Who could have imagined that one-day social media would become more than just a source of entertainment or a means of staying connected? Social media platforms like Instagram, TikTok, and Facebook have recognized this opportunity and are capitalizing on the ever-growing user base by diving headfirst into a phenomenon known as live commerce.
Live commerce is also called live streaming commerce or social commerce. This innovative approach combines the power of live video streaming with the convenience of online shopping, creating a unique and immersive e-commerce experience. And when it comes to embracing live commerce, TikTok is making a bold wager, investing heavily in this promising trend.
Before we delve into TikTok’s ambitious endeavours in the realm of live stream commerce, let’s take a closer look at the remarkable growth of the live commerce market over the span of a decade.
Explosive Growth of the Live Commerce Market
In the realm of modern retail, the dynamic fusion of live streaming and e-commerce has reshaped the way we shop and connect with brands. Live commerce involves real-time video broadcasting by sellers or influencers showcasing products or services while engaging with an audience of potential buyers. Viewers can interact with the host through live chat, ask questions, request demonstrations, and make purchases directly during the live stream.
China, the birthplace of many digital innovations, played a significant role in pioneering live commerce as we know it today. The concept of live commerce began to take shape in 2010 in China, where it became known as “shoppertainment” or “live streaming shopping.” However, the concept of live streaming combined with e-commerce began to gain traction around 2015. One of the early pioneers of live commerce in China was the platform Taobao Live, launched by Alibaba Group in 2016. Interestingly 2020, Alibaba’s Taobao Live set an astonishing record, raking in an astounding $7.5 billion in sales during the first 30 minutes of its presales for China’s annual Singles’ Day.
Since then, live commerce has expanded beyond China’s borders and has become a global trend. Various social media platforms and e-commerce websites, such as Instagram Shop, Facebook Shops, Amazon Live, and YouTube, have incorporated live commerce features into their platforms. By embracing this trend, they cater to the increasing demand for interactive and engaging shopping experiences.
The world of livestreaming e-commerce in China has undergone a phenomenal surge, witnessing an incredible growth rate of 900% over the past five years. The sales generated through livestreaming e-commerce have soared from $62.3 billion in 2019 to a staggering $479.46 billion in 2022. The momentum continues this year with an anticipated 30% year-on-year increase, projecting the sales to reach an impressive $623.29 billion. These remarkable figures showcase the tremendous success and rapid expansion of livestreaming e-commerce in China’s dynamic marketplace.
In contrast to China’s booming livestreaming e-commerce market, the United States is still in the early stages of adoption. The livestream e-commerce sales in the US are projected to reach $31.7 billion in 2023.
The COVID-19 pandemic also contributed to the acceleration of live commerce adoption as physical retail was limited, and consumers increasingly turned to online channels for shopping.
TikTok’s Ambitious Quest for E-commerce Domination
For TikTok, e-commerce has long been a strategic priority. In a significant move, the Chinese company owned by ByteDance, launched the TikTok Shopping feature in late 2020. At the time of its launch, TikTok boasted an impressive user base of 800 million monthly active users, firmly establishing itself as the fastest-growing social media app worldwide.
Harnessing this extensive reach, TikTok swiftly expanded its in-app shopping features across the globe, including regions such as Asia (including the Chinese mainland, Hong Kong, Indonesia, Malaysia, Thailand, Vietnam, Philippines, and Singapore), United Kingdom, and the United States (North America).
It is important to note that TikTok expects to quadruple its gross merchandise sales through TikTok Shop, from $4.4 billion in 2022 to $20 billion in 2023, according to Bloomberg. The company is banking on the rapid expansion of the Southeast Asian market, recognizing it as a key catalyst for its anticipated success.
Looking at the bigger picture, TikTok generated an estimated $9.4 billion in revenue in 2022, with a remarkable 100% YoY growth. The contribution to ByteDance’s overall revenue stood at approximately 9.4%.
TikTok primarily generates its revenue from its advertising business, which has seen significant interest from companies like Disney+, Hulu, and Netflix. These companies have substantially increased their advertising budgets on TikTok throughout 2022, recognizing the platform’s potential for reaching and engaging a large user base.
TikTok growth in the US
November 2022 marked an exciting turning point for TikTok, as it made a significant move in the United States by launching its much-anticipated live stream commerce platform TikTok Shop.
For a long time, Amazon has been the go-to platform for online product searches across different generations. However, the rise of e-commerce capabilities on social media platforms has shifted consumer behaviour, particularly among Gen Z and Millennials. These younger generations are more inclined to shop directly from social media platforms, embracing in-app purchases more readily than their older counterparts.
The emergence of TikTok as an e-commerce player is particularly noteworthy. In Q1 2023, the percentage of consumers initiating their online product searches on TikTok significantly surged 36% YoY, while the share of those starting on Amazon has declined. This trend reflects the growing influence of TikTok as an e-commerce destination.
According to a Q1 2023 survey by Jungle Scout, TikTok is gaining significant shopping appeal among Gen Z consumers in the United States. The survey found that over two-thirds (68%) of adult Gen Zers are likely to make purchases on TikTok. This places TikTok on par with YouTube (~68%) and just behind Instagram (71%) in terms of its attractiveness as a shopping platform for Gen Z.
