In recent years, TikTok has become a global social media player with an audience of more than 1.1 billion active users worldwide. In the third quarter of 2023, TikTok received about 272.7 million downloads globally.
Today, TikTok is not just an entertainment and advertising platform with modern trends, fashion, and beauty news — it has become an integrated e-commerce platform. In September 2023, TikTok launched the marketplace TikTok Shop in the US. According to predictions, the TikTok Shop will become the third leading e-commerce platform in the USA after Amazon and Shopify.
TikTok vs. Amazon
Nonetheless, will TikTok be able to compete in sales with the commercial giant Amazon, whose reputation is solid? Amazon is well-established as an e-commerce platform with a massive product catalog, a rich user base, a global logistics network, and cloud computing services. Amazon is about accessibility and reliability. In opposition to the largest competitor, TikTok could offer a personalized and creative approach to sales for its audience, most of whom are young people.
Recently, TikTok Shop has launched a new logistics offer, ”Fulfilled by TikTok” (FBT), making it easier for businesses using TikTok Shop in the UK to sell on the platform. It is designed to facilitate logistics processes with an affordable solution and allow sellers to focus on the more essential aspects of their business. Although Tiktok doesn’t have its own warehouses, it cooperates with logistics partners, currently only in the UK, but it is planning to expand to the US. They can also sell directly through their stores. Certainly, TikTok Shop can’t compete with powerful Amazon FBA yet. But it has the potential to change over time.
Advantages of TikTok Shop
In 2022, TikTok was the most downloaded mobile app worldwide, making the platform a highly powerful marketplace for selling to a large audience.
- Trend-Driven Sales: TikTok’s unique ability to set trends and make them go viral has turned it into a cultural phenomenon and a leading place for trend-driven sales. Because of the extreme user engagement, trends can become a viral sensation in days.
- FOMO: TikTok Shop relies highly on Fear of Missing Out to increase sales. Time-limited offers and exclusive deals consider the relevance of trends, encouraging users to make quick purchasing decisions.
- Quick In-App Shopping: TikTok Shop provides a seamless in-app shopping experience, offering a simplified decision-making and purchasing process for users who want to buy products they have found on the platform.
- Integration with E-commerce Platforms: If you sell on major platforms like Shopify, you can connect your Shopify store to TikTok Shop, introducing products to a large audience of TikTok shoppers. Shopify TikTok integration makes it simple to manage listings, handle sales, and maintain synchronization between your stores.
- Product Demonstration: TikTok customers can view product tiles, read reviews, and buy directly from a favourite brand’s profile. Companies can create their product collections straight on their profile page.
- Potential for Niche Businesses: TikTok Shop’s trending functionalities instantly allow niche products or brands to become famous. It can be profitable for sellers with unique or specific offers.
- Youthful Audience: TikTok is a platform for sellers targeting a younger audience. It is especially beneficial for brands and products that relate to Generation Z and millennials.
- Global Expansion: The global expansion of TikTok Shop allows sellers to make their products available to international customers in the UK, Singapore, Thailand, and others. It allows sellers to reach a wider audience and enter new markets previously out of reach.
Disadvantages of TikTok Shop
On the other hand, TikTok has several issues related to its Chinese roots, data security, and trust that could prevent it from competing with other e-commerce giants.
- Demographic Limitations: TikTok Shop is still in the early stages of development, and its user base is less massive than that of more well-known e-commerce platforms, such as Amazon. Sellers may have a smaller potential customer pool on TikTok Shop.
- Importance of Native Video Content: Native videos can express honest impressions and opinions, which makes them more trustworthy and attractive to the audience. It requires more resources and investment from businesses to create high-quality video content.
- Limited E-commerce Features: TikTok Shop is primarily a video platform, and its e-commerce features are developing. It cannot provide sellers with the same features and tools as Amazon.
- Lack of Data Security and Reliability: TikTok is owned by the Chinese company ByteDance. Regulators in the United States, Europe, and Canada are concerned that ByteDance could share sensitive user data with Chinese authorities. It can threaten national security and people’s privacy.
Advantages of Amazon
While TikTok Shop holds its unique advantages in trend-driven sales and a youthful audience, Amazon’s strengths include an established global presence, extensive features for sellers, trust, credibility, and robust infrastructure, making it a formidable force in the e-commerce industry. You can use M2E Cloud for your Amazon integration with a few clicks.
- Global Presence: Amazon has approximately 2.2 billion visits worldwide and is the most visited e-commerce platform in the United States. It boasts a massive customer base and wide market reach, giving sellers access to millions of potential customers worldwide.
- Reliable Tools and Functions for Sellers: From inventory management to marketing tools like Amazon Advertising, sellers have access to reliable resources that can help optimize their sales strategies.
- Authentic Customer Reviews and Ratings: Amazon customers can leave feedback and ratings, influencing other potential buyers’ purchasing decisions. Unsponsored customer reviews hold a higher level of trust among consumers compared to influencer-promoted paid integrations within the TikTok Shop platform.
- Prime Membership: Amazon Prime Membership program encourages customer loyalty and repeat purchases, which can be advantageous for sellers.
- Integrated Logistics and Infrastructure: Amazon has a complex logistics network and infrastructure, including warehouses, delivery services, and technology-driven supply chain management, which ensures efficient order processing and delivery.
- Advanced Analytics: Amazon provides advanced analytics and data tracking features to help sellers fine-tune their marketing strategies.
Furthermore, M2E Cloud is now offering users free access to Amazon Analytics, so you can try this helpful tool for analyzing your Amazon sales.
Disadvantages of Amazon
In the meantime, Amazon’s structured approach, high fees, strong competition, and strict policies may not be appropriate for the needs of some sellers, especially those looking for trending sales and direct customer engagement, as seen in TikTok Shop.
- High Competition: Amazon’s marketplace is highly saturated, making it difficult for new sellers to stand out. This saturation can make it difficult for new or smaller sellers to stand out and gain visibility among the wide range of products available.
- Winner-Take-All Principle: Sellers with higher sales, better reviews, competitive pricing, and excellent customer service tend to rank higher in search results.
- High Fees: Amazon has a complex fee structure that can eat into the profitability of smaller sellers.
- Strict Policies and Regulations: Amazon has strict policies and rules that sellers must follow. Violating these rules can result in fines, account suspensions, or permanent bans, so sellers must navigate the platform carefully.
- Limited Trend-Driven Sales Approach: Amazon’s sales approach is more traditional and less focused on the trend-driven dynamics that characterize TikTok Shop. It could limit the platform’s appeal to sellers who rely heavily on viral sales trends.
AI in the E-Commerce Industry
A new challenge for marketplaces is AI, which changes the e-commerce marketplace, modernizing the way buyers and sellers interact. With AI-powered tools like recommendation engines, personalized shopping experiences, and efficient inventory management, marketplaces optimize product discovery and enhance user engagement.
The ones who integrate AI capabilities the fastest will have a significant advantage in e-commerce in the future. Amazon, for example, provides sellers with new generative AI capabilities to simplify the process of creating new product titles and descriptions. In September, TikTok introduced the AI-powered TikTok Creative Assistant, which was developed to generate ideas for brand campaigns on TikTok.
Wrapping it up
Predicting the future is challenging, but given the trends, it’s plausible that TikTok Shop could carve out a significant niche in the e-commerce market, particularly for certain types of products and among younger consumers. However, overtaking or even equalling Amazon in the short term seems unlikely, given Amazon’s extensive infrastructure, customer trust, and broader target audience.