Shopee Joins Forces with YouTube: Will TikTok Maintain Competitive Edge?

utheast Asia, where it has experienced exponential growth. The platform has solidified its position as the second-largest e-commerce player in the region, second only to Sea Ltd’s Shopee. Cube Asia estimates that TikTok Shop’s gross merchandise value (GMV) exceeded $17 billion in Southeast Asia last year. However, as Shopee expands its presence in the market, the question remains whether TikTok will be able to maintain its current growth trajectory and maintain its competitive position in the e-commerce landscape. What was appealing? Social commerce has been prevalent in Southeast Asia for more than a decade. However, before TikTok Shop, it was largely confined to social media and content platforms like Instagram and Facebook, where the integration of content and commerce features was suboptimal. Simon Torring, co-founder of Cube Asia, a Singapore-based e-commerce consultancy, told Inside Retail that TikTok has effectively bridged this gap by bringing content and commerce closer together, thereby improving the user experience. “Our research shows that much of the growth in TikTok Shop sales is not coming from cannibalizing other e-commerce channels, but rather from cannibalizing offline channels and new additional retail spend, indicating that consumers are finding the experience so new and fun that it expands the total online market in large retail categories on the platform,” he said. How does it work? There are a few ways retailers can host livestreamed events on TikTok Shop. According to Torring, the dominant model is for brands to offer commissions on sales to influencers through the platform’s in-app “Open Affiliate Program.” In this program, brands set commission rates for their products, which can range from a modest percentage to more than 35 percent. However, it’s worth noting that average commission rates in the fashion and beauty sectors typically fall between 8 percent and 12 percent. “Influencers can then showcase these products via live streams and short videos, and any sales generated through their links result in commission earnings for the influencers,” Torring said. He added that while there are more sophisticated engagement models, such as a “targeted affiliate plan,” where brands can propose customized commission terms to specific influencers, the open model described above has significantly transformed the region’s affiliate marketing economy due to its streamlined nature. For brands hosting their own live streams for their followers, the process can be difficult in the early stages. “It requires them to find and hire live streaming talent, which can be expensive and cumbersome, and set content and streaming guidelines that align with their brand. These guidelines include high-level strategies, specifics like the frequency of flash sales and whether hosts can raise their voices or ring a bell,” Torring said. “Live streaming is a steep learning curve for most established brands and retailers. It’s an area where many are still in “test and learn” mode. There are notable exceptions, though. L’Oréal, for example, has fully embraced live commerce in the past few years. They now operate established live commerce businesses on the TikTok store in several regional markets.” He noted that “competitive brands” in categories like fashion, beauty, and personal care are doing well in this new sales channel. Those brands that have emerged online in recent years have organizations and go-to-market strategies built specifically for social and live commerce. Potential challenges According to Torring, at its core, TikTok Shop largely mirrors the strategies and product implementations already in place by its Chinese sister app, Douyin. “Southeast Asia has proven to be a very good fit for this model because many of its core principles—like live commerce—were already thriving in the region before TikTok Shop came along,” he said. “The difference is that TikTok Shop provides a more seamless environment for combining content and commerce features in one place, which has unlocked a ton of value.” TikTok Shop, on the other hand, has yet to reach comparable levels of engagement and adoption in Western markets as it has in Southeast Asia or China. “In the US, where TikTok Shop launched last September, the situation is very different. The percentage of GMV coming from live streaming is much lower than in Southeast Asia. Instead, the ‘Shop’ tab seems to be driving significantly more sales,” Torring explained. “The UK is currently the only active market for TikTok Shop in Europe. Despite being one of the first markets to launch TikTok Shop globally in 2021, it has yet to gain significant traction.” Despite its remarkable growth trajectory in Southeast Asia, TikTok Shop still faces challenges. As the e-commerce landscape in Southeast Asia is highly competitive, TikTok Shop has to constantly innovate and adapt its strategies to maintain a competitive edge. “We saw in Indonesia last year, and with the discussions in the US this year, TikTok Shop is vulnerable to China ties and concerns about disrupting local competition in the markets it operates in,” Torring added. “That will likely continue to be the case as long as Bytedance is its parent company – whether it is justified or not.”