TikTok, a short-video social platform under ByteDance, made its debut in May 2017 and has since become a global phenomenon with over 1 billion active users worldwide.
As of March 2023, it boasts 150 million monthly active users in the United States alone. The app's downloads reached a staggering 3.5 billion in 2023, marking a remarkable 79.1% growth since 2020, with the peak occurring in 2022. In Q1 2023, TikTok generated a revenue of USD 24.75 billion, projected to reach USD 94.01 billion by the end of 2022. While leading in the social media app space, surpassing competitors like Twitter and Snapchat, TikTok continues to trail behind Facebook and YouTube.
In 2023, TikTok's e-commerce platform, TikTok Shop, witnessed comprehensive expansion. Starting from February, it progressively opened up cross-border e-commerce in Southeast Asian regions such as Thailand, Malaysia, Vietnam, the Philippines, and Singapore. In August, there was a unified adjustment with reduced deposits. In April, local shops in the United States were opened, followed by the opening of cross-border small shops in October. Additionally, TikTok strengthened its overseas e-commerce position by acquiring Indonesia's local e-commerce giant, Tokopedia, under GoTo. Rumors suggest that TikTok will gradually launch small shops in Brazil, Spain, France, Italy, Australia, New Zealand, and other sites after the new year, reshaping the global e-commerce landscape.
Currently, TikTok faces robust competition in North America from the well-established supply chains of its siblings, Shein and Temu. Both have garnered a substantial user base through cost-effective marketing strategies, with TikTok Shop still in its early stages in North America. Nevertheless, TikTok maintains a significant lead in terms of user traffic and benefits from its inherent advantages in app-driven engagement. Originating from short-form videos, TikTok provides a more effective platform for content and ad placements, posing considerable pressure on Shein and Temu.
According to Bloomberg reports, TikTok aims to expand its U.S. e-commerce business tenfold by 2024, reaching USD 17.5 billion. The developed social network environment and substantial demand for cost-effective products among U.S. consumers make TikTok in the U.S. a potential major trend in 2024.
（TikTok's Los Angeles Headquarters; Image from "GA Global Architecture"）
Black Friday Entry: TikTok Gains Momentum in the U.S. Market
TikTok Shop strategically entered the U.S. market for the first time during last year's 'Black Friday,' the most lucrative promotional period.
The promotional campaign, running from October 27 to November 30, marked TikTok Shop's largest annual event, gathering resources from the U.S., the U.K., Saudi Arabia, and other countries. It employed a dual model of 'Content + Shelves,' allowing both self-operated and fully hosted merchants to participate, offering substantial discounts, prominent placements, and increased traffic. Starting two weeks ahead of Amazon, discounts reached up to 60%, with orders over USD 100 enjoying discounts of up to 50%.
This new model and promotional approach led to remarkable transaction rates. Various metrics for TikTok Shop hit record highs, with EchoTik data revealing a continuous upward trend in the U.S. e-commerce GMV since October. In the week of Black Friday, the total GMV reached a historic high of USD 61.2 million, marking a 131% MoM increase. The highest single-day orders peaked at USD 17.1 million, showcasing the significant impact of the mega promotion on TikTok Shop's commercialization in the U.S.
During this event, top-selling categories remained in skincare, beauty, and women's clothing. According to the 'TikTok Shop U.S. Q3 Development Trend Report,' most items in the top 10 selling women's clothing stores had an average price range of USD 30-USD 50. The best-selling product types included basic clothing and denim apparel, such as denim pants, solid color tank tops, and solid color jumpsuits. Unlike Shein and Temu, which focus on low-cost product promotions, TikTok Shop also achieved substantial sales in fitness equipment and large furniture.
TikTok has witnessed rapid user growth in the U.S., becoming a major new media social platform. TikTok Shop's entry into the higher purchasing power U.S. market has fully activated the overseas short video and influencer-driven e-commerce ecosystem. Many brands are leveraging collaborations with creators to boost seasonal sales. Research confirms that TikTok Shop is the preferred platform for many brands when entering social commerce, followed by Instagram and Amazon Live. Data shows that brands joining TikTok Shop have witnessed significant sales growth. For instance, toy brand Educational Insights achieved sales growth of 300% to 400% upon joining, and Trio Beauty saw a 525% increase in order volume on Black Friday compared to the previous month, with 44% of sales from video content, 28% from live broadcasts, and another 28% from product detail pages.
