Traffic explodes, and sellers flock to TikTok

“The data empire is quietly growing new branches.”

On January 25, at TikTok's Los Angeles headquarters, after attending the Shop investment conference, Louis, who is engaged in foreign trade business, expressed his feelings on WeChat Moments.

Louis told the 21CBR reporter that TikTok Shop is vigorously supporting sellers and providing traffic subsidies, which is very generous.

For example, merchants will receive half-postage or full-postage subsidies, and the postage price across the United States is about US$5-10 per pound. "Compared with other platforms at this stage, the intensity is very strong," Louis said bluntly.

Also in January, Yang Chao attended the "Amazon Sellers Breaking Through TikTok" forum, where he deeply felt Zhulang's enthusiasm.

"Many sellers crowded in the corridors and aisles to listen." He told reporters. (500+ communities are waiting for you at the end of the article)

Photo provided by the interviewee

TikTok is steadily advancing its e-commerce business. It has tested its Shop and live streaming businesses in Southeast Asia and has also taken action in North America.

It is reported that this year, TikTok's e-commerce GMV target is US$50 billion, about RMB 360 billion, more than double the US$20 billion last year.

Now, Douyin's GMV has exceeded 2 trillion yuan, and TikTok is copying the same model, first monetizing with advertising, then focusing on e-commerce to build a B-side commercial ecosystem.

TikTok has strong potential and a large overseas market. Many sellers believe that they must catch up with this trend and receive the "flooding wealth."

Growing quietly

Last September, TikTok Shop was quietly launched in the United States, allowing users to purchase tagged products directly from videos and live broadcasts in the "For You" dynamic.

The "shop partner" set up for sellers means that Shop pays a third party, and the intermediary agency guides sellers to open stores on Shop. Similar services on Amazon require sellers to pay.

Louis mentioned that Shop has hired many Chinese people who have lived in the United States for many years. They have no language barriers and are familiar with the American way of doing things.

"After meeting them, I found that they are all elite soldiers and their configuration is no worse than Amazon's."

Louis and his seller friends have opened stores on Shop, and they think they can make a fortune. "TikTok has a high premium and brings its own traffic."

He did some calculations and found that a product that costs 10 yuan in China is sold for about 30 yuan.

It can be sold for $30 on TikTok. After deducting the costs of freight, warehousing, etc., the gross profit is about $13, equivalent to RMB 90, which is 3-4 times that in China.

People familiar with the matter revealed that TikTok may launch the "FBT" service at the end of the first quarter or the beginning of the second quarter of this year.

This service is similar to Amazon's "FBA", that is, the seller puts the goods in the collection warehouse in advance, and Amazon will ship them on your behalf. After deducting the logistics, warehousing and other costs, Amazon will share the profits with the seller.

Amazon warehouse source: Internet

"We will most likely look for (a warehouse) in Ontario, which has the best warehousing resources in Southern California." Andrew has several warehouses in the local area, and TikTok was interested in renting them.

He introduced that the largest cargo airport in the western United States was built in Ontario. In recent years, the city has also flattened a lot of farmland to build factories and warehouses, and "the warehouse prices are also advantageous."

In the coming months, TikTok will increase its U.S. in-app sales commission from 2% and cut some subsidies for sellers. Most commissions will be raised to 6% on April 1 and eventually to 8% in July.

It is hard to say how much TikTok can earn from Shop, but with traffic that other platforms envy, it would be a waste not to engage in e-commerce.

For merchants and creators, TikTok e-commerce has launched the "TikTok Fulfillment Program" to help merchants store, select, package and deliver goods.

In terms of product selection, TikTok's main consumer group is under 30 years old, and the average order value of most products does not exceed US$60. Therefore, Shop recommends that sellers launch products with a unit price of US$20-60.

At the same time, TikTok is working with third parties to develop a secure payment system.

It emphasizes on its official website that U.S. user data and payment information are stored in the United States and managed by USDS (U.S. Data Security Team), "providing a safe and reliable environment for users to shop with confidence."

Step carefully

The American Shop mall is particularly "harsh" to sellers.

Currently, the platform recruits investors by invitation and is only open to U.S. citizens, green card residents, and large sellers on Amazon with a sales volume of $2 million. A legal person can open a maximum of five stores.

During the review, sellers need to submit the company's water, electricity, and gas bills, tax records, warehouse lease contracts in the U.S., etc. Shop will conduct multiple video inspections of the company and warehouse. If the store fails, it will be blocked.

Registration Page

After the store is opened, once the product is sold out, the seller must immediately remove the link. If the store does not ship the product within 72 hours after the user places an order, the store will be deducted points.

