established over a decade ago by Zhang Yiming and Liang Rubo, surged to an internet powerhouse valued at over $200 billion, predominantly propelled by the popularity of its short-video platforms, TikTok and Douyin. The emergence of TikTok Shop as a rapidly growing segment underscores the company's quest for a new growth avenue beyond social media advertising.

In 2023, ByteDance witnessed a staggering revenue surge of approximately 30 percent to surpass $110 billion, outstripping growth projections for established rivals such as Meta Platforms Inc. and Tencent Holdings.

The Shopping Experience

TikTok Shop's distinctive feature enables users to purchase items while browsing through short videos and live streams within the primary social media app. This shopping format aims to blend Amazon's shopping convenience with the product discovery element synonymous with apps such as Meta's Instagram.

Notably, a similar approach proved highly successful for Douyin, diverting a substantial portion of Chinese consumer spending from Alibaba Group Holding and JD.com, especially during the COVID-19 pandemic-driven surge in online activity.

Also Read: TikTok’s Owner Wanted to Create a Hit Videogame. It Failed.

In a bid to solidify its e-commerce foothold, TikTok in the US has also begun offering incentives such as free shipping and subsidies to influencers endorsing various products through videos and live streams.

The recent announcement of an impending increase in merchant fees to 6 percent per sale from April, further rising to 8 percent in July across most product categories, signifies a shift towards revenue generation. Despite these increments, TikTok's commissions remain notably lower than Amazon's typical seller fees, which hover around 15 percent.

Evolving Consumer Trends and International Expansion

The growing acceptance of shopping via Chinese e-commerce platforms, particularly Shein and Temu, signifies an evolving consumer trend in the American market. TikTok's aspirations for global e-commerce dominance are underscored by its acquisition of GoTo Group's e-commerce entity Tokopedia in Indonesia, a strategic move valued at $1.5 billion. This acquisition facilitated TikTok's re-entry into online retail in the region, overcoming months of regulatory scrutiny.

Also Read: TikTok asks managers to give more staff lower review grades

Sales targets for TikTok Shop on a global scale or in other markets remain undisclosed at present, leaving uncertainties surrounding the platform's overarching ambitions beyond the US expansion.

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Published: 04 Jan 2024, 07:26 AM IST
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