Amazon joins hands with TikTok, has the world of cross-border e-commerce changed?

The cross-border e-commerce sector has ushered in a new revolution. The cooperation between Amazon and TikTok heralds a major shift in the market landscape. This cooperation not only brings new growth opportunities to the two platforms, but also brings a new experience to merchants and consumers. This article will explore the logic behind this cooperation, its potential impact, and its significance to the era of cross-border e-commerce 3.0.

Summer has just ended, and the balance of cross-border e-commerce has already tilted in a new direction.

As we all know, the "Four Chinese Cross-border Dragons" represented by TikTok, AliExpress, Temu, and SHEIN have performed well and are very motivated in overseas markets this year. In contrast, the traditional cross-border platform Amazon is gradually showing signs of fatigue.

In the past cross-border landscape, bystanders always placed Amazon and China's four cross-border dragons at the two ends of the scale, and the focus of discussion was always the battle for the global market between domestic cross-border platforms and foreign established e-commerce companies.

But cross-border situations are changing rapidly, and the direction of events always confirms the same old saying: "There are no eternal friends or enemies, only eternal interests." Yesterday's competitor may become a friend one day.

For Amazon and TikTok, the specific time for "turning enemies into friends" is August 8.

On the same day, the two parties successively issued announcements stating that they had signed a cooperation agreement. This means that in the future, TikTok users can receive advertisements for Amazon products in the short video information flow and complete shopping without jumping.

Image source: TikTok

The two major platforms have made their choice, and consumers are naturally happy to see it. The only ones who reacted strongly are the merchants: on the one hand, some Amazon merchants have rolled up their sleeves and are ready to do a big job; on the other hand, some TikTok merchants are anxious and worried about the increasing competition from peers on the platform.

Why did Amazon and TikTok choose each other? What impact will this cooperation between the "old brand" and the "upstart" have on the cross-border e-commerce industry? The undercurrent of cross-border e-commerce is still surging.

01 Successful hand-holding, unexpected but reasonable

On August 1, one week before the official announcement of its cooperation with TikTok, Amazon released its second quarter financial report for fiscal year 2024.

According to the financial report, Amazon's total revenue in the second quarter was 147.98 billion US dollars, a year-on-year increase of 10.1%, which was slower than the 13% year-on-year growth rate in the first quarter. Even though the net profit in the second quarter reached 13.49 billion US dollars, a year-on-year increase of 99.8%, according to industry insiders, its main growth point lies in Amazon's cloud computing business rather than e-commerce business. As soon as the financial report was released, Amazon fell more than 7% after the market closed that day.

When external competition intensifies, the internal gears are tightened and stalemate will not produce any results. If you want to seek new growth, the first step is to break the balance.

It is not easy to take this step, but the "four little dragons" facing Amazon each have their own unique skills:

• Temu relied on "spending money + social fission" to quickly grow in volume in the early days, and later gained a foothold in the United States with its domestic cost-effective supply chain;
• Relying on its unique flexible supply chain advantages, SHEIN has become a unicorn worth hundreds of billions of yuan after years of dormancy.
• AliExpress is the most well-known platform backed by Alibaba. As a long-established cross-border platform in China, it has many merchants and sells a wide range of products.
• TikTok has long been the most popular social platform among Generation Z, with 1.5 billion monthly active users and huge potential for commercial monetization.

To put it bluntly, the reasons why domestic cross-border e-commerce platforms are so powerful today are, first, strong supply chain capabilities, and second, new traffic that has not yet reached its peak.

Amazon has been a powerful company for more than 30 years, so it naturally understands the truth that "if you don't plan for the future, you will have immediate worries." Judging from its recent actions, Amazon does not intend to sit idly by, whether it is supply chain or traffic.

In April, Amazon launched the e-commerce platform Bazaar in the Indian market, testing the waters for "low-price e-commerce"; in June, Amazon launched the fully managed project "Low-Price Store" at a closed-door meeting in Shenzhen, trying to win over domestic merchants and factories with industrial belt resources and enhance supply chain advantages; in August, faced with traffic problems that are more difficult for traditional e-commerce platforms to solve, Amazon chose to directly join forces with TikTok.

Below the official announcement from TikTok, there is a short paragraph detailing how the partnership will work.

Image source: TikTok

• Consumers (TikTok users) will see ads for Amazon products in TikTok's "For You" recommendation interface. If users are ready to place an order, they can link their TikTok account with their Amazon account in a safe, fast and convenient one-time operation.
• Once the account is successfully linked, TikTok users can pay directly on the Amazon product ad page without redirecting, which will make the user's shopping experience faster and more seamless.
• U.S. users who choose to link their Amazon accounts will see real-time pricing, Prime membership, estimated delivery times, product details and more in Amazon’s product ads.
• Users can unbind their Amazon account from their TikTok account at any time.

Simply put, this cooperation actually means that Amazon merchants can place advertisements in TikTok's recommended information flow, and users can complete purchases directly within the TikTok app, making the consumption process from seeing the advertisement to clicking "pay" smoother.

