In a move that might reshape e-commerce on social media, TikTok plans to restrict links to external e-commerce platforms like Amazon. The Information’s recent report suggests that TikTok aims to funnel users towards its native shopping feature, TikTok Shop, if they wish to make a purchase based on in-app content.
The shift comes amidst revelations that TikTok Shop is projected to incur a staggering loss of over $500 million in the U.S. this year. This figure mirrors TikTok’s hefty expenditure on workforce expansion, developing a delivery infrastructure, and incentivizing merchants with offers like discounts and free shipping.
Presently, content creators on TikTok promote a variety of products available on their Amazon storefronts, benefiting from commissions on each sale. However, with the impending policy change, such third-party e-commerce promotions would be off the table.
Details regarding when TikTok might enforce this ban remain ambiguous. What is evident, however, is that post-implementation, users will only be able to buy products endorsed by TikTok creators via the TikTok Shop. This integrated feature allows purchases directly from videos or through creators’ in-app storefronts.
The strategic pivot aims to stimulate activity on TikTok Shop, which, despite recent growth, hasn’t quite made its mark. As per the report, TikTok Shop’s daily sales have grown from $500,000-$1 million in June to $3-$4 million, with insiders projecting this to skyrocket to $10 million by year-end.
TikTok’s decision to centralize e-commerce transactions within its platform underscores the growing intersection of social media and online shopping. By driving purchases through TikTok Shop, the platform seeks to offer a streamlined, cohesive user experience. However, it remains to be seen how this bold strategy will sit with creators who have leveraged external e-commerce platforms for revenue. As competition in the social commerce realm intensifies, platforms must strike a balance between user experience, creator incentives, and profitability.