In the future, more brands are likely to actively establish their presence on TikTok in the U.S., pioneering new media marketing. For TikTok, excelling in U.S. e-commerce holds crucial strategic significance, aiming to achieve ambitious GMV targets: expanding its U.S. e-commerce business tenfold by 2024, reaching USD 17.5 billion.
Opportunities and Challenges for TikTok in the U.S. Market
Will TikTok in the U.S. Be the Biggest Trend in 2024? The Answer is Not Quite.
Facing intense competition from U.S. new media platforms, TikTok undoubtedly holds an absolute leading position. With over 1 billion monthly active users, averaging a monthly usage time of 19.6 hours per user, it has completely disrupted the media consumption habits of American youth.
TikTok's unique advantage lies in its powerful algorithm recommendation system, which can accurately analyze each user's preferences and push interesting short video content, forming a positive feedback loop. The high user stickiness provides businesses with a massive creative platform that is semantically open and highly active. Combined with TikTok's simple creation tools, U.S. users can easily produce locally flavored content with zero barriers. These advantages make it a "traffic treasure trove" for businesses going global, where new products can quickly generate tens of thousands of sales. As cross-border e-commerce is shifting towards independent platforms, sellers entering this track early mean they can enjoy substantial market dividends sooner. Utilizing TikTok's channel for direct monetization is possible as long as there are products.
Looking ahead to 2024, the TikTok user base will continue to have an open-minded view, global awareness, and video content guiding different countries' cultures and trends. The international dissemination platform provides traffic that is a thousand times greater than Douyin, offering an excellent communication stage for going global and international brands. The key is for brands to seize this opportunity and create creative content. As long as it's eye-catching and interesting, TikTok can reach more potential users, effectively increasing brand awareness and sales performance in the U.S. market. TikTok Live is also an accelerator for growth. By collaborating with influencers, brands can better disseminate diverse product features to young people.
However, even standing on the trend, TikTok's "road to the U.S." faces numerous challenges.
Firstly, TikTok Shop has set high thresholds for full-trust and self-operated models for cross-border sellers. Full-trust sellers are required to be stable factory-type enterprises with a stable supply chain, while self-operated sellers must have an annual sales volume exceeding $2 million. Currently, TikTok Shop is in the targeted invitation stage. It's evident that TikTok Shop has set clear boundaries in positioning compared to Temu's zero-threshold store opening standards. For product quality and logistics chain reasons, TikTok Shop chooses more mature brands and sellers with accumulated cross-border trade. Additionally, TikTok Shop requires local stocking, shipping from the U.S., and investigates virtual I-warehouses. In terms of store registration, strict local audits, including facial recognition, make it difficult for domestic sellers to take advantage.
This is TikTok's means of meeting local operationalization and ensuring consumer experience, leading to higher operating costs and strict admission rules, making it challenging for Chinese businesses to enter the U.S. on a large scale. According to EchoTik statistics, in October this year, the number of TikTok Shop U.S. stores with sales records reached 30,000 (the number of submitted stores for entry reached a staggering 250,000). However, according to industry insiders in TikTok's overseas e-commerce, the current number of Chinese sellers in TikTok's U.S. store is less than 10,000.
Relatedly, TikTok Shop has high compliance requirements. In the year-end wave of store closures in the U.S., reasons included but were not limited to empty parcels, virtual warehouses, non-compliant store registration information, brushing orders, 48-minute violations, subsidy wool, selling counterfeit goods, and inactive stores. This is similar to the wave of store closures experienced by Amazon in 2021 and 2022, highlighting compliance as the guideline for cross-border e-commerce.
Additionally, to offset the losses from providing subsidies to sellers, TikTok informed platform sellers on January 3 that it would increase the commission on sales through its app. In the coming months, the sales commission for most products will gradually increase from the current 2% to 8%, reaching levels similar to Shein (8%-12%) and Temu (6%-10%). Furthermore, TikTok has started to reduce subsidies for sellers on the app, with some promotions only applying to popular products. This move is another significant source of revenue for TikTok, but it will also reduce its appeal to sellers.
