TikTok North American e-commerce, rising amidst the variables

At the beginning of this year, TikTok e-commerce has attracted the interest of sellers across the country. Let’s take a look at the situation of TikTok’s North American e-commerce~

At the beginning of 2024, almost all sellers across the country showed unprecedented enthusiasm and interest in TikTok e-commerce.

At many offline TikTok-themed sales and sharing conferences, the entire venue was packed with eager people:

The general enthusiasm of everyone is based entirely on the fact that the opportunity to make money "can't wait" - although the North American TikTok Shop will not really start to grow until the second half of 2023, the "latecomer" sellers are already late. "If you join now, there will definitely be a lot more sunk costs than starting in July and August last year, almost 100 short videos of trial and error; in addition, the fixed cost of finding influencers will also be higher, requiring you to have a better eye for product selection and content creativity." said a big seller who got into the North American TikTok first.

In the past 2023, TikTok's development scale in North America, the world's largest consumer market, has completely refreshed the prosperous ecology of global short video social platforms and interest content e-commerce.

Based on the two major markets of Europe, America and Southeast Asia, TikTok's social + e-commerce dual huge traffic and capital blessing are influencing the world.

The United States is the country with the largest number of TikTok users in the world. According to demandsage data, TikTok's MAU in the United States reached more than 160 million last year, which is close to 45% of the total U.S. population. 65% of American users visit TikTok every day. This short video platform from China has become an indispensable part of the daily life of many young Americans.

The second country in terms of the number of users of the TikTok short video platform is Indonesia in Southeast Asia. The number of TikTok users in Indonesia has reached 113 million; in addition, Thailand has the highest TikTok penetration rate among Southeast Asian countries.

As a short video content platform, what challenges does TikTok face in the overseas market in 2023? What milestones and key nodes did TikTok Shop, which is based on TikTok user traffic, experience in 2023? Where will the TikTok platform and TikTok Shop go in the global market in 2024?

1. TikTok US Region——Experiences a “Critical Node” in Its Destiny in 2023

In the past 2023, TikTok's operations in the US market went through two important stages:

The North American compliance challenges peaked in March-May in the first half of the year, and the "acceleration" of the North American TikTok shop gradually emerged after August-September in the second half of the year.

From these two different stages, we can see the development and turning points of TikTok's short video platform and e-commerce in the past year.

In the first half of 2023, TikTok in the North American market was caught in the final stages of compliance and policy restrictions.

TikTok will have 1.67 billion users worldwide in 2023, and its influence in North America is close to that of traditional Western Internet social platforms such as Facebook, YouTube, and Instagram. As users' leisure time is occupied by entertainment, dance, and humorous short videos, TikTok has also become an important online social media platform in the lives of American residents.

In fact, in the past three years, from executive orders to increasingly stringent hearings, TikTok's compliance path in the United States has gone through many rounds of tug-of-war. In the first half of 2023, the "TikTok threat theory" in the United States and the corresponding local suppression of this Chinese overseas app have reached a fever pitch.

On March 23, 2023, the U.S. House of Representatives held a hearing on the TikTok short video social platform for more than five hours. During the questioning, TikTok CEO Zhou Shouzi only got about 6 minutes of complete speaking time and was in a passive state almost throughout the whole process.

Then on May 17, 2023, the U.S. state of Montana also enacted a new bill, stating that it would ban all app stores in the state from providing TikTok starting January 1, 2024. As a result, Montana became the first state in the United States to explicitly ban TikTok completely (the ban was rejected and suspended at the end of 2023).

Faced with the "panic" in North America, the world's largest market, sellers who are anxiously waiting for TikTok to quickly complete the compliance process in the United States and who are launching e-commerce platforms to make money and monetize are increasingly feeling that "the situation is unclear."

"Since July 2021, we have been calling on Douyin e-commerce players to switch to TikTok. The tone at that time was that 'the US market will account for half of TikTok's global e-commerce market.' Everyone was looking forward to the opening of TikTok e-commerce in the United States as soon as possible. But the actual time it took to obtain compliance and data took more than a year and a half, which was longer than we imagined." The seller who entered the North American TikTok e-commerce first said, "E-commerce bosses are under pressure, and many people even 'left for a short while'."

Although TikTok Shop officially launched the "full hosting model" on May 16 last year, taking a small step towards e-commerce, "few big sellers want to do full hosting. Unless you run a factory, everyone still has the dream of building a brand." A big seller in the United States told Xiaguang News. The previous semi-closed loop model was mostly used to divert traffic to third-party platforms, which did not help TikTok's own e-commerce ecosystem.

The future market forecast for TikTok's e-commerce in North America has reached a stalemate at this time.

Just when many sellers were pessimistic about the future of TikTok's North American e-commerce and were preparing to collect inventory costs and withdraw, Temu, a "catfish" that was accelerating in the overseas e-commerce market in Europe and the United States, frequently received news of "warehouse explosions". Its overseas scale continued to grow from April to July last year.

