The full hosting model is sweeping cross-border e-commerce. Can the first batch of TikTok Shops make money?

As major cross-border e-commerce platforms have successively launched full-hosting models, the industry's discussion on whether merchants should enter the full-hosting market has reached an unprecedented level of heat.

As early as September last year, Temu took the lead in adopting the full hosting model. In December of the same year, AliExpress also tried "full hosting". Subsequently, TikTok Shop, Lazada, Shopee and many other domestic and foreign e-commerce platforms followed suit and competed to extend olive branches to cross-border sellers.

Although the major e-commerce platforms seem to be moving in unison and promoting the "full trusteeship" model, taking on the operations previously handled by sellers, including store operations, warehousing, and distribution, etc. , different platforms have different strategies for pricing and traffic competition.

01

"Boat" full trusteeship,

Can the operational difficulties be cured?

Vic, a women's clothing giant, is a recent addition to the "full-service army".

"The model of cross-border e-commerce seems to be to move excess domestic production capacity abroad. What is inevitable is that once the clothing industry is 'rolled up', it is difficult to pursue big explosions and growth without sustainable product development, especially if you want to make a hit product to the extreme. " As an early cross-border practitioner, Vic summed up a certain repetitiveness of this industry.

Vic had experienced two failed business ventures, from home textile music pillows to jewelry auctions, and lost 5 million in total...

When she set her sights on the cross-border e-commerce market, she initially tried various cross-border e-commerce platforms by feeling her way forward, but she soon discovered that the cross-border industry was too competitive: product selection, operation, promotion, delivery, etc. all required a huge amount of her time and energy, and she was unable to focus her time on building core supply chain advantages, let alone working hard to polish her products.

Vic finally realized that he was constrained by his shortcomings in operational capabilities.

This seems to be a common problem in the cross-border e-commerce industry. Even if it is currently on the cusp of a "hot-selling product", the general post-product development capabilities are difficult to match the skyrocketing traffic and sales.

In the past, if sellers wanted to go overseas and join new platforms, they either had to find an agent or set up their own e-commerce operation team (self-operation). The threshold for going overseas was extremely high. The risks and benefits of the agent and the seller were quite unequal, and building a cross-border e-commerce operation team required a lot of time and money to train the team.

"In fact, many factory-type sellers are looking forward to the full hosting model," Vic did not hesitate to try the full hosting. As a result, as one of the first specially invited sellers, trying the TikTok Shop full hosting in February this year became a turning point for Vic to "turn the tide" in cross-border overseas expansion.

"Sales started to increase immediately the day after the products were officially put on the shelves. The first month of cooperation coincided with the Ramadan promotion in the Saudi market, with more than 80 products on the shelves and an average daily sales of more than 3,000 pieces." - This is the result of Vic's full-hosting of TikTok Shop.

Compared with the "hands-on" role of self-operated businesses, the "hands-off" role played by fully-managed cross-border e-commerce sellers seems to be more appealing.

Vic said: "TikTok Shop's fully managed model allows me to do my job as a craftsman with peace of mind and focus on supplying goods. I can focus more on polishing the goods, whether it is quality inspection and receipt of goods in the warehousing stage, pricing and listing, or promotion and traffic diversion, live broadcast operation, influencer sales, logistics and delivery, or after-sales service, payment settlement, etc., these relatively tedious links can be handed over to the platform for professional operation. "

For factories and sellers that focus on factories and light on operations and integrate industry and trade and have the ability to steadily and continuously launch and deliver new products, the implementation of TikTok Shop's full hosting will undoubtedly help them quickly enter the cross-border e-commerce field.

From self-operation to full-hosting, it is obvious that Vic has reaped the benefits of choosing the right overseas model for himself .

02How to choose a platform

Sellers’ two-question full hosting model

The disruptive "full-hosting" model has already created a huge stir.

There is a saying in the seller circle: "Newcomers get bonuses, while latecomers get shot." However, the funds and energy of enterprises are limited. Most merchants cannot be all-encompassing and supply goods to every platform. So which platform is suitable for them? [Sellers' Home] chatted with many sellers and found that their choices were influenced by the following two factors:

01Flow rate

When choosing a platform, traffic size is also a key focus for merchants.

How can you maximize the traffic of your products? Children's clothing merchant Arwin entered the TikTok Shop full hosting based on his imagination of TikTok's own traffic.

Arwin has a rich e-commerce entrepreneurial story. He opened an online store selling parent-child clothing in 2008. But after the outbreak of the COVID-19 pandemic, the situation slowly changed, and his domestic e-commerce business declined slightly.

Companies have to start learning how to change. It is always painful to get out of the comfort zone. At the end of 2018, Arwin began to try cross-border e-commerce and cooperated with SHEIN; in 2021, it completely transformed into an ODM cross-border business; in September 2022, it established Temu, and joined the TikTok Shop full hosting this year. On March 31 this year, Arwin had more than 40 products on the first day of listing on TikTok Shop, and there were sales the next day, just in time for the Ramadan promotion, which directly drove growth. 2,300 orders were sold per day, with a sales rate of 100%, which lasted for a month.

He said that his success was due firstly to TikTok Shop's testing capabilities, and secondly to TikTok Shop being the motor that activates the traffic pool.

Vic also feels the same way about the first aspect. According to Vic himself, TikTok Shop often organizes merchant training and shares with merchants. It combines the platform's recent popular topics and node trends to provide product design and development suggestions, including popular clothing elements and style recommendations.

