TikTok Made Me Buy It: Inside TikTok Shop

Alex Barinka is used to opening up her TikTok and seeing it look more or less the same every day.

A little bit of Formula one content for Ari drivers, design the hardest F one track. A little bit of cooking content. This dinner is quick, delicious and you only need to buy five things to make it. I'm a bit of a fashion junkie as well, so I get some kind of eclectic cowboy slash edgy style in there, elgurlies.

I'm looking for white cowboy boots for Coachella because fashion.

Alex is a technology and social media reporter here at Bloomberg, and she's a regular TikTok user, but lately she's been spending her time looking at a newer feature in the app, TikTok Shop, icy.

Socks, icee utility items, a statue of a gnome using the restroom that somebody could put in their lawn.

TikTok Shop is the latest commercial venture from Byteedance Limited, the parent company that owns TikTok. It's TikTok's own marketplace where users can find and buy products as they scroll. Content creators on TikTok have been trying to sell us things for years, but before TikTok Shop, you had to leave the app to buy the stuff elsewhere. Now you can buy things directly through the app without ever leaving it.

So if you're somebody who loves to watch dog training videos, you might see a video with a leash tagged.

In it, and it's shooting for the moon.

We've reported, according to people familiar with the matter, that TikTok is aiming to sell seventeen point five billion dollars worth of goods in the US in twenty twenty four. That is an ambitious, kind of audacious number, but it's also why we can start kind of confidently talking about TikTok in the same vein as Amazon.

Today. On the Big Take, we'll take you inside the strategy behind TikTok shop as it seeks to compete with bigger e commerce rivals. To succeed, it might have to change the way we shop. I'm your host, Sarah Holder, and this is the Big Take from Bloomberg News. TikTok Shop got its start in southeast Asia. In twenty twenty one, it started attracting customers with something called live stream shopping.

Let's try them.

This is literally the first thing.

I've tried on and I'm obsessed. This is the coolest jumpever.

Live Stream shopping is exactly what it sounds like.

That's where people show up, they turn their camera on, they're hawking goods, they're selling things. They might sell something as small as a tube of lip gloss or as big as a house. It's something that in Asia has really taken off and users are really used to it.

But replicating the success of live stream shopping in other parts of the world hasn't been easy.

Two years ago, they set their sights on more western markets. TikTok started in the UK rolling out shop, and they did it in a way that was similar to Southeast Asia. What they found was users there are just not willing to show up at the same time and buy from someone on a live video. They're much more used to the social media ad experience where they see something in their feed, they can click on it and buy it whenever they feel like so.

When TikTok shop finally dropped in the US this past fall, the company tried something.

Different, so they took that insight from the UK market, and when they turned their sites on the US, which is kind of a gem in e commerce world, they said, hey, let's actually split our strategy here.

They'd keep live streaming shopping as an option, but add the ability to tag products in all the other videos on your feed. The plan was to create an e commerce experience unlike other social networks.

With Instagram, with Facebook, with YouTube. Often what they did is they linked you out to another website to check out, and everything else was off platform.

But TikTok wants you to shop within the app itself. And to do that, TikTok has been hiring different types of employees to work on this part of the business.

TikTok is starting to grow and cultivate this walled garden where they are hiring e commerce people. They're hiring people who used to work for department stores and brands, They're hiring logistics people.

With this new feature, TikTok is hoping to tap into how people already use the app. Users already scroll to find new trends and products to buy, Influencers already post to sell stuff.

TikTok's been known kind of as a place where fashion fads and new products sell out. There's a hashtag called TikTok made Me buy It that existed well before TikTok Shop, so that kind of user behavior is already there.

So if an influencer recommends and tags a new mascara, for example.

An influencer for a beauty product might make you know, lower than ten percent, but they'll make a cut of that revenue.

And then if you watch the video and end up buying the product.

The merchant then would take home, you know, maybe half, maybe it's a large majority chunk of the sales, and they would pocket that as revenue, and then TikTok takes their cut. So they've created this kind of three legged stool of an ecosystem.

We spoke to one of the vendors that TikTok invited to start using TikTok Shop, Scott Macintosh.

I invented cell phone seat here. They are new cell phone seat colors are in limited editions.

So I got the viral cell phone seat phone holder for your car here on TikTok shop. Absolutely love.

It's basically a cup holder that holds your cell phone. You can put it in your car. Scott used his savings to create the cell phone seat with help from some investors. And when Scott first started trying to use TikTok shop, he says, it wasn't a great experience.

I jumped through a lot of hoops to regster for the shop because it was real glitchy because they were just launching it.