It is best to start selling products immediately after the online store is opened. If it is idle for more than two months, the authorities may close the store.

"This is also the issue that sellers are most concerned about today," said Louis.

As a sales channel, Amazon has moderate traffic, and sellers prepare inventory based on past data; TikTok is a traffic platform, and it is difficult for sellers to accurately predict the traffic brought by different bloggers and videos.

When it comes to stocking up, sellers are caught in a dilemma - if sales are hot, they won’t be able to get more goods, wasting traffic; if sales are not good, the goods they prepared in advance in the US warehouse will be a waste of money, which is too risky.

"The delivery time reserved for sellers is very short, which actually prevents sellers from shipping from China after receiving orders."

The enthusiasm of sellers to open stores cannot be stopped. Reporters learned that many domestic buyers also look for friends with status in the United States to help them open stores.

"Shop will most likely be successful in the United States, and everyone is looking forward to how big it can become," said Louis.

Launching Shop service in the United States is called a "risk that cannot be lost."

Among TikTok's 1 billion monthly active users, there are more than 150 million users in the United States, which is close to 45% of the total U.S. population. If we are not careful, it will affect the development of TikTok in other countries.

The management chose to test the waters in Southeast Asia and enter the US market after accumulating sufficient experience in multiple countries.

In 2021, TikTok Shop will be open to local Indonesian merchants and users.

Merchants recommend products to users through short videos, live broadcasts, product displays on homepages and other functions; influencers cooperate with merchants, use their personal influence to recommend products, and obtain sales shares or cooperation profits.

The following year, the model was replicated in Singapore, Malaysia, Indonesia, the Philippines, Vietnam and Thailand.

Data from The Information shows that TikTok Shop's GMV in the Southeast Asian market reached US$4.4 billion in 2022, and the target for 2023 is US$12 billion.

Copy Live

Since the beginning of this year, leading domestic live broadcast rooms have teamed up with TikTok to actively promote overseas live broadcast plans.

In mid-January, Xiao Yangge teamed up with TikTok Singapore’s local influencer to top the Singapore live broadcast GMV list.

Its parent company, Three Sheep, adopts the same strategy as its domestic counterparts. The main account teams up with local influencers to promote products, and opens up long video authorization on the platform to third-party editing and secondary creation to promote products.

Oriental Selection has also released a large number of TikTok-related positions, such as operations managers, business managers, overseas store operations, etc.

A large number of MCN agencies have begun to emerge in Southeast Asia like mushrooms after a rain.

"The live streaming categories in Southeast Asia are mainly 3C and beauty products." Leo, who works for an MCN in Southeast Asia, told reporters.

Since last year, more and more domestic inspection teams have gone to Thailand, and Leo receives 2-3 groups almost every month.

They are concerned about the qualifications of domestic products entering Thailand, and they also understand the consumption habits and levels of local people, including the situation of existing competing products.

TikTok has a positive attitude towards this live broadcast test field. TikTok partner will contact third-party agencies for merchants and anchors to solve shooting and editing problems and provide support in terms of traffic.

For MCN, TikTok issues traffic coupons that can be deducted from cash after the organization completes multi-dimensional assessments such as live streaming, sales volume, and support for influencers. At the same time, it holds multiple training sessions on practical operations such as "how to place advertisements" and "how to shoot videos."

"There is no mandatory requirement to cut ties with the domestic market, but the allocation of resources such as traffic subsidies is more inclined towards local businesses." Leo mentioned that the Thai TikTok team is highly localized.

Fastmoss predicts that by the middle of this year, TikTok's single-day live streaming GMV in the Southeast Asian market will exceed US$100 million.

"The United States will try live streaming this year, but the focus will still be on Shop," Louis told reporters.

TikTok in Los Angeles Source: Respondent

Americans have not yet developed the habit of watching live shopping, so it is not easy to replicate.

Ben has lived in the US for many years and often watches streaming media. "My friends are all like this, spending 1/3 of their time on YouTube, 1/3 on Twitter, and the rest of their time playing games and singing, leaving them with no time to spend on live streaming."

Perhaps the more important reason is that American anchors are not good at "making things happen".

“American bloggers mainly edit videos carefully, and they don’t know what to say during live broadcasts, so it’s easy for them to fail. They also don’t like to be restricted by MCN agencies in terms of style.”

Ben commented, "It will be difficult to achieve this in at least the next one or two years. It will take a long time to cultivate consumers."

The road to business is long and difficult, so Tiktok moves forward cautiously.

(Louis, Andrew, Yang Chao, Leo, Ben, all are pseudonyms)

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