TikTok, a global sensation, faces challenges with government regulations and its e-commerce efforts. Douyin, its Chinese counterpart, reached a trillion-dollar GMV in just two years, outpacing giants like Alibaba and JD. TikTok, with even greater traffic, seems to follow a similar e-commerce path, raising hopes for smooth progress. However, despite its fast growth, TikTok's e-commerce journey is far from simple. While the platform targets a GMV of $23 billion in 2023, many Chinese sellers abroad face setbacks, especially in Western markets, with low conversion rates and limited gains.
Among TikTok’s recent initiatives, the most attention-grabbing is the "TikTok Shop."
As early as October last year, TikTok Shop’s marketplace model was launched in Indonesia as a "test." After passing through Double 10 and Double 11 promotional events, TikTok officially decided in February to expand the marketplace features, rolling them out in Thailand and the Philippines, with plans to cover more Southeast Asian countries.
Now, users who open TikTok can easily find the marketplace entrance in the bottom navigation bar. Clicking on an influencer's profile "window" also leads to the TikTok Shop, which features sections like "Flash Sales," "Newcomer Zone," and "Category Recommendations."
Initially, many cross-border sellers saw TikTok merely as a new source of traffic. "Before the TikTok Shop was available, we could only place links to our own websites in the bio section of our TikTok profiles. Interested users could click the link and visit the independent site to make purchases."
However, TikTok soon began experimenting with e-commerce. In 2020, TikTok partnered with Shopify, allowing merchants to run ads with links directing users to their independent sites.
This model, though effective in driving traffic, didn't build a platform-specific e-commerce ecosystem for TikTok. Much like Douyin (Douyin is the Chinese counterpart of TikTok), TikTok eventually launched its own store: TikTok Shop.
In 2021, TikTok Shop launched in the UK and Indonesia, gradually expanding over the next two years to Thailand, Vietnam, the Philippines, Singapore, and other countries. TikTok Shop integrates advertising with sales. After businesses run ads, consumers who see the video content can directly make purchases, complete payments, and access after-sales services within the TikTok platform. This created a closed-loop e-commerce ecosystem for TikTok.
Up until this point, TikTok and Douyin’s approaches were aligned. Both platforms, after briefly driving traffic to third-party sites, began building their own internal e-commerce systems. But from launching live-streaming e-commerce to introducing the "Marketplace," TikTok’s approach began to diverge.
Although Douyin began developing its marketplace in 2021, it wasn't until May of last year that Douyin had a prominent traffic entry for its marketplace on the main page. In comparison, Douyin’s GMV (Gross Merchandise Value) in 2021 was ¥730 billion (approx. $101 billion), and in 2022, GMV exceeded ¥1 trillion (approx. $137 billion). Despite growth in total GMV, the growth rate had begun to slow down.
The launch of the "Douyin Marketplace" was based on the fact that Douyin had already established a large-scale transaction volume, and users had cultivated the habit of shopping on Douyin. The marketplace function served as a long-tail channel to further increase Douyin's GMV.
TikTok Shop, however, is taking a different approach. In 2022, TikTok’s GMV in Southeast Asia was $4.4 billion, with Indonesia showing a dramatic 493% growth. According to eMarketer, five Southeast Asian countries ranked in the top 10 for global e-commerce growth in 2022. Industry insiders believe that TikTok Shop is still in its early stages.
One is a cash cow; the other is a potential growth stock. Therefore, for industry professionals, TikTok’s launch of the marketplace is fundamentally different from Douyin’s. As TikTok faced challenges expanding e-commerce in overseas markets, launching the marketplace was seen as an effort to familiarize overseas consumers with a model they already recognize, in the hopes of cultivating consumer habits and paving the way for future market expansion.
Despite growth in Southeast Asia, TikTok Shop has faced significant challenges in Western markets. In the UK, the monthly GMV (Gross Merchandise Value) was only $24 million, while in Indonesia, it reached $200 million. Industry experts attribute the discrepancy to the maturity of Western e-commerce markets, where consumer purchasing behaviors are already well-established.
Southeast Asia’s e-commerce market is still developing, with younger consumers increasingly gaining purchasing power. TikTok’s user base aligns well with this demographic, leading to better sales data in Southeast Asia. However, many Southeast Asian consumers still view TikTok more as a social and entertainment tool than a trusted shopping platform, making conversion rates a challenge for many sellers.
Many cross-border sellers, especially those from China, have relied heavily on "guides" to operate on platforms like Amazon or independent sites. However, these strategies are becoming less effective as the cross-border e-commerce landscape evolves. Sellers flocking to TikTok hoping for quick growth are often disappointed as the platform itself has not yet developed a comprehensive "guide" for success.
While TikTok has plenty of traffic, it lacks the ability to target that traffic precisely. Unlike Douyin, which has accumulated a wealth of user behavior data in China, TikTok struggles to gather and leverage data overseas due to regulatory concerns and consumer privacy issues. These challenges hinder TikTok's ability to effectively promote interest-based e-commerce in Western markets.
Early management of TikTok’s cross-border e-commerce operations was chaotic, with frequent changes to official policies. Sellers reported inconsistent delivery time assessments and unclear rules regarding product categories. For instance, a TikTok Shop seller in the UK experienced unexpected changes when TikTok removed the best-performing product category without notice, highlighting the platform's lack of consistency.
Many sellers are grappling with low conversion rates on TikTok Shop, exacerbated by poor platform management. While TikTok tries to regulate and prevent fraudulent activities, there is still a lack of clear rules and reliable data to identify high-quality sellers. This confusion is driving away serious sellers while providing opportunities for opportunistic sellers who simply want to cash in on short-term gains.