These findings highlight the evolving e-commerce landscape, where social media platforms are successfully challenging Amazon’s long-standing dominance. With their built-in user bases and engaging content formats, platforms like TikTok entice consumers to discover, explore, and purchase directly within their ecosystems.
On several occasions, Amazon has been accused of copying TikTok’s innovative features. One notable instance occurred in December 2022 when Amazon introduced its own TikTok-inspired feature called “Amazon Inspire” within its app. This feature aimed to captivate customers by offering a personalized feed of photos and videos, allowing them to purchase products showcased in the content seamlessly.
But what is TikTok’s superpower?
TikTok has an irresistible appeal that can easily hook you in. Unlike traditional social media platforms, TikTok offers a refreshing experience tailored to your interests. By analyzing your preferences, actions, and interactions, ByteDance’s algorithms curate a personalized feed that keeps you engaged for hours. By understanding what we enjoy and interact with, TikTok presents us with a stream of videos that align perfectly with our tastes. It’s like having a personal curator who knows exactly what content will captivate us. This personalized discovery, combined with the platform’s ability to deliver captivating and diverse content, makes it hard to put down.
In a captivating dance of user numbers, TikTok dominates the United States with an impressive 116.5 million users, as if the entire nation has fallen under its mesmerizing spell. But the magic doesn’t stop there. Setting its sights on the enchanting landscapes of Indonesia, TikTok captivates an astounding 113 million users, transforming the nation into a thriving hub of creativity and entertainment. Across the ocean, Brazil joins the TikTok frenzy with 84.1 million users, while Mexico and Russia bring their own rhythmic flair, boasting 62.4 million and 51.2 million users, respectively. As the TikTok empire continues its global conquest, it paints a vibrant picture of a world united by short videos and boundless imagination.
Looming Challenges in the United States
While TikTok has shown promise in terms of shopping appeal among Gen Z, there are legitimate concerns regarding the long-term viability of TikTok Shop. Several factors contribute to these apprehensions, including slowing growth in social commerce, limited adoption of live shopping features, and the looming possibility of a TikTok ban in the United States.
TikTok’s staggering 1.6 billion active daily users create a promising opportunity for its global commerce expansion. However, it appears that TikTok Shop is still in the early stages of adoption in the United States. As of March 2023, fewer than 100 U.S. merchants were actively selling on TikTok Shop. It’s worth noting that TikTok Shop started enlisting merchants on an invite-only basis as recently as November 2022, as highlighted in the TikTok Commerce 2023 report. While the numbers may currently be modest, the company is steadily working towards expanding its merchant base and refining its commerce platform. As time goes on, we can expect TikTok Shop to evolve and potentially gain more traction in the U.S. market.
To bolster its offerings in the United States, TikTok has been incentivizing merchants by offering discounts to encourage them to try out its platform.
In contrast, leading social platforms such as Instagram and YouTube have faced challenges establishing livestream shopping as a habitual activity among U.S. consumers. Meta’s Instagram, for instance, discontinued its live shopping business in March 2023. This move has created new opportunities for other social media networks to step in and expand their presence in the livestream shopping space.
TikTok is undoubtedly seeking to expand its success in Southeast Asia to a global level. However, when it comes to livestream commerce, its effectiveness may vary depending on the product categories and market dynamics. While livestream commerce could potentially thrive for certain product categories like fashion and consumer electronics, it may not resonate as strongly in markets where shoppers are gradually returning to physical stores.
The success of livestream commerce hinges on understanding consumer preferences and adapting to the specific market conditions of each region. TikTok will need to navigate these nuances to find the right balance and capitalize on the global potential of livestream commerce while considering the evolving shopping habits of consumers in different markets.
Government Actions
TikTok, the popular social media app, has been caught in the crosshairs of political and legal battles, hampering its adoption among American merchants. Congress has been pushing for a ban on the app, going so far as to demand that its parent company, ByteDance, sell to an American company. Yet, ByteDance has stood its ground, refusing to comply with Congress’s request.
The situation escalated further when the Biden administration threatened TikTok with a potential ban, citing concerns over China’s access to private business information.
In the midst of all this turmoil, government agencies in the US and Canada have already banned TikTok from government-issued mobile devices, with many US states following suit. Surprisingly, more than half of the U.S. states have banned TikTok on government-issued devices.
Even the picturesque state of Montana has taken a strong stance, banning TikTok on all devices, much to the dismay of the company, which has filed a lawsuit challenging the ban. Five TikTok content creators in Montana filed a lawsuit against the state in federal court.
Meanwhile, across the pond, France, the UK Parliament, and even European Union institutions have banned TikTok on government staff mobile phones. India was the first country to ban TikTok in mid-2020.
With so much controversy surrounding its operations, TikTok faces an uphill battle to establish a robust e-commerce platform in the US and EU markets. However, the ultimate success of TikTok’s venture may not solely rest on government actions, but also on the reception of live-stream shopping in these regions. It seems the app’s journey is filled with twists, turns, and a fair share of legal drama, leaving us all curious to see how the story unfolds.
Is TikTok, the global frontrunner in short-video sharing, poised to dethrone the reigning champions and become the unrivalled ruler of online commerce? Do let us know your expert views in the comment section below!
