A TikTok ban could hurt Amazon sellers looking for alternatives

In March The US House of Representatives overwhelmingly passed a bill that could force ByteDance to divest TikTok or face a ban from US app stores. Much of the discussion and debate on the topic has centered around U.S. data security and speech rights, but the potential move also highlights something else: TikTok is increasingly focused on e-commerce, but the interplay of tech giants and geopolitics is putting pressure on smaller sellers.

Over the past few months, sellers – many of them from China – looking for an alternative to Amazon have flocked to TikTok to sell clothes, cosmetics, electronics and many other products to American buyers through TikTok Shop. In interviews with TechCrunch, sellers in Shenzhen – a Chinese megacity that is a major trading hub for Amazon sellers – said they felt a collective sense of frustration over rising geopolitical tensions and “helplessness” over a potential TikTok ban.

“The situation is not under our control,” a retailer specializing in maternity and children’s products told TechCrunch. “It’s just hard to know how the situation will develop.” Because existing supply chains are difficult to shift, “we just have to play it by ear.” (The sellers asked to remain anonymous due to political sensitivity.)

The TikTok Store officially launched in September 2023 and already serves 200,000 sellers. However, since then, no updated data has been released on how many sellers are currently on the platform, how much products are sold there, or how much is being sold elsewhere (and where else that might be).

However, research by Jungle Scout, a data analytics provider for Amazon, gives some idea of ​​TikTok’s impact on e-commerce. It found that 20% of Amazon sellers, brands and companies plan to expand to TikTok Shop this year. Before the current political backlash intensified, ByteDance reportedly projected that it had the potential to grow its U.S. e-commerce business tenfold this year to $17.5 billion.

TikTok isn’t the only platform on the list of retailers looking for more channels beyond Amazon to expand their customer base. Its growth is part of a larger shift we’re seeing in alternative marketplaces like Temu, attracting more attention not only from buyers but also from Chinese exporters and e-commerce sellers. Amazon is apparently paying attention to this, which is another sign that alternatives are gaining popularity.

TikTok did not immediately respond to a request for comment.

A new way to sell and buy

TikTok has been trying to grow its e-commerce business since its U.S. launch last September.

The app is known – or infamous, depending on who you talk to – for tightly controlling what content is shared with whom. The TikTok store also has a heavy dose of curation.

Unlike Temu, known for its seas of cheap white-label products sourced from Chinese factories and sold directly to U.S. consumers, TikTok’s strategy is to promote and highlight more branded goods, making it a more direct competitor to Amazon.

TikTok is also trying to attract sellers with more traditional grants. According to reports, in order to encourage sellers to sell goods at a significant discount during the recent Black Friday sale, TikTok gave grants to these sellers to reduce their prices by up to 50%.

Incentives and algorithms aside, sellers were interested in selling through the app simply because TikTok’s short-video platform generates massive engagement. According to a survey by Tabcut, a Chinese company that monitors TikTok Shop performance, nearly 70% of sellers reported year-over-year sales growth in the first 11 months of 2023.

This is also borne out by consumer behavior, where influencer-recommended products continue to grow in popularity, particularly among desirable younger consumers.

According to Jungle Scout, nearly 20% of consumers started searching for products on TikTok in the first quarter of 2023, up 44% from the previous year. While 56% of all consumers still preferred to start their product search on Amazon, 40% of Gen Zers preferred TikTok search engine over Google.

According to Pew Research, the high concentration of young buyers is not surprising considering that 52% of TikTok users in the U.S. are between the ages of 18 and 34. TikTok has the potential to change the way younger generations of Americans shop online.

In addition to relying on its momentum, TikTok revolves around the media to convey its message.

Earlier this month, commercial research firm Oxford Economics released a report on TikTok’s impact on the U.S. small and medium-sized business (SMB) sector. It was funded by TikTok and, perhaps unsurprisingly, provided a clear endorsement of TikTok’s economic impact: it was estimated that presence on the platform (either through advertising or simply marketing through accounts) led to revenues of $14.7 billion for 7 million small and medium-sized businesses in the US that use it.

Amazon competition?

TikTok appears to be serious about entering e-commerce, but the situation is still in flux. On one hand, the company – even in the face of a potential U.S. sales ban or forced sale – continues to roll out new e-commerce features, such as a new video shopping format that was unveiled at a conference this month. On the other hand, it modifies or enforces seller policies seemingly on the fly, trying to find a way to thrive in a particularly glaring spotlight.

“The internal management of TikTok (the store) is a bit chaotic at the moment. It’s a new platform, so it hasn’t started oppressing sellers, but the rules are still changing,” said a lamp seller who has been selling on Amazon since mid-2010.

One of these principles seems to be related to what algorithms get to consumers. Sellers outside China say TikTok’s U.S. store has stepped up efforts in recent months to prioritize U.S. stores over foreign ones. Sellers tell TechCrunch this has led to the creation of black market “agents” – parties that intermediate transactions between foreign sellers and U.S. residents, who in turn set up TikTok stores that appear to be U.S.-owned but are actually run by foreign merchants.

Retailers are eager to jump over these hurdles to grow their user touchpoints and diversify their channels as one giant emerges after another.

“Margins are shrinking on Amazon and competition is getting fiercer because of Temu, so TikTok gives us another option,” the lamp seller said.

To assess TikTok’s impact on Amazon, “we need to understand the entire U.S. retail market,” said Richard Xu, a partner at Starting Gate Fund, which invests in cross-border retail solutions between China and the U.S.

According to the Department of Commerce, e-commerce accounts for about 15% of U.S. retail, so “if we’re just talking about the small share of the e-commerce sector on the Internet, there’s not much to discuss,” Xu suggested.

However, if your TikTok Shop strategy is primarily focused on bringing offline businesses online for the first time, this could be a very big move. “(Using) live e-commerce to enable small shops and offline stores to participate, the potential is quite significant.”

In any case, while 15% seems small, the number is still significant – $285.2 billion – so the potential for TikTok Shop is enormous, even if it only captures a small slice of the existing e-commerce pie.

Juozas Kaziukenas, founder of the Marketplace Pulse analytics company, doubts whether TikTok will ever replace Amazon. “It doesn’t provide a wide range of choice and fulfillment, and Western customers are accustomed to search engine-driven e-commerce,” he said. “But many people spend many hours every day using TikTok, so sometimes they will shop on it.”

“In the United States and other Western countries, shopping apps have developed in parallel with entertainment or connectivity apps such as social media. We are used to downloading different things from different applications rather than doing everything in one place,” he added.

“Today, social apps like TikTok are trying to figure out shopping opportunities before retailers like Amazon tackle social (e.g. through Amazon Inspire). However, the status quo of different applications serving different needs remains unchanged.”