Catching up with Temu, TikTok may launch its own platform!

TikTok is taking bigger and bigger steps. Recently, TikTok quietly launched a new shopping function in the European and American markets, seemingly following the path of Amazon VC accounts and catching up with competitors such as Temu and SHEIN in a self-operated manner. To this end, TikTok has begun poaching people from SHEIN.

Behind a series of eager actions, perhaps there is a coexistence of catching up and anxiety. Looking at ByteDance's cross-border e-commerce layout in recent years, it seems that it has not made much of a splash. Dmonstudio and If Yooou have been shut down one after another, and the platforms they have laid out have died quickly and continued to iterate. Perhaps the only thing they can show off is the GMV contributed by the Southeast Asian market.

On the other hand, there are many players in the cross-border e-commerce field in the European and American markets, and TikTok has many strong competitors. Temu has been soaring all the way, expanding vigorously and achieving remarkable results. It rushed into the top ten of the local visit list two months after its launch in a new market; SHEIN's revenue has increased significantly, accounting for nearly half of the fast fashion sales in the United States, and is still planning a third-party platform model. Now, TikTok wants to catch up with Temu and other platforms. Can it get a piece of the pie?

To catch up with Temu and SHEIN, TikTok may launch its own platform

Recently, many British users have discovered that a new feature called "Trendy Beat" has appeared in the TikTok application. This module will feature some popular internet celebrity products in TikTok short videos, such as ear picks, pet hair trimmers, etc.

The products in the module are all shipped directly from China, and all fully managed products carry this label. Tracking the links to the shopping pages shows that they all come from a company registered in Singapore called Seitu, which is affiliated with ByteDance.

Regarding this module, TikTok also confirmed that it is testing related functions, and the goods sold in the module are mainly sold through the supplier network. According to TikTok's previous application documents in the United States, TikTok's full-hosting model investment promotion may focus mainly on clothing categories, such as dresses, scarves, hats, shoes, suits, etc.

Industry insiders said that TikTok named this project "Project S", led by Bob Kang, the e-commerce director of ByteDance, in preparation for the launch of its own platform. More than 100 people from the original ifyooou project team were directly incorporated into the S project. Currently, the project team has about 300 to 400 people, mainly the supply chain team and operations staff of the original ifyooou. They initially participated in the landing of the Saudi site business in the Middle East.

TikTok's purpose in creating this project is obvious: to use its own understanding of current product trends to acquire or manufacture these products, thereby expanding its online retail business. In other words, TikTok is screening products with increasing popularity based on internal data, and then screening suppliers based on categories, which is a bit like Amazon's VC account.

Currently, this feature is mainly available on TikTok's UK store, but the editor has learned that TikTok has submitted an application for the Trendy Beat trademark in the United States at the end of May, and it is likely to be launched in the United States in the future. However, once this model is successful, TikTok will naturally increase the promotion of Trendy Beat products, which will intensify competition with third-party sellers on its own platform and e-commerce companies that place advertisements.

"In the past, we bought goods from factories through information asymmetry and did business on TikTok, but now the platform is directly connected to the factories, and we have almost no room for maneuver," said a TikTok seller. This model is no different from Amazon's VC sellers. In the future, promotion and weight will be dominated by them, and third-party sellers can only eat soup.

Many sellers are also worried that after joining the full trusteeship, pricing, delivery, and after-sales service will all be managed by the official, and the sellers' autonomy will be reduced. It is very likely that the same situation as Temu will occur, and the competition for goods and prices will be widened, which will also intensify the squeeze on small and medium-sized sellers.

But for the platform, the benefits of this model are obvious. By directly connecting with the factory, the platform can control every link and the quality and price of the goods. It is relatively more standardized and can allow the platform to gain more local market share to a certain extent. This model has been verified by Temu.

An industry insider revealed that Bob Kang is obsessed with Temu and wants to replicate its success. He wants to achieve his goal through the combination of supply chain and sales process. It is not difficult to see TikTok's intention. An internal employee pointed out that ByteDance is building an online retail department to challenge competitors such as Temu and SHEIN. The company has already poached some employees from platforms such as SHEIN.