It is understood that this function is currently limited to advertising of Amazon's own products, and it is not yet known when other merchants will be able to participate.

In fact, for most domestic users who are familiar with Douyin, the above-mentioned "shopping while watching videos" model has long been commonplace. Except for the slight difference that there will be no jump after clicking on the details page, the rest are the paths that Douyin in China has already taken. Even the cooperation between Amazon and TikTok this time is very similar to the former Taobao and Douyin.

In 2018, facing the sudden rise of Pinduoduo, Taobao, which felt the growth crisis, and Douyin, which was trying to enter the e-commerce market, hit it off and started cooperation. A large number of third-party shopping links from Taobao began to appear in Douyin's information flow, which was to attract traffic to Taobao and increase Taobao's order volume, and to prepare for Douyin to initially cultivate an e-commerce ecosystem.

The following story is mentioned more often.

Two years later, in April 2020, Douyin spent 60 million yuan to sign Luo Yonghao to start live e-commerce; in June of the same year, "Douyin e-commerce" officially became Douyin's first-level business department; since then, Douyin e-commerce has been advancing by leaps and bounds with live broadcasts and short videos. In October 2020, Douyin officially announced that Douyin's live broadcast room will no longer support the jump of links to third-party e-commerce platforms.

Nowadays, although you can still jump to the Taobao page by clicking "View Details" in Douyin's information flow ads, according to industry insiders, the ad jump part occupies the traffic pool of Douyin's CID ads, which is different from the traffic pool of Douyin's e-commerce.

Historical experience tells us that cooperation between platforms always "makes mutually beneficial choices within a specific stage of development." Today, this logic also applies to Amazon and TikTok in overseas markets.

02 Temporary Allies

Let’s talk about the effect first. According to an official Amazon representative, “The implementation of this shopping ad model will increase the click-through rate of Amazon products by 70%, which will effectively drive the sales growth of Amazon’s related products.”

In the past, the core paid traffic model for Amazon merchants was CPC (Cost Per Click), a pay-per-click advertising model where the platform charges users based on the number of times they click on the ad. The most commonly used method among merchants is keyword payment. Users enter keywords in the platform search bar, and after the results are displayed at the bottom of the webpage, users enter the product details page through the relevant advertisement, and the platform will charge the corresponding fee.

The exposure of CPC ads is determined by bidding. For the same keyword, merchants with higher bids will get more traffic. However, according to data from mobile analytics company GWS, from April to July last year, the daily active users of Amazon's US site dropped sharply from 54 million to 46 million, a drop of 14.8%. Therefore, with the traffic ceiling of Amazon gradually showing, the internal competition of merchants placing CPC ads will not only intensify, but will also gradually lose its meaning.

Simply put, Amazon’s traffic is not enough for merchants to share. In the stock era, whether it is Amazon as a platform or merchants doing business on Amazon, the most urgent thing they want to get from external cooperation is just two words: traffic.

At this point, TikTok is undoubtedly Amazon's best choice.

In April this year, TikTok's global downloads exceeded 4.92 billion times, with more than 1.5 billion monthly active users, making it the most popular social platform for Generation Z. According to eMarketer data, about 43% of Generation Z users search for products online on TikTok, exceeding traditional product search methods such as Google or Amazon. It is estimated that by 2026, there will be 39.5 million TikTok buyers in the United States.

According to data, some foreign analysts predict that "if Amazon allocates 5% of its $10 billion annual online advertising budget to social media platforms including TikTok, it will most likely gain $1 billion in new GMV." From a strategic perspective, Rick Watson, founder and CEO of e-commerce consulting firm RMW Commerce, also said: "Amazon's move ensures that it will not miss out on new sources of future growth."

On the other hand, what can TikTok, which is also developing its own e-commerce business, gain from this cooperation? The answer is also simple - money, money that can be put in pockets and can steadily monetize traffic.

As one of the important pillars of commercialization (TikTok for Business), as early as the end of last year, foreign media Information reported that "TikTok plans to snatch advertising fees from Meta."

At the same time, according to Media Radar statistics, among the 30,000 companies that have placed advertisements on TikTok in 2023, Amazon has ranked among the top five advertisers with Apple, Disney, Comcast, and DoorDash, contributing more than US$200 million in annual revenue to TikTok's advertising business.

Now that the two parties have officially announced their cooperation, Amazon products can be traded directly within TikTok. The shorter conversion path and higher conversion efficiency will undoubtedly lead Amazon to put more money into Tiktok's basket.

But joining hands with Amazon does not mean that Tiktok has chosen to shelve or abandon its e-commerce business. Under the surface of simple advertising cooperation, TikTok may still be planning for its own "e-commerce dream".

TikTok's e-commerce performance in the European market has always been far inferior to that in the Southeast Asian market, and its e-commerce business in the North American market was not officially launched until September last year.

