How is TikTok Shop doing after one year in the US?

TikTok Shop has been in the US market for a year and has sold billions of dollars worth of goods . Many sellers have quickly achieved explosive growth through this platform. However, the best-selling categories on the platform have certain limitations. Big brands do not have very high sales, and this year's performance may not meet expectations.

After one year in the US, performance may not meet expectations

Last September, TikTok Shop’s performance skyrocketed after its launch in the United States. During the Black Friday promotion, the GMV on November 24th exceeded 33 million US dollars. At that time, an industry insider revealed that TikTok’s GMV in the US region had exceeded 14 million US dollars per day.

During its rapid development, there was a TikTok Shop registration boom in the industry, and many sellers (including many big sellers on Amazon) joined in. At that time, many peers reported the good news of performance growth.

Now, how is TikTok Shop’s performance one year after entering the US market?

According to Bloomberg, TikTok plans to expand the revenue of TikTok Shop in the United States to $17.5 billion this year, which is its first full year of revenue. The current trend is significantly lower than this figure, which will reach about one-third of the estimated data, and the GMV of TikTok Shop so far this year is estimated to be $4.5 billion.

TabCut data shows that in the past 30 days, the total sales of the top 20 brands in TikTok Shop were about 70 million US dollars, which is less than 1 billion US dollars after annual calculation. Even taking into account the errors in data estimation and the contributions of many small brands, it still cannot explain the gap of 16 billion US dollars.

According to the latest report from Marketplace Pulse, no major brand currently has significant sales on TikTok, and the top 20 brands on TikTok Shop are almost all niche brands from China and the United States. All the best-selling brands have either tailored unique strategies for TikTok or became popular quickly when the platform was launched.

(Image source: Marketplace Pulse)

Since content drives sales on TikTok, that content comes primarily from two sources: first, created by the brands themselves; and second, and most commonly, by a large number of influencers incentivized by revenue sharing.

Vitamin and supplement brand Goli Nutrition is one of the top brands on TikTok right now. According to TabCut, Goli Nutrition has generated more than $7 million in sales in the past 30 days, deploying aggressive marketing campaigns and high commissions for products that are already popular on marketplaces like Amazon. For example, affiliates who drive enough sales can get a BMW as a reward.

Goli Nutrition’s marketing strategy has been much discussed, but it’s clearly not a strategy most brands would consider, and it won’t work if repeated too often.

TikTok   Shop has built a unique e-commerce ecosystem in a short period of time through a content-driven shopping model, but it still faces challenges in how to enable more brands to master this strategy and maintain continued growth.

Most brands failed and sellers' profits declined

One of the challenges facing TikTok Shop is the lack of categories that customers want. Currently, although a few brands have achieved monthly sales of millions on TikTok Shop, most brands still cannot do well, and most of the brands that sell well are health, wellness and beauty brands.

Unlike other e-commerce platforms, TikTok's shopping channel is unique. Amazon, Walmart, eBay and other shopping marketplaces in the United States have known input data in terms of advertising expenditures, conversion rate tracking, listing optimization, etc. They have typical discovery, consideration and purchase channels. TikTok does not have these, and it is not an alternative or competitor to Amazon and other companies.

TikTok Shop is a content and alliance issue. Currently, only a few brands have found the path to success, and many brands are still confused.

A TikTok Shop seller said that he has sold false eyelashes, yoga clothes, tights, health products, sunglasses and other products this year, with more than 800 SKUs. The fastest growing category in the first half of the year was health products, with the best stores having monthly sales of $100,000, while ordinary stores only had monthly sales of a few thousand dollars.

In June this year , TikTok Shop in the US cancelled the requirement of "Amazon store GMV of no less than 2 million US dollars", and more Chinese sellers poured in. As the internal competition intensified, products were caught in a price war, and sellers' profits fell sharply. Some sellers estimated that their profits are now about 2/3 lower than last year. At the same time, TikTok Shop's review has become more stringent, and a batch of US cross-border stores were blocked in August.

In addition, the benefits of TikTok’s short videos and live streaming are also disappearing.

Western users are only now getting used to the social commerce model. For example, if you host some live events, most users don’t have the patience to watch such content, and most brands don’t have the vision to produce such content.

A domestic brand entered the TikTok Shop , with two full-time anchors and several part-time anchors, broadcasting three times a day, each for four hours, but the sales data was not good. After a live broadcast, even if there were 30,000 or 40,000 people watching, the sales volume was only one or two thousand US dollars at best, and zero sales at worst.

Before TikTok came along, Facebook and Instagram gave up on social commerce too early and refocused on selling ads. Previously, Zuckerberg had high hopes for Facebook and Instagram to become shopping destinations, but now his once highly focused work has become advertising sales.

TikTok is solving the chicken and egg problem in social commerce. It can’t get brands on board because there’s no scale, and it can’t drive users to shop because there’s not much to buy. In its first year in the US, it solved the cold start problem by getting brands interested and getting users used to social commerce. Twelve months later, the top brands list will look different.

The growth rate is amazing, and the peak season may usher in an explosion

However, for a platform that has only been established for a year, TikTok Shop is also successful . At present, it has become a fast-growing platform that is very different from other e-commerce platforms, and the advantages of content e-commerce are becoming increasingly prominent.

Data shows that Amazon 3PL business has increased order shipments by 70% for sales channels such as TikTok . Amazon, Walmart, direct-to-consumer marketplaces, or any other marketplaces other than TikTok, Shein, and Temu have not achieved 70% growth in the United States. Therefore, TikTok is likely the key driver behind the 70% growth because it was launched 12 months ago. This growth rate is amazing!

In the past year, TikTok Shop has also accelerated the construction of content e-commerce platforms and optimized content e-commerce business capabilities. First, TikTok Shop has made a lot of adaptations in the content field, allowing more domestic sellers to operate easily; second, TikTok Shop has promoted more influencers to sell goods through live broadcasts through operations and traffic strategies; finally, TikTok Shop also led self-operated sellers to go overseas and directly meet with top local influencers in the United States to improve efficiency.

Although TikTok Shop 's estimated performance fell short of expectations, its explosive performance during this year's peak season cannot be ignored.

Some sellers performed well in the TikTok Shop Super Brand Day event from September 17 to 23. For example, the Chinese brand OQQ, which pre-launched short videos, achieved a GMV of US$5.19 million during the 7-day event, a month-on-month increase of more than 200%, and topped the sales list of the entire platform during the 6-day event.

TikTok Shop has started its Black Friday campaign. The number of videos with the Black Friday promotion tag on the platform has exceeded 200,000, with over 2 billion views. While launching multiple seller benefits, TikTok Shop will also lock in traffic subsidies and large discount coupons for key live broadcast rooms, and superimpose exclusive discounts for live broadcast rooms . By then, a group of sellers may usher in an explosion.

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