Earlier, there were reports that TikTok has set a sales target of $20 billion for its e-commerce business TikTok Shop in 2023, a more than three-fold increase from last year's $4.4 billion. In order to achieve the set goals, TikTok Shop will focus on developing emerging markets such as Indonesia, while also expanding its business in markets such as Europe and the United States, and will aim to catch up with platforms such as Amazon.

However, due to the presence of Amazon, a well-established platform in the European and American markets, and the presence of potential platforms such as Temu and SHEIN, TikTok Shop has not made smooth progress in the European and American markets, and its sales have not been satisfactory. In this way, it seems that there is a reason why TikTok has placed a heavy bet on the European and American markets and vigorously developed full hosting.

TikTok has long shown signs of wanting to increase its investment in the European and American markets. Previously , a seller broke the news that TikTok intends to cut off third-party cross-border sellers on European and American sites , and now the launch of the Trendy Beat function seems to be paving the way for this . When American technology giants laid off employees at the end of 2022, a TikTok spokesperson said that TikTok will add 3,000 engineers in Europe, the United States and other places in the next three years, and will hire more employees later.

In order to compete for market share in Europe and the United States, TikTok Shop recently made major personnel adjustments, including transferring personnel from the Spanish and Brazilian markets to the United Kingdom, and announcing the suspension of expansion plans to 12 new countries, focusing on the existing UK, US and Southeast Asian markets.

At the same time, in order to ensure that the products can be delivered to consumers smoothly, TikTok did not choose to build its own warehouse and logistics network. Instead, it established a partnership with a third-party logistics company in the United States through leasing and signed a logistics agreement to store inventory, package and deliver orders for sellers.

Judging from this series of actions, TikTok is competing with platforms such as Temu and SHEIN for more market share by expanding its online business and providing a complete logistics system. But as far as TikTok is concerned, whether it can make a splash is still unknown.

ByteDance has repeatedly failed in cross-border e-commerce, but Temu is soaring

Looking at ByteDance’s cross-border e-commerce layout in recent years, it can be found that it has not made much splash.

Dmonstudio, an independent women's clothing website that competes with SHEIN, was shut down four months after its launch, but this project is said to be highly valued within ByteDance and was secretly incubated for a year. The platform's team has nearly 100 core members who were poached from SHEIN, and the team is also equipped with customer service staff in the corresponding languages ​​to serve the needs of users in different countries and regions.

As ByteDance’s third attempt in the fast fashion field, If Yooou focuses on affordable women’s clothing, with a high degree of overlap in product selection with SHEIN. However, it was shut down in May after its launch, with the highest number of visits being only a few hundred thousand, and it fell sharply in the later period.

Pinduoduo Fanno, which is positioned in Europe, focuses on cheap and good products, and is responsible for directly competing with Amazon, targeting the European market. It was once reported to be shut down, but the official also responded that the APP can be used normally, but it has not made much of a splash so far.

The platform died quickly and continued to iterate, but ByteDance is still enjoying its conquest of the cross-border e-commerce market.

At the beginning of 2021, TikTok Shop opened a UK site with great enthusiasm. However, in the early stage, the platform did not strictly manage it, which led to the differentiation of merchant quality and uneven product quality. It did not attract a group of consumers and sales were always tepid. However, the Indonesian site started almost at the same time as the UK site. In the first half of 2022, the average monthly GMV of TikTok e-commerce in Indonesia exceeded US$200 million (about RMB 1.41 billion).

This year, TikTok Shop's cross-border e-commerce sales in Indonesia will more than double from last year's $2.5 billion. According to industry estimates, TikTok Shop's gross merchandise volume (GMV) across Southeast Asia is expected to reach $15 billion this year, much higher than last year's $4.4 billion, accounting for the majority of its global e-commerce business.