According to industry insiders, “The culture of Southeast Asia is closer to that of China, and the degree of e-commerce in the region is not high, so it is easier for them to accept the live streaming e-commerce and short video e-commerce models brought by TikTok. The middle class and above in European and American countries are used to purchasing goods through Google or Amazon searches, so they still regard TikTok as a social and entertainment tool rather than a trustworthy shopping platform.”

This is equivalent to saying that TikTok has a huge amount of traffic, and there are also people with purchasing power among them, but due to shopping habits or low trust in TikTok, the commercialization capabilities of some potential consumers have not been fully activated; while Amazon, as a long-established e-commerce platform in Europe and the United States, has a huge trust foundation and mature experience in merchant operations and supply chain management. From this point of view, Amazon is also the best choice for TikTok at present.

Based on the binding setting of Amazon account and TikTok account in the cooperation, TikTok has also added a channel to accurately locate potential consumers on the platform. After cultivating the shopping mentality of American users on social platforms with the help of Amazon's product system, TikTok's e-commerce business with huge traffic may gradually get on track or even take off on the spot.

Will TikTok and Amazon continue to work closely together by then? I'm afraid we need to calculate another account.

03 Towards Cross-border 3.0

Looking back, the "two-way rush" between TikTok and Amazon has actually been evident for a long time.

In 2021, the initial stage of TikTok's e-commerce was similar to the early stage of Douyin in China, adopting a "semi-closed loop model" of clicking on external links and jumping outside the app to complete transactions. However, this approach can easily divert users and traffic to outside the site, which is not very helpful for TikTok to accumulate its own consumer users. So soon, TikTok launched its own "full closed loop model" TikTok Shop.

However, as TikTok Shop's performance in the European and American markets was lower than expected, two years later, in July 2023, TikTok launched the ACCU (US cross-border self-operated) store specifically for Amazon merchants.

At that time, the requirements for ACCU stores to enter were extremely high. Merchants had to have a US business license and an annual turnover of more than 2 million US dollars on the Amazon platform. In July of this year, TikTok lowered the entry threshold for ACCU stores, but they still needed a US business license, the ability to ship locally, and a store rating greater than 4.0 on the Amazon platform and an operating time of more than 3 months.

It is not difficult to see that TikTok has always intended to attract mature merchants on the Amazon platform. This cooperation also adopted the method of "direct payment without jumping", which not only attracted Amazon merchants to initially contact TikTok, but also completed the closed loop of keeping users on its own platform.

At the same time, Amazon’s desire to build social e-commerce is well known to everyone.

As early as 2017, Amazon created an application called "Amazon Spark", which is a product similar to Instagram that encourages Amazon users to post their favorite things and share daily thoughts and pictures. However, this innovation is little known, and in 2019, with the departure of the business leader, the Spark project was abandoned.

In May 2023, Amazon tried to launch the Inspire feature in the United States. This feature supports the push of picture and video information streams to satisfy consumers' shopping experience of browsing and buying, but it also failed to make a splash.

Frustrated, Amazon began to choose to cooperate directly with social platforms Snapchat, Facebook, and Instagram. Starting at the end of 2023, users on these social platforms can purchase Amazon's products directly within the app.

One detail is that while Amazon signed a cooperation agreement with TikTok, it also signed a cooperation agreement with the photo social sharing website Pinterest.

From traditional shelf e-commerce such as Amazon to social e-commerce and content e-commerce represented by TikTok, from the frequent actions of both parties in recent years to this cooperation, it all indicates that cross-border e-commerce is moving towards the 3.0 era.

In the cross-border 1.0 era, merchants only need to put their products on the platform shelves, and users will go to the platform to find the products they want to buy according to their needs, which is the so-called "people looking for goods"; in the cross-border 2.0 era, with the increase in merchants and products, competition began to emerge. In order to let users see their products, merchants and platforms started to compete for traffic, and traffic investment became an important marketing method. This period is called "goods looking for people."

In today's 3.0 stage, "social" and "content" have become new opportunities to promote the growth of cross-border e-commerce. On the one hand, social platforms also have search functions, and users can still obtain the desired product information on the platform through keyword searches, retaining the path of "people looking for goods"; on the other hand, the content information flow of social platforms, through short videos, live broadcasts, etc., has broadened the dimensions of users' understanding of goods and improved the efficiency of "goods looking for people".

Image source: Reportlinker.com

Therefore, in summary, cross-border 3.0 actually combines the advantages of the two e-commerce models, taking "content" and "social" as the foundation, bringing new growth to the cross-border industry. According to reports, the global social e-commerce market is expected to reach approximately US$2.9 trillion by 2026, with a significant upward trend.

The game of cross-border e-commerce has been updated, and as a result, in the future, if merchants want to grab users’ attention, they will have to start “rolling content”.

However, those businesses or brands that fail to establish "content competitiveness" in a timely manner and do not have "price competitiveness" brought by supply chain advantages may be forgotten in invisible corners by increasingly younger consumers in the future.

Text｜Ah You ‍‍‍‍‍‍ Editor｜Chen Meixi