TikTok's E-Commerce Play: Can It Outshine Amazon's Retail Dominance?

ByteDance Ltd's TikTok is attempting to outdo Amazon.Com Inc AMZN at its own game by transforming into a burgeoning hub for e-commerce. 

Earlier this year, Scott McIntosh got an invitation to promote his phone/cup holder on TikTok, which has quickly become a popular social media app with 150 million U.S. users. 

TikTok's strategy included paying for shipping and covering discounts up to 30% while still paying full price to McIntosh for each sale. The catch was to create a multitude of product videos for the platform, Bloomberg reports.

Also Read: Is Amazon Gearing Up for a Fashion Showdown? Drastic Fee Cuts Signal a New Retail Battlefront

This venture turned out to be highly successful for McIntosh. His Cell Phone Seats gained a staggering 50 million views on TikTok, leading to a surge in orders and a record $10,000 in sales post-Cyber Monday. 

The success prompted McIntosh to increase his holiday inventory, anticipating continued growth into 2024. 

He acknowledged TikTok's unique approach to incentivizing purchases through engaging content.

TikTok has evolved from a platform known for short, entertaining videos to a significant player in setting consumer trends and e-commerce. 

In September, TikTok Shop, an ambitious project to combine the convenience of shopping on Amazon with the interactive product discovery found on social media platforms, was launched in the U.S. 

Unlike other platforms that struggle to convert viewers into buyers, TikTok's approach has been more effective, with its U.S. users spending an average of 33 hours a month on the site. In November alone, TikTok saw over 5 million new customers making purchases.

However, TikTok's journey in e-commerce is challenging. Many users view products on TikTok but buy them on platforms like Amazon. Moreover, TikTok's delivery times are longer than Amazon's quick service. 

Despite these challenges, TikTok's U.S. e-commerce operations are expanding, attracting former Amazon employees and focusing on small brands and big names such as Mondelez International and Benefit Cosmetics.

Currently, TikTok is subsidizing merchants, a temporary strategy, and maintaining merchant loyalty will be crucial to its ambition of competing with Amazon.

Meanwhile, Amazon has been courting influencers to craft numerous videos for its shopping platform to remain relevant amid intense competition.

Also Read: TikTok's Subscription Model Test - Is Ad-Free Trial A Revenue Risk?

Price Action: AMZN shares are trading higher by 0.29% at $147.90 premarket on the last check Wednesday.