The popular video sharing platform TikTok is making significant efforts in logistics, attempting to seize a large share of the US e-commerce market by leveraging its large streaming audience.
The social media application is building a warehouse and fulfillment business network, undertaking specific tasks such as managing the inventory and delivery of a series of independent merchants selling products to a large number of TikTok fans.
TikTok is actually borrowing from Amazon. com's approach, hoping to compete directly with this e-commerce market leader through the emerging online retail field of social commerce. TikTok's idea is to handle logistics on their own, rather than relying on third-party sellers to handle order fulfillment, which will help attract more merchants to settle in TikTok Shop and win over shoppers with fast and reliable delivery services. TikTok's parent company is ByteDance, headquartered in Beijing.
But TikTok outsources its logistics business, which is different from Amazon's approach. TikTok is reaching an agreement with logistics service providers such as ShipBob and Newegg to handle inventory warehousing, sorting, packaging, and shipping of online order goods. Then, these logistics companies will place the package in their own distribution network for distribution.
Kelsey Chickering, chief analyst at market research firm Forrester Research, said that only what you can buy at TikTok Shop can demonstrate its value. She also said that if TikTok can "provide merchants and brands with a better product sales experience, making it easier for them to start selling (at least serving as the sales manager for them), then for TikTok, all it does is provide their users with a better experience because the product is better".
The popularity of TikTok has exploded in the past three years, with the number of users in the United States increasing to 150 million. One of the secrets to TikTok's success lies in its adoption of an algorithm that can push videos based on each user's needs, bringing what users may consider the most attractive content, whether it's homemade dance videos, comedy skits, or makeup tutorials.
This has spawned a self media industry composed of internet celebrities and content creators who recommend products ranging from lip gloss, clothing and accessories to home cleaning tools, providing application users with experiences similar to TV home shopping channels such as QVC and HSN. Viewers can see models and demonstrations of the product, then click on a link to purchase it through retailers.
TikTok is using TikTok Shop to allow internet celebrities to directly provide product links in their applications, thereby retaining more sales on their own platforms.
TikTok is using TikTok Shop to retain more sales on its own platform and is adding infrastructure to allow internet celebrities to directly provide product links in their applications. This move makes this social media application compete with retailers such as Amazon, Target and Wal Mart, as well as e-commerce websites Shein and Temu, which also have Chinese ancestry and are developing rapidly in the United States.
TikTok faced challenges beyond the logistics sector in establishing the TikTok Shop, including unclear regulatory prospects. Some US officials have labeled the application as a national security risk and threatened to ban it.
Experts say that TikTok must also strive to win the trust of customers, as many customers are not accustomed to entering their credit card information into social media applications in order to shop from third-party merchants.
Increasing logistics services will help TikTok stand out in the increasingly crowded US e-commerce market. A spokesperson for TikTok stated that the platform's logistics services can "provide merchants and customers with a seamless and fast delivery experience.
According to research firm Insider Intelligence, Amazon accounts for approximately 40% of the US e-commerce market. For a long time, Amazon has provided logistics services to third-party merchants through the Fulfillment by Amazon project. Amazon has established a vast network of distribution centers, using more of its own trucks and trucks for distribution, and no longer relying on carriers such as United Parcel Service and FedEx as it did in the early days.
The spokesperson did not comment on whether TikTok will eventually establish its own warehouse.
A merchant in an online clothing store in Indonesia prepares their own goods and delivers them to customers.
Third party sellers in online markets often need to balance various aspects of their business operations, from product production, product marketing, to shipping. Some businesses say this may hinder their sales growth as processing small orders is time-consuming and expensive. For small businesses on TikTok, this may pose a particular challenge; The products on TikTok may unexpectedly become popular, leading to a surge in orders.
Annie Leal, who lives in McCarran, Texas, uses TikTok to promote her "I Love Chamoy" sugar free Mexican seasoning series. Earlier this year, when TikTok Shop opened to select merchants in the United States, she joined the platform.
Recently, she started using ShipBob to complete orders placed through TikTok Shop, freeing up some of her own time. Outsourcing order fulfillment instead of self processing can incur certain costs, but Leal says this is much easier than some alternative solutions.
Leal said, "Simply put, we have considered whether to buy our own warehouse or not? Do we need employees to do this?" However, "I want to focus on those things that I feel comfortable with, that is, I love marketing, I love content creation. I love creating new products. Leave professional things to professional people to do.