TikTok Seeks Up to $20 Bln in Ecommerce Business This Year

TikTok hopes to more than quadruple the size of its worldwide e-commerce operations to as much as $20 billion in merchandise sales this year, relying on growth in Southeast Asia. The report said the increase compares to last year’s $4.4 billion in gross merchandise value, representing the worth of total goods sold through its online marketplace TikTok Shop. It adds that the company is betting on markets such as Indonesia.

ByteDance-owned TikTok, which translates to “dancing video” in Chinese, has tapped into a hungry market for short-form videos known as lip-syncs and dancing. But the app’s popularity has also landed it in controversies, including bans by certain governments and lawmakers over national security concerns. The company is looking to diversify its user growth by tapping into the e-commerce space, and its efforts could be boosted by adding a US-based in-app mall.

The platform’s in-app shopping features allow brands and influencers to promote products by linking them to their websites or third-party online stores. The TikTok Shop feature was launched in 2022 and is now available in seven countries across the region, including Singapore, Malaysia, Thailand, the Philippines, and Indonesia, per a company statement. The merchants who sell through TikTok Shop are given a discount on product and shipping costs, which they share with the platform. This business model is reminiscent of the one used by Amazon’s digital marketplaces, which take a cut from each sale. For example, Jodi Hidayat, who sells a line of squishy night lamps called the Rest of World on the app, told PYMNTS that TikTok Shop takes 2% of each purchase from him. “The longer you sell on the app, the deeper the cuts get,” he said.

In addition to boosting the potential profits for its merchants, TikTok is also seeking to bolster the underlying technology that supports the in-app commerce platform. The firm has built an artificial intelligence system, dubbed TikTok Bots, to process orders and help customers with any issues they might face. And the company is reportedly working to expand its e-commerce capabilities to include live streaming, a trend that has gained popularity on apps such as Twitch and YouTube.

Although TikTok’s e-commerce ambitions are impressive, logistics companies warn that logistical challenges native to the region could hold it back from achieving its full potential. LOCAD, an e-commerce logistics provider, says Southeast Asia is expected to be the fastest-growing region for TikTok Shop this year. Still, regional challenges such as high shipping costs and a lack of infrastructure could hinder its expansion.