TikTok Shop is like a Hummer, running wildly on the fertile soil of Southeast Asia. In order to seize the dividends of the Southeast Asian market, TikTok CEO Zhou Shouzi once said that he hopes TikTok will develop from an entertainment short video platform to a comprehensive platform including e-commerce, and will invest hundreds of millions of dollars in Indonesia and Southeast Asian markets in the future.

Although it has achieved success in Southeast Asian markets such as Indonesia and Vietnam, the size of this market is relatively small in comparison, and there are reports that Temu is conducting market research in Southeast Asia, perhaps preparing to enter the Southeast Asian market. In order to stabilize the rapidly growing Southeast Asian market and tap into new market growth outside of the existing market, TikTok chose to reorganize and focus its business on the British and American markets. TikTok seems to have realized the importance of platform management and chose a full hosting model in an attempt to win the favor of consumers.

TikTok, which has been working hard in the cross-border e-commerce track, has repeatedly expressed its strong ambitions. In the second year of its official e-commerce business, it set a GMV target of US$2 billion, and in the third year it increased to US$23 billion. But can the new model now enable it to make a difference in the European and American markets? Can it catch up with Temu, which has been soaring all the way?

Compared with the tepid popularity of TikTok Shop in the UK market, Temu has been booming since its launch overseas. Every time it enters a site, it is a sweeping hunt.

Last year, Temu launched its European and American sites. With its huge preferential subsidies and viral marketing, Temu quickly gained a foothold and then began to expand globally, launching more than 10 sites in Italy, Germany, etc. In the first quarter of this year, the number of downloads of Temu APP increased by 19 million times, and the total number of downloads reached 33 million times, with a rapid development momentum and impacting the global e-commerce market.

Since Temu was launched in Italy at the end of April this year , it has frequently attracted local consumers with a large number of discounts, such as shoelaces for less than 1 euro, shower heads for 10 euros, and smart watches for 20 euros. Two months later, Temu, who has always been a philanthropist, quickly gained a resounding reputation in the Italian market.

Casaleggio Associati updated the traffic, data and ranking of Italian e-commerce platforms in June. In the total visit list, Temu entered the top 10 for the first time and ranked 10th. Amazon is still the shopping website with the largest traffic in Italy. In the market ranking, Temu jumped to 4th place.

All orders are free of charge for delivery, which takes 8 to 20 working days, and the platform also promises to refund 5 euros if the package is late. If the product is discounted within 30 days of purchase, the price difference will also be refunded to users, and the free return period is up to 90 days.

With low prices, rich varieties and various benefits, local consumers have been attracted to Temu, which has rapidly grown in Italy and is even more popular in Europe and the United States. As of the first quarter of 2023, Temu's GMV has approached $1 billion, but it has been less than a year since Temu went online.

Even though the rapid expansion is due to the imbalance between high costs and returns, which squeezes sellers' profits and causes most sellers to be pessimistic about the platform, it cannot be denied that Temu has attracted batches of user groups, and sellers are also flocking to the platform one after another.

Faced with this situation, TikTok Shop could no longer sit still and began to accelerate its pace of layout in the European and American markets. However, for TikTok Shop , on the road of cross-border e-commerce, its strong rivals include not only Temu, but also SHEIN, which is developing rapidly.

Competing with SHEIN and Temu, can TikTok Shop overtake them?

As we all know, the US market has always been SHEIN's stronghold. Relevant data shows that nearly 30% of SHEIN's annual revenue comes from the US. At the same time, SHEIN also accounts for half of the fast fashion sales in the US. For many American consumers, SHEIN may have become an indispensable shopping app in their lives.

According to the download list data, SHEIN was installed 229 million times in 2022, making it the most downloaded shopping app in the world. In the 2023 BrandZ Top 50 Chinese Global Brands list released some time ago, SHEIN's ranking rose to fourth place.

SHEIN's influence can be imagined, and if TikTok Shop wants to gain a foothold in the European and American markets, it will inevitably have to rely on SHEIN, a strong competitor.