The learning curve seemed worth it though, because of the huge boost invisibility he got.

So previously you would see my video, you would find my link to my website and buy on my website, whereas TikTok shop made it direct path to purchase, Like I don't have to click to another website wait for that to load, find the product I want, you know, enter my information. No, it was click the video button in that you can buy the product right there, and you can use Apple Pay. It was like two clicks. So I was like, yeah, I want to be part of this. This this is going to be great.

And because of the perks that TikTok was offering.

The fact that they were paying for the shipping, which still they still do, by the way, is a huge part of my margin for this product. That was a huge incentive to put as much effort as I could into TikTok shop.

The catch Scott needed to make a bunch of videos to promote his items.

We got the shop going and TikTok was going great. And I met with this with a TikTok rep named Mandy, and she told me, Okay, you have to go live on TikTok for at least, you know, thirty minutes, but we recommend two hours every day. And I was like what. I was like, okay, I'll try it. I was a believer in TikTok after what I'd seen, but he.

Ended up loving doing these livestream videos.

Then it started to work. I started seeing sales, people started buying the products, People started coming back to my show. They would ask me questions and they would give me ideas. And we only had the product in black, and somebody was like, hey, why don't you have other colors? And I was like, I don't know, I guess we could have other colors.

Scott getting hooked on live streaming is no coincidence. It's part of TikTok's longer term strategy.

Going into twenty twenty four, we've seen them start to do what is really worked for them in Asia and push more into live stream and live stream shopping. You're also seeing them roll out live partnerships like with Peloton, who's going to stream fitness classes on the app live.

In this way, TikTok's ambition with TikTok Shop is twofold. They're hoping to capture a piece of people's daily e commerce activity, but also to introduce new shopping habits to audiences in the US.

If there's one truism in the tech world, it's that changing user behavior is hard, and usually when it happens, those are the companies that go big.

After the break, we'll look into the advantages challenges TikTok faces in this new world of online shopping. Hey, we're back. Before the break, we were hearing from tech and social media reporter Alex s Birinka about how TikTok Shop, TikTok's latest venture in the e commerce space, not only wants to beat the competition, but also wants to shape the

TikTok has reached a moment where, on average in the US, the average US user is spending an hour and a half on the app.

That's roughly thirty to forty hours per month.

That's almost double other social media apps like Instagram. That is a ton of time.

But Alex says just because people are spending their time there doesn't necessarily mean they'll shop there. Many users are still going to Amazon to actually buy the items they first saw on TikTok.

When you're asking somebody like TikTok is to open your pocketbook to enter your credit card information, that's a different level of trust that Amazon already has. They need to kind of start breaking that user behavior that people are so used to where they see something and they say, hey, let me go enter that search bar in Amazon, find it, check it out from a place that I know, and instead convince them to make that action on TikTok shop.

Another challenge TikTok faces is that not every seller knows how to make videos that are engaging enough to sell their products.

If a video is not interesting, they're not going to show it to people. You can't just rely on having followers, So you have to not only show off the product in a way that people might want to buy it, but work it into videos that are entertaining, interesting, intriguing enough to also show up on people's feeds and look, I am somebody who posts on TikTok.

It's not easy, and the initial incentives that first do even inexperienced TikTok vendors like Scott to the platform are drying up. After all, TikTok shop eventually needs to make a profit.

We have reported that they will raise their fees to more kind of industry standard levels, but for a lot of the different product categories, they're still lower than places like Amazon, certainly because they're trying to convince more people to sell on TikTok shop.

TikTok shop being such a priority for the company also risks alienating users on the app who are not as interested in buying stuff and just want to watch the usual cooking videos they came for.

There will be over the next twelve months a really interesting line that TikTok will be walking where it will be showing more shop content to people while also not showing them too much that they feel like the whole app has just turned into one big ad role for all of the products that are being sold on TikTok shop.

As for how this is all going so far, Alex says there was some good news this past holiday season.

Five million new US users was buy something who hadn't bought something on TikTok shop before.

And for Scott McIntosh, December was a knockout month in TikTok sales.

I mean, in a nutshell, it was unbelievable. We made our net revenue for the whole year in December pretty much from TikTok.

He said that these results were a combination of ads working alongside TikTok affiliates and continuing to make videos. But to reach that goal of selling seventeen point five billion dollars worth of goods in the US in twenty twenty four, TikTok needs a lot more months like December, or it needs a lot more Scott McIntosh's thanks for listening to the Big Take from Bloomberg News. I'm Sarah Holder. This