(Bloomberg Businessweek) -- Unlike other social media platforms, TikTok, owned by China's ByteDance Ltd., seems bent on making money via e-commerce. Globally it aims to reach $20 billion in gross merchandise value this year, a fourfold increase from 2022, Bloomberg has reported.
This month, TikTok Shop made its debut in the US—the short video app's largest market, with about 150 million active users. Consumers can buy products tagged in videos or QVC‑style livestreams. Alternatively, they can enter a marketplace via a shop tab, prominently displayed on the app's home screen, to search and browse.
There are those who might brush off TikTok's new endeavor, believing Americans don't have the habit of shopping through videos. Meta Platforms Inc. pulled the plug on Facebook's live shopping feature last year.
Indonesia offers a cautionary tale. Launched there in 2021, TikTok Shop is already poised to outsell the nation's third-largest e-commerce company, Alibaba Group Holding Ltd.-backed Lazada, which has been around for more than a decade. Users in Indonesia spend an average of an hour a day on the app, just like those in the US.
For now, TikTok doesn't care about making money via the app in Indonesia, its second-biggest market, after the US, by number of users. Its goal is to prove its platform can help brands and manufacturers convert user attention into sales. That strategy is a big headache for its established rivals. Indonesia's largest e-commerce platform, Shopee—owned by Singapore-based Sea Ltd.—became profitable for the first time in the fourth quarter of 2022. But the competitive threat is forcing it to reaccelerate investment to boost growth, cutting into profits. In the second quarter, operating income at its e-commerce division came in at $66 million, a 40% drop from the quarter ended December. In July, Alibaba invested an additional $845 million into Lazada. TikTok Shop has been so disruptive that the Indonesian government is talking about banning e-commerce on social media platforms.
No doubt, TikTok's biggest success has been as a social and entertainment platform, attracting younger users who spend more time on the app than they do on Facebook. It hasn't been the best destination for traditional advertisers. The conversion rate there, or the percentage of users who take a desired action, is only 1.85%, versus as much as 9.2% at Facebook, according to data from Momentum Works, a Singapore-based consulting firm. Its younger user base and full-screen video format are the likely culprits for that. So, TikTok is keen to diversify and find another revenue stream.
This summer, “lazy girl jobs” was trending on TikTok, as Generation Z users expressed their desire for gigs that offered flexibility and work-life balance. How about livestreaming and social commerce? TikTok is certainly eager to experiment.
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