Recently, SHEIN has been expanding its territory and announced the "Herculean Gravity" plan to help 10,000 sellers around the world achieve annual sales of over one million US dollars and help 100,000 sellers achieve annual sales of over 100,000 US dollars in the next three years. At the same time, SHEIN will continue to launch a third-party seller platform based on the US site, and will expand to Germany, France and other countries in the future. In other words, in addition to SHEIN's own products, it will also provide products from third-party sellers.

In contrast, whether it is Temu, SHEIN, or TikTok, they are all competing for market share in the same way, that is, full hosting.

The sudden popularity of Temu has made cross-border e-commerce realize the benefits of "full trusteeship". AliExpress has made this model popular among sellers, and SHEIN has won great success overseas with the full trusteeship model. Subsequently, platforms in the circle began to follow suit, and TikTok also tried to use the new model to attract consumers in the European and American markets.

Official data shows that Temu's fully managed model has released a huge effect. As of March this year, more than 50 million registered users frequently shopped on its APP, with monthly transaction volume reaching US$1 billion, and factories are also supplying Temu in large quantities.

However, under this model, more sellers have stood up to oppose it, saying: "Full trusteeship will drive up prices to the point of death." For sellers who have already settled in Temu, the platform's various policy benefits gradually disappeared in the middle and late stages of settlement, and along with it came various price cuts. The sellers' profits can be described as miserable. It can be said that the pricing is completely controlled by the platform. No matter how many orders there are, it is useless. The key is that they don't make money.

Today, TikTok is also following a route similar to Amazon's VC account, and its later operations may be similar to Temu, which is equivalent to cutting off third-party sellers and allowing the platform to directly connect with suppliers.

However, in the view of some TikTok sellers, the platform's full hosting will significantly improve TikTok's e-commerce performance in the short term, but in the long run, it may not be suitable. Industry insiders analyzed that TikTok Shop is different from e-commerce platforms such as Temu and SHEIN. Platforms such as Temu allow consumers to search, see and purchase products intuitively, but TikTok focuses on interest e-commerce, with a relatively long transaction link and a low order success rate.

The full hosting model is worry-free for sellers, as all the work is handed over to the platform. The platform solves the front-end problems of sellers with supply chain strength, and the platform can also attract some high-quality sellers with the halo of TikTok. But in fact, TikTok has abandoned its own genes and basic market, and its positioning to consumers is not very clear. However, some sellers believe that under this model, sellers can keep stable inventory, focus on products and reduce marketing costs, which just overcomes the shortcomings of interest e-commerce.

TikTok is likely to lose a lot of money with this move. Earlier, TikTok announced a reform period, and industry insiders estimated that it would affect 95% of small sellers. They have already planned their future direction: withdraw, open stores in Southeast Asia, and reduce their layout on TikTok. The loss of this group of sellers is bound to affect the sales atmosphere on the platform. Even if the new model and traffic dividends will attract a group of new sellers, it will take some time for TikTok to complete the supply chain.

At the same time, this model will also have a certain impact on TikTok's sales. As we all know, many brands and businesses have used TikTok as an important channel for brand publicity and promotion. This business contributed $12 billion in sales to TikTok in 2022. Once the model is launched, it is equivalent to intensifying competition among multiple parties, and TikTok is also very likely to tilt traffic towards its own products.

TikTok wants to catch up with Temu and other platforms through transformation, continue to expand its market share, and even overtake them when necessary. There are many key points to focus on. Most Internet giants have also aimed at this incremental market, but most of them have turned into dust. Among the large companies going overseas, ByteDance is considered by overseas analysts to be the most likely to stand out. In terms of cross-border logistics, everyone is the same, and there is not much difference in advantages, but ByteDance has more advantages in content and is familiar with the European and American markets.

At present, some platforms are embracing full hosting, but some are opening up to third-party models, perhaps overcoming the shortcomings of a single model and introducing an opposing model. The combination of the two is the future direction of e-commerce. If Tik Tok Shop operates properly this time, it may also be able to overtake others.

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