（Screenshot of TikTok Shop announcing an increase in sales commission rates, image from the internet）
Breaking through with compelling narratives
In the face of a highly competitive market, TikTok Shop is not only competing for merchants and users with e-commerce platforms like Amazon, AliExpress, Shein, and Temu, but also contending for traffic with traditional social platforms like Facebook and Meta. Currently, Temu, the top e-commerce platform in North America, experienced a substantial increase in GMV in 2023, with third-quarter sales surpassing 5 billion USD. In comparison, TikTok Shop is still in its early stages in the United States.
For more information about Temu, please refer to the in-depth article by EqualOcean: "Temu Unleashed: A Journey of Skepticism, Revelation, and the Quest to Redefine E-commerce"
Southeast Asia, with a population age structure similar to that of China, is more likely to replicate the success of TikTok's e-commerce model. However, in mature economic systems like Europe and the United States, adapting and introducing short video shopping to overseas consumers who have long relied on official websites and have a low e-commerce penetration rate pose a challenge for TikTok. How can TikTok break through and lead the new trend in e-commerce in North America as a short video platform?
The answer lies in short videos and content.
In China, video content creation platforms like Bilibili, Xiaohongshu, Douyin (TikTok), and Kuaishou rely on content-driven strategies and collaboration with influencers to actively embrace e-commerce. This trend reflects the current direction of social platforms moving towards e-commerce. Constantly optimizing short video content, introducing interactive e-commerce features, and personalized recommendations are crucial for capturing user engagement. Collaborating with e-commerce by embedding shopping functionalities directly into short videos, allowing one-click seamless transactions, is a common practice.
Earlier this year, TikTok officially released its fourth annual trend prediction report, "What's Next Trend Report 2024," and issued a new call to advertisers: dare to try, break the mold.
The report highlighted three major trends: Curiosity Peaked, Storytelling Unhinged, and Bridging the Trust Gap. These trend declarations provide answers on how to seize marketing opportunities on TikTok, leverage platform and traffic advantages, and advance in e-commerce.
By guiding users' curiosity and interests on the platform, TikTok helps them discover unknown perspectives in life, sparking new possibilities. Similar to promoting products, only by seeing and experiencing through videos can users truly understand what they want. In other words, TikTok's videos have the power to "create" new demands through endless possibilities.
Simultaneously, various voices, methods, and themes are disrupting traditional narratives, as seen in the deepening impact of live streaming on product sales. TikTok has the potential to overturn global shopping perceptions, just like it did in the domestic market. Videos, as the clearest and most authentic means of communication and marketing, accelerate brand transparency and showcase excellent performance, helping brands lead social change. According to relevant data, after seeing advertisements on TikTok, audience trust in brands increased by 41%, loyalty increased by 31%, and perceived brand alignment with individual preferences increased by 33%.
According to a previous survey initiated by EqualOcean, among the four leading players in China's cross-border e-commerce known as the "Four Little Dragons" – Temu, Shein, Alibaba International Digital Business, and TikTok Shop – TikTok Shop and Temu are generally considered the "top two dragons." They have gained widespread recognition, offering significant business opportunities and growth potential for sellers.
Conclusion
As more Chinese brands expanding overseas optimize and establish additional supply chains, they will actively seize the TikTok dividends in the American market. However, the specific prospects of this dividend, whether it be the high threshold for entry, the heavy operational costs of local stocking requirements, or the inherent high competitiveness and uncertainty of the market, still raise questions.
Nevertheless, with the continued expansion of TikTok's loyal user base in the American market as the platform develops, the business opportunities within it remain limitless. It is a trend, but the direction matters. By aligning with local cultural tones, utilizing the unique advantage of audio-visual storytelling, expanding product categories, improving quality, creating compelling stories, and discovering value, TikTok still has great potential.
This article is the first in the "EqualOcean Global Benchmark Enterprise - ByteDance" series, and more insights will be released in subsequent articles. Stay tuned.