Despite Shutdown Fears, TikTok Still Aims For 400% E-commerce Growth In the U.S. This Year

Before the earlier shutdown turmoil in the United States, TikTok E-commerce had already set a goal to achieve 400% growth in the U.S. this year. Currently, the fastest-growing category on TikTok E-commerce in the U.S. is home goods, with health products also showing significant growth.

Although there is still no final decision on how TikTok will operate legally in the U.S., the social media's E-commerce section continues to operate normally. According to a source close to the department, the internal team is very confident about achieving the 400% growth target in the U.S. this year.

On January 19, when TikTok briefly went offline, its e-commerce management team assured some merchants that TikTok would not be shut down in the U.S. and that its e-commerce business would not be affected by the turmoil.

A Chinese merchant operating on TikTok E-commerce also expressed optimism. In their view, the current development state of TikTok E-commerce in the U.S. is similar to that of Douyin E-commerce in China around 2020, with small and medium-sized merchants able to achieve around 1,000 orders per day.

However, the consumption habits of U.S. users differ significantly from those of Chinese users. Internal meeting materials show that short videos are the primary source of GMV (Gross Merchandise Volume) for TikTok E-commerce in the U.S., accounting for about 40%, while the mall contributes around 30%, and live streaming only accounts for about 10%. Within the mall GMV, search accounts for 40%, recommendations for 25%, and channel pages for 10%.

In contrast, users in countries like Indonesia, Malaysia, Cambodia, and Thailand have consumption habits more similar to those in China, as they are more willing to shop through live-streaming e-commerce.

U.S. users tend to be more rational in their consumption, which translates to lower operational costs for merchants.

On one hand, the return rate in the U.S. market is lower. According to the aforementioned source close to TikTok E-commerce, the current average return rate for TikTok E-commerce in the U.S. is around 5%, while Douyin E-commerce in China has an average return rate of 40%, with some categories like apparel even exceeding 70%.

On the other hand, content operation costs for merchants are lower in the U.S. market. Several merchants have stated that Douyin E-commerce no longer has organic traffic, and merchants cannot achieve sales without paid promotions.

Since last year, the competition within Douyin E-commerce has intensified, making it increasingly difficult for small and medium-sized merchants to earn profits. In contrast, TikTok E-commerce still has organic traffic, and merchants can generate a steady stream of orders simply by promoting products through short videos.

As a result, a large number of small and medium-sized merchants and MCN agencies that could no longer make profits on Douyin have shifted to TikTok E-commerce in the U.S.

A manager from an MCN agency suggested that over 90% of the merchants on TikTok E-commerce are from China, stating, The U.S. understanding of the influencer economy is far less developed than China's.

Amid this trend, TikTok E-commerce adjusted its merchant entry policy for the U.S. region at the end of November last year.

One significant change is that merchants no longer need to provide third-party e-commerce platform experience or U.S.-based operational qualifications to enter the U.S. TikTok E-commerce market. They can now register with business licenses from mainland China or Hong Kong.

Before the adjustment, the majority of merchants on TikTok E-commerce in the U.S. were those who had achieved a certain scale on Amazon. Small and medium-sized merchants had to rent qualifications from U.S.-based companies, which posed a high barrier to entry., but TikTok's E-commerce department internally believes that the U.S. e-commerce business has vast growth potential, as paid traffic only accounts for 20%-30% of the total traffic, which is not a high proportion.