On the other hand, unlike the "shelf" model of other platforms, users must have shopping needs before opening the APP. This scenario is accurate but relatively limited. TikTok, with 1 billion monthly active users, has a huge traffic pool. "Content e-commerce" and "shelf e-commerce" go hand in hand, like a complete shopping and entertainment center, covering four major order channels: live broadcast, short video, window display and mall, providing traffic to merchants in multiple ways and increasing the number of orders for merchants.

TikTok Shop itself is a "content e-commerce" or "interest e-commerce" , in addition to the "mall" corresponding to the shelf model. The two order-taking models with the greatest growth potential are video-based sales and live-streaming sales. TikTok itself has a huge e-commerce user base. When users are stimulated to shop after watching short videos and live-streaming content, sellers will receive orders. This is also what many merchants value most .

TikTok influencer marketing is a popular marketing method for many sellers. If you want to highlight the differentiation of products in the same category, influencer demonstrations in videos and live broadcasts are important channels to distinguish your products from other competing products.

Seller Fang started selling clothing through mainstream e-commerce platforms three years ago, with a maximum daily order volume of only more than 300 orders, and he was unable to make a profit. Last year, he entered the TikTok Shop and launched it through influencers. Currently, the daily order volume has exceeded 1,000 orders, of which more than half come from influencer marketing on TikTok. As the number of cooperating influencers continues to increase, the order volume continues to grow. Fang said: "This type of video showing the effect and material of clothing is very popular among TikTok users. The trust that influencers bring to fans can greatly increase the conversion rate of products."

At the same time, TikTok Shop’s fully hosted “shelf e-commerce” model requires sellers to only submit products and deliver them, and buyers can shop directly by clicking on the TikTok Shop button.

In the TikTok Shop mall, a prominent search box is placed at the top. The products in the mall have been classified and displayed according to categories such as clothing, beauty, and electronic products. The platform recommends popular products and products that may be sold to the corresponding consumers. This section undoubtedly allows merchants to obtain new sources of traffic in addition to live broadcasts and short videos.

Image source: TikTok Shop cross-border e-commerce

From the "content e-commerce" scenario of goods finding people to the "shelf e-commerce" dual drive of people finding goods, the promotion of sellers' sales has only increased.

02

Operation system

Of course, the fully hosted model is extremely challenging for the platform to control the details of operations.

Compared with AliExpress, Temu, and SHEIN, which have been deeply engaged in shelf e-commerce, the full-hosting model only integrates resources and sells the goods of merchants in a unified manner. The logic is reasonable. Many sellers have questioned TikTok Shop, worrying whether its full-hosting model can bear every link such as warehouse, logistics, and operation at the beginning.

Although the outside world often thinks that TikTok Shop's full hosting was just launched in May, Seller Home has learned that, in fact, TikTok Shop's Saudi Arabian market started trial operation at the beginning of this year, long before TikTok Shop officially announced the launch of the "full hosting" model, and its operation is relatively mature. At present, TikTok Shop's cross-border e-commerce full hosting model has been opened to Saudi Arabia and the United Kingdom for investment, and other countries will soon be opened.

Vic said, "TikTok Shop is interest-oriented. It is a living manifestation of the signal update of the times. It means change and opportunity. Now that we are at the forefront, we must keep up with the times."

03

Grab TikTok Shop

New opportunities for full hosting

The first batch of sellers who joined TikTok Shop’s full hosting service have already tasted the “really good” law. Categories such as clothing, home furnishings, and beauty tools are in full bloom.

A handicraft trader: "At present, TikTok Shop's fully managed business is in short supply of home decorations. Many products are not only sold out as soon as they are put on the shelves, but also sold out as soon as they are put on the shelves. In particular, categories such as decorations and artificial flowers have seen a surge in views and sales recently."

A household goods merchant in Zhejiang: "Summer is here. We have long noticed that keywords related to home cleaning and bathroom have skyrocketed on TikTok. We were previously struggling to make sales, but after the full hosting was launched, we can finally convert traffic into sales! We efficiently promoted more than 100 products within 7 days and received 1v1 professional guidance from industry managers."

Yiwu City, an integrated industrial and trade supplier that has been operating the home storage category for 11 years, has been testing the waters of cross-border e-commerce for many years and has tried many competing platforms. The number of SKUs exceeds 10,000+. After launching the TikTok Shop full-hosting business, the product was sold out on the day it was put on the shelves, and the number of orders quickly exceeded 1,000 two weeks after it was put on the shelves.

At present, TikTok Shop's full hosting has achieved certain results. In addition to the continued development of existing merchants, new merchants can create hot products by fine-tuning categories. It is reported that TikTok Shop is still opening new secondary categories. According to feedback from many sellers, hardware tools, auto parts and other categories are actively recruiting investors recently.

The full hosting model is expected to become a new trend in the future development of e-commerce . The earlier you enter the market, the bigger the pie you can get. The progress bar for 2023 has reached 50%, and the peak season in the second half of the year has begun.

Figure: TikTok Shop official marketing calendar

For the June 30 Saudi Eid al-Adha promotion (May 18-June 28), the official data released by TikTok Shop showed that TikTok Shop GMV increased by 140%, orders increased by 150%, and the number of dynamic products increased by 190%. During the promotion, the official linked several super influencers to showcase products through short videos such as dressing, explaining products, and sharing shopping experiences. There were many popular videos with millions of views, and the sales of goods exceeded 100,000 US dollars. Content e-commerce is gradually exploding.

Currently, the investment categories of TikTok Shop's fully hosted model include women's clothing, children's clothing, men's clothing, underwear and pajamas, sports and outdoor, clothing accessories, beauty and life, digital hardware, etc. Sellers who have the conditions may wish to give it a try.