However, compared to Temu's rapid expansion in North America, TikTok's US e-commerce seems to be too cautious, and seems to be "a step behind" in terms of traffic and operations. Due to its weak initial efforts and long compliance timeline, TikTok's North American e-commerce seems to have "lost at the starting line" compared to Temu.

It was not until the end of August 2023 that the long "compliance waiting" period came to an end, and TikTok e-commerce finally "woke up" and made efforts in the United States. Subsequently, TikTok Shop was fully opened in the United States.

However, once the traffic was released, it became "out of control".

On September 12, TikTok officially cancelled its semi-closed-loop model in the United States and launched a fully closed-loop store. Shortly thereafter, TikTok Shop in the United States was fully launched, becoming a milestone in the global development of TikTok e-commerce. The number of TikTok brand stores has increased significantly, and GMV has also seen a straight-line growth. At the same time, TikTok has launched a large number of subsidy policies to support American influencers to "get involved" in the e-commerce sales trend. Many overseas brands have taken this opportunity to take off in the North American market.

After a "surge" in the second half of the year, until the day of the US "Black Friday" shopping festival, the highest single-day GMV of TikTok Shop in the US exceeded 33 million US dollars. According to FastMoss data, it is expected that by the end of 2024, TikTok's US closed-loop e-commerce data will reach 100 million US dollars per day.

"We didn't complete the market testing and compliance testing, so we didn't dare to release the traffic," an insider familiar with the situation told Xiaguang News. "By the middle of 2023, the compliance was finally completed, and we could start the closed loop. The traffic was released in large quantities purely under the algorithm adjustment, and e-commerce suddenly took off."

The rate at which North American users can access e-commerce traffic on a daily basis has increased significantly, which has directly affected TikTok's e-commerce coverage in North America. TikTok's "overspeed development" in the second half of the year has made e-commerce sellers full of imagination about TikTok's North American e-commerce.

Many players even assert that "2024 will be the year of TikTok Shop's explosion in the US". Facing the US, the world's largest consumer market, the era opportunities and key dividends brought by TikTok's content social e-commerce are rare and should not be missed.

2. “Risky” but not “dangerous”: TikTok continues to bet on Southeast Asia

Looking at the global market, apart from the turbulent changes in North America, Southeast Asia is TikTok's earliest bet and also the overseas market with extremely good performance.

Southeast Asian countries are one of the earliest overseas markets for TikTok Shop to be launched. Starting from February 2021, the first to be launched were the UK and Indonesian sites of TikTok Shop. However, compared with the "unfavorable climate" of live streaming sales in the UK, TikTok Shop has developed very smoothly in Southeast Asian countries such as Indonesia. By April-June 2022, TikTok Shop Thailand, Vietnam, the Philippines, Malaysia, Singapore and other sites have also been launched one after another, rolling up the trend of live streaming sales in Southeast Asian countries.

According to FastMoss data, many of the top 20 on TikTok's global live streaming rankings in 2023 are Southeast Asian countries, such as Indonesia and Vietnam. Indonesia alone accounts for 65% of Southeast Asia's volume, Vietnam and the Philippines each account for 10%, and Thailand accounts for 5%.

In the past year, TikTok Shop has carried out live streaming in Indonesia for categories including beauty products, 3C digital products, kitchen products, etc. Live streaming of beauty products and personal care products alone accounted for 70% of the top 20 on the list. In other Southeast Asian countries, the cumulative number of viewers of TikTok Shop live streaming rooms with outstanding performance has exceeded 100,000.

In Malaysia's live broadcast room in 2023, Muslim fashion clothing will reach thousands of households of local consumers through TikTok Shop. In the Philippines, many young people buy mobile phones and digital products through TikTok Shop live broadcast room, and the maximum number of viewers in the live broadcast room can reach tens of thousands. In Thailand and Vietnam, a large number of consumers also buy daily consumer goods through TikTok Shop live broadcast.

Southeast Asian consumers' online shopping habits have undergone tremendous changes over the past year due to the influence of TikTok e-commerce.

"TikTok is developing very rapidly in Indonesia. Brands can see results within less than a year after settling in." An Indonesian MCN practitioner told Xiaguangshe that almost no seller who wants to quickly expand the market in Indonesia will miss TikTok Shop.

Three years after its launch in Indonesia, TikTok Shop's GMV increased 7-8 times from the $600 million in the first year. However, TikTok Shop has become the "dark horse of social e-commerce" in the Indonesian market, and has also caused "squeezing" from local officials and local e-commerce companies. On September 27, 2023, the Indonesian Ministry of Trade's regulations stipulated that "social media is prohibited from being used as a sales platform for goods." On October 4, TikTok Shop Indonesia was shut down.

In the following two months, TikTok and local officials tried their best to mediate, and TikTok CEO Zhou Shouzi even flew to Indonesia to participate in the negotiations. Finally, in December 2023, on Indonesia's National Online Shopping Day, TikTok e-commerce returned to the Indonesian market by acquiring the local e-commerce platform Tokopedia. The specific plan is that TikTok's Indonesian e-commerce business will be merged with Tokopedia, an e-commerce platform under the GoTo Group, and integrated into the new "PT Tokopedia" entity.