One cross-border seller shared that most content on TikTok Shop is not original, as the investment required for creating original content is too high. Repurposed videos are a low-cost alternative, even if the conversion rates are low. Smaller businesses struggle to produce high-quality content, while larger brands remain hesitant to fully invest in TikTok as a sales channel, viewing it more as a marketing tool.
Despite TikTok’s efforts to attract high-quality sellers, the platform faces a gap between its ambitions and the reality of attracting and retaining sellers who can deliver original, high-quality content. TikTok needs to bridge this gap to build a sustainable e-commerce ecosystem, but it faces ongoing challenges in both platform management and market readiness.
Recently, several Southeast Asian countries have been cracking down on e-commerce platforms like Shopee and Lazada. Regulatory bodies have imposed fines and taxes on counterfeit and substandard products, and have also criticized these platforms in state-run media. A seasoned industry professional told Geek Park, "Counterfeit goods have always been a serious issue in Southeast Asia, especially in Vietnam. It's high time TikTok took action."
Improving product quality and regulating operations are critical tasks for TikTok. In January this year, TikTok launched its "Professional Operations" initiative, encouraging sellers to specialize by reducing their product categories to just one. The platform also announced that products outside of a seller's primary category would not be approved for listing. Shortly after, TikTok rolled out the "Reputation Management" incentive program, known as the "Polaris" initiative, aimed at attracting high-quality sellers to TikTok's e-commerce platform.
Compared to the somewhat abstract initiatives mentioned above, the launch of TikTok Shop’s marketplace feature is a more concrete solution, offering multiple benefits. It not only raises the entry barrier for sellers, helping to regulate the commercial ecosystem, but also provides a new way to address the low conversion rates of live-streaming sales.
An industry insider told Geek Park, "First, the threshold for entering TikTok Shop is higher than opening a regular store. Sellers need to provide more detailed qualifications and pay a higher deposit. Second, the marketplace feature displays products and prices directly on the page, much like shelf-based e-commerce, which is more familiar to overseas consumers. This model can boost sales while reducing the content management burden on sellers, helping them overcome conversion rate challenges and increase profits."
The marketplace feature's contribution to sales has already been proven. Last October, TikTok quietly tested the marketplace feature in Indonesia. During the "Double 10" promotional period, TikTok reported that the seller Dunia Fashion88 received more than 5 million views on TikTok Shop’s marketplace, with the marketplace contributing 34.4% of their total sales.
Industry professionals noted, "For TikTok, e-commerce cannot thrive without quality sellers. The fact that the marketplace boosts sales has already been proven, which may convince sellers who were considering leaving to stay. The platform can also use this to attract more high-quality merchants who are still on the fence."
Looking back, TikTok didn’t rush to attract sellers in the early stages of its e-commerce journey. In 2020, the COVID-19 pandemic led to a boom in cross-border trade, and many new cross-border sellers emerged. For example, Amazon, a well-established e-commerce platform, reported that 3,500 new sellers joined every month in 2020, with cross-border sellers increasing by 1.3 million that year.
However, the good times didn’t last long. In 2021, Amazon implemented a crackdown on Chinese cross-border sellers, with over 50,000 accounts being suspended, resulting in industry losses of over 100 billion yuan. Small and medium-sized sellers, who were already vulnerable to risks, found themselves in dangerous situations, such as product backlogs and broken cash flows, once their accounts were banned.
As a result, TikTok became a lifeline for many of these sellers and a new opportunity for opportunistic traders. Both the platform and the sellers were eager to replicate the success of Douyin (the Chinese version of TikTok), but overseas conditions weren’t yet mature. This created a "mutual rush" leading to "mutual disappointment."
Today, TikTok's frequent moves appear to be a catch-up strategy. The saying "the platform that can truly change consumer habits will dominate the future" holds true, but before TikTok can change overseas consumers’ habits, it needs to focus on improving seller quality and strengthening its supply chain, logistics, and other operational capabilities.
Compared to the "blindly charging forward" approach of the past two years, TikTok is now attempting to move beyond its early "Wild West" phase and into the next stage of its e-commerce journey.
TikTok’s e-commerce expansion, while promising, has faced its fair share of challenges. In Southeast Asia, its marketplace is gaining traction, but in Western markets, TikTok Shop has struggled to meet expectations. Sellers, especially those who rely on outdated strategies, are facing tough times with low conversion rates and operational difficulties. Despite its immense traffic and potential, TikTok needs to refine its platform and adapt to local consumer behavior. The platform's future in e-commerce will depend on its ability to improve seller experience, enhance targeting, and overcome regulatory hurdles.
Why are TikTok sellers losing money?
Many TikTok sellers are experiencing low conversion rates, largely due to ineffective strategies, a lack of market maturity, and platform issues like unclear policies.
What is TikTok Shop?
TikTok Shop is the platform’s integrated e-commerce feature, allowing businesses to sell directly through TikTok, combining ads and sales into a closed-loop system.
How does TikTok’s e-commerce compare to Douyin’s?
While Douyin has already developed a mature marketplace model, TikTok is still in the early stages of building its e-commerce ecosystem, especially in Western markets.
Why is TikTok struggling in Western markets?
TikTok’s e-commerce model is still unfamiliar to many Western consumers, and regulatory challenges, data privacy concerns, and low adoption rates hinder its growth.
What does the future hold for TikTok e-commerce?
TikTok must refine its marketplace features, improve targeting capabilities, and adapt to local markets to achieve long-term success in global e-commerce.
