Unlike other platforms, TikTok, owned by China’s ByteDance Ltd., seems hell-bent on making money through e-commerce. Its global goal is to reach $20 billion in gross merchandise value this year, four times more than in 2022, according to Bloomberg.
This month, TikTok Shop debuted in the US with about 150 million active users. Consumers can purchase tagged products in videos or QVC-style live streams. They can also enter a market through a tab on the app’s home screen, to search and browse.
There are those who could reject TikTok’s new initiative, believing that Americans are not in the habit of purchasing through videos. Meta Platforms Inc. removed Facebook’s live shopping feature last year.
Indonesia is an example to follow. Launched there in 2021, TikTok Shop is already set to outsell the country’s third-largest e-commerce company, Alibaba Group Holding Ltd, which has been around for more than a decade. Users in Indonesia spend an average of one hour a day on the app, the same as those in the United States.
For now, TikTok doesn’t care about making money through the app in Indonesia, its second largest market, after the US, by number of users. Its goal is to demonstrate that its platform can help brands and manufacturers convert user attention into sales.
Indonesia’s largest e-commerce platform Shopee, owned by Singapore-based Sea Ltd., turned a profit for the first time in the fourth quarter of 2022. But the competitive threat is forcing it to re-accelerate investment to drive growth, which reduces its benefits. In the second quarter, operating income from its e-commerce division was $66 million, down 40% from the quarter ended in December. In July, Alibaba invested a further $845 million in Lazada. TikTok Shop has been so disruptive that the Indonesian government is talking about banning e-commerce on social media platforms.
Without a doubt, TikTok’s greatest success has been as a social and entertainment platform, attracting young users who spend more time on the app than on Facebook.
It has not been the best destination for traditional advertisers. The conversion rate, or the percentage of users who take a desired action, is only 1.85%, compared to 9.2% for Facebook, according to data from Momentum Works, a Singapore consulting firm. Its younger user base and the full screen format. Therefore, TikTok wants to diversify and find another source of income.
This summer, “lazy girl jobs” were trending on TikTok, as Gen Z users expressed their desire for jobs that offered flexibility and work-life balance. How about livestreaming and social commerce? TikTok is eager to experiment.
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