The ban and return of TikTok e-commerce in Indonesia is a microcosm of TikTok e-commerce's situation and determination to expand in the Southeast Asian market. By reaching a cooperation with the local Internet giant GoTo, TikTok Indonesia e-commerce "brought a unique path" and embarked on a unique path of deep localization in Southeast Asia.

3. 2024: How long will TikTok’s overseas e-commerce “bonus period” last?

In 2024, TikTok, as a "world-class player" of colossal size, will be a behemoth in both content and e-commerce ecology.

According to internal information, based on the existing overseas sites, TikTok Shop will further expand its market to Latin America (such as Brazil), Europe (such as Italy, Spain, and France), Australia (Australia, New Zealand), and the Middle East in the new year.

Of course, TikTok's e-commerce in the United States is still the most popular "biggest bonus market" at the moment.

"American users already have the habit of TV shopping, and it is only a matter of time before TikTok's e-commerce business becomes popular in the United States," a TikTok seller in the United States told Xiaguang News. Since TikTok Shop opened up traffic in the United States in August 2023, many overseas brands formerly from Amazon and independent sites have quickly gained volume in TikTok Shop, with monthly sales even soaring to tens of millions (US dollars). More and more Chinese sellers are eager to join this e-commerce army.

A large number of original domestic Douyin sellers, as well as overseas sellers who have taken the lead in testing the Southeast Asian TikTok Shop, have focused their attention on the US TikTok Shop this year. For a time, the industry was in a state of confusion as practitioners were enthusiastic about it.

"We call those who are serious about TikTok overseas 'TikTok'. If you see someone talking about "TK", they must be a domestic seller who started from Douyin and is still in Shenzhen." A North American TikTok seller laughed. This is a small way for them in the industry to quickly judge whether the new e-commerce partners are experts.

At a closed-door sharing session, several major TikTok sellers in the United States came up with different answers to the question, "How long can the North American TikTok e-commerce dividend last?"

Although there are different "bonus periods" in the "different ways of playing" stages such as advertising, influencers, self-broadcasting, and Da broadcasting, for brands that join TikTok e-commerce in North America in the future, the bonuses of brand voice, influence, and user reach will continue.

From the perspective of the broad "bonus period" - that is, "the continuous dividends of all live broadcasts", the year 2024 can be seen as a period of opportunity (of course, there will be adjustments in strategy accompanying market changes during this period). However, if we look at the "narrow bonus period" - that is, the initial bonus period of "short videos + top influencers", then "there are at most 3-6 months".

"It's already difficult to break through today, and it will be even more difficult in the future." - From the current composition of TikTok's US e-commerce, more than 70% to 80% of the sales come from influencers, and only about 20% to 30% of the GMV comes from live streaming. In the coming year, the proportion of GMV brought by live streaming is expected to increase significantly, possibly to more than half.

However, TikTok's North American market is extremely special. Many industry insiders who have "tested the waters" have said that the gameplay, mentality and ideas of doing "Douyin e-commerce" in China and "TikTok e-commerce" in the United States are completely different.

First, as a short video platform, TikTok’s content influence is the most important, and the richness of the content depends on the characteristics of the creators. Most of the time, American content creators are more willing to share their lives than those in China, and they are more "down-to-earth" but also more "rough".

Secondly, due to the limitations of the development stage, brand and merchant self-broadcasting on TikTok's e-commerce in the United States is still in a relatively early stage. At the same time, the business order costs of top influencers are relatively high, and they are not very receptive to the live broadcast model, and are still in the short video promotion stage.

Third, the categories of goods sold by TikTok e-commerce in the United States are very different from those in China. Jade, jadeite and gold jewelry, which are highly accepted in China, are not accepted in the United States. On the contrary, pet products and smart home products, including smart lawn mowers, pool robots, and garden bird feeders, which have good sales in the United States, have limited demand in China.

In addition, the compliance of TikTok's e-commerce business in the United States is still an important influencing factor - "For example, the information of Douyin's influencers in China can be shared with merchants, but this is not the case in the United States. They will not give you a list of influencers because it is not compliant." In addition, unlike the cultural and language consistency in China, TikTok's e-commerce business in the United States still has the problem of "crowd dispersion" - "The Spanish-speaking area is suitable for selling low-priced products, but the population it can reach is limited."

Although TikTok Shop is the lifeline of TikTok's overseas monetization, it is only a part of the TikTok platform business. From the overall perspective of the North American market, TikTok still presents a "crushing situation" relying on the influence of its content.

Even the development of live e-commerce needs to expand more possibilities through short videos. According to the ranking of TikTok's global advertising list in 2023, advertising revenue is still the most important component. In addition to advertising business in the United States, e-commerce advertising in Indonesia, the Philippines, and Thailand also occupies an important part.

"For new merchants, the most important thing is to always be present and feel the warmth." said a seller who entered the US TikTok e-commerce in January 2023.

Author: Guo Zhaochuan WeChat public account: Xiaguang Society