Amazon and TikTok Join Forces to Create A New Era of 'Social Commerce'

Under the trend of integration between e-commerce and social media, content and e-commerce platforms need to understand how to leverage each other's strengths.

Recently, Amazon and TikTok announced a significant collaboration aimed at providing users with a more convenient shopping experience. Following the partnership, TikTok users will be able to browse and purchase products from Amazon directly within the TikTok app, without having to leave the application.

Before this, the rapidly expanding TikTok e-commerce and the largest e-commerce platform, Amazon, were undoubtedly competitors. They also faced dilemmas: with declining consumer spending and fierce market competition, the growth of Amazon's e-commerce business has been slowing down year by year; TikTok's e-commerce has not been very successful after stepping out of Southeast Asia and is facing strict regulatory challenges in the United States.

In the view of industry insiders, the cooperation between Amazon and TikTok is a win-win situation, bringing traffic and sales to Amazon and providing new commercialization channels and ways to alleviate regulatory pressure for TikTok. This may be a new development opportunity for both TikTok and Amazon.

Strong Alliance

According to the announcement, users will be able to see Amazon's product recommendations on TikTok's For You recommendation page and link their TikTok accounts with their Amazon accounts with a one-time setup. Once the accounts are linked, users can complete purchases on Amazon through product advertisements without leaving the TikTok app, achieving a faster and smoother experience.

In addition, users can also see real-time pricing, Prime eligibility, delivery estimates, and product details in TikTok's Amazon advertisements, allowing users to quickly obtain key product information while browsing short videos.

To use this social commerce service, TikTok users need to bind their profiles on these platforms with their Amazon accounts. However, TikTok has emphasized the protection of user privacy in the cooperation, stating that users can choose to cancel the association of their Amazon accounts in TikTok's app settings at any time.

This cooperation with the e-commerce platform is an important attempt for TikTok on its path to commercialization, helping it explore more profit models and enhance industry competitiveness.

For Amazon, it brings a richer source of traffic - A study by HerCampus found that 74% of Generation Z Internet users search for products on TikTok, and 51% prefer TikTok because its video format is more attractive.

However, it is still necessary to pay attention to how this integration will affect the user experience and participation on TikTok and whether it will significantly promote Amazon's sales through social channels.

For Amazon sellers, this cooperation does not currently mean they can directly advertise on TikTok or promote products through TikTok's influencers. The current cooperation is limited to Amazon's official advertisements on TikTok. In the future, if the cooperation between Amazon and TikTok deepens, it may provide more opportunities for Amazon sellers to promote products directly on TikTok.

Incremental Choice

Indeed, for Amazon, in the face of external competition and a downward economic environment, finding new growth is urgent.

As an e-commerce giant, although its business scale is already very large, the growth rate is slowing down. Amazon's financial report for the second quarter of 2024 shows that its e-commerce business net sales were $55.39 billion, a year-on-year increase of 4.6%, lower than the expected $55.55 billion from analysts, mainly because, in the context of a downward economy, consumers tend to buy cheaper products.

At the same time, shopping activities through social media platforms are growing rapidly. Insider Intelligence, a market research institution, estimates that by 2025, the market size of social e-commerce will grow from $67 billion in 2023 to $100 billion. This change in growth patterns has prompted Amazon to look for new ways to grow.

In the past, Amazon has explored itself in many ways, launching an application similar to Instagram called Spark, and then launching a short video feature called Inspire, which targets TikTok. Both have not made a deep impression on users and have not driven sales. For Amazon, cooperation with giants may be a better way to find a way out than going it alone.

In the view of industry insiders, this cooperation is undoubtedly beneficial for Amazon. Justin Post, an analyst at Bank of America, pointed out that by leveraging TikTok's huge user base, Amazon can offset investors' concerns about competition from TikTok Shop.

Post added that since TikTok Shop's GMV currently accounts for 2.2% of Amazon's US sales, this strategic alliance may help Amazon regain some lost ground.

Amazon's demands are not limited to this. At the same time as announcing the cooperation with TikTok, Amazon has also reached a similar agreement with Pinterest, allowing users to purchase Amazon products directly within the app without leaving.

This is a deepening of last year's cooperation. In April 2023, Pinterest had already established a strategic partnership with Amazon, aiming to attract more brands and users to the Pinterest platform to stimulate revenue growth. The cooperation at that time allowed Pinterest users to click on product links on Pinterest to jump to Amazon for shopping.

Previously, Amazon had also cooperated with Meta's social media platforms Facebook and Instagram, with a similar model to this cooperation, allowing users to place orders and purchase Amazon products directly within the social platform without switching pages and logging in and out of accounts. At that time, the industry believed that the cooperation was to jointly respond to the impact of TikTok, TEMU, and SHEIN.

In addition to investing in social e-commerce, facing intense market competition, especially challenges from low-priced retailers, Amazon also plans to launch a low-priced store, focusing on selling unbranded products, mainly recruiting fashion, home, and daily necessities, with prices below $20.

Previously, Amazon also significantly reduced the sales commission for clothing products, especially for clothing priced between $15 and $20, and below. Industry analysis suggests this move can attract more low-priced clothing sellers and enhance the platform's competitiveness.

Whether it is layout in the low-priced market or cooperation with social media platforms, they are all measures for Amazon to cope with market competition and economic challenges, trying to maintain a leading position in the fiercely competitive e-commerce field. Their effectiveness and value will gradually emerge over time and with market development.