The influencer marketing industry is projected to grow in value to $15 billion this year, demonstrating its huge potential for creating profit for brands. As a result, social media companies have optimised their platforms to capitalise on this potential, transforming their platforms into functioning retailers, where consumers can purchase products as they scroll through socials.
Instagram has introduced Instagram Shopping, where users can browse and buy products from images and videos, while YouTube launched a live shopping feature. Following the success of these social platform-turned-retailers, and influenced by its own success in China, ByteDance’s TikTok intended to expand its social commerce feature to Western markets. However, the initiative fell flat, and TikTok has consequently cancelled its ecommerce expansion plan.
Why TikTok’s livestream shopping wasn’t a success in western markets
Last year’s launch of TikTok Shop failed to attract enough consumers in Western markets to make it a financial success and many abandoned the scheme after seeing a lack of engagement and a lack of influencer opportunity to benefit from the model. The fact is, western markets are not comfortable enough to buy from this QVC livestream style of selling, as it’s still an unfamiliar environment. Therefore, brands and followers have been slower to adapt to this form of promotional content.
This is a stark contrast to the evident success in the East, where there have been over ten billion products sold on TikTok’s sister app, known as Douyin. As a result of the larger volumes of consumers engaging with and buying via the social media platform’s online shopping channel, more influencers have also adopted the format in China. They have been incentivised to produce content with commission on each unit they sell, resulting in broadcasting for long periods of time - often up to fourteen hours - and continuously discounting the prices of the products over the hours. The combination has supported the success of Douyin’s shopping format in China compared to the comparatively poor performance in the West.
The success in China has created a domino effect across Asia, as TikTok Shop has now launched in Thailand, Malaysia and Vietnam and has been available in Indonesia since last year. It is now a waiting game to see whether the success across Asia will follow in the footsteps of Chinese consumers, with sales soaring, or whether it will follow a similar path to the UK and fail to take off.
What TikTok can learn from the trial and other rival social media platforms
As brands needed to offer commission to influencers to incentivise sales as well as offering heavy discounts to attract consumers to buy in the moment, the margins were so low per unit that high volumes of sales were necessary to turn a substantial enough profit. Coupled with the cost of creating and running a live stream, it was a challenge for brands to make TikTok Shop viable without a significant amount of consumers engaging.
Only as consumer awareness increases, will consumer confidence in this new style of shopping format also grow. As the idea of shopping on TikTok is still relatively unfamiliar, consumers should be given time to understand it more and engage with the content.
Although consumers may find the model of TikTok Shop feels overly promotional in comparison to other social shopping formats, where the process feels less transactional, they are ultimately becoming more used to social commerce and so there is still potential for TikTok Shop to succeed if it’s able to grow awareness and adapt its approach.
How social commerce has evolved and what the future holds
According to Statista, social commerce is expected to exceed $3 trillion in revenue worldwide by 2028. As the line between social media and shopping continues to blur, it can be assumed that slowly, in western markets social commerce will continue to grow.
This will be accelerated as digital-first generations mature. Generation Z users for example, are much more accustomed to online shopping than their predecessors, further confirming the potential for social commerce. Recent data shows that over half of social media users (55%) in this demographic have already bought something via social media. This could translate into future sales on livestreaming formats as the Gen Z audience grows in size and purchasing power, with Gen Z expected to account for over 60% of social commerce spend globally by 2025.
Ensuring that TikTok targets its audience correctly, tailoring content accordingly is now pivotal for the platform’s future expansion plans. Though TikTok shop has been proven by eastern markets to have huge potential, allowing the audience to become comfortable with making payments through social media is what TikTok now should focus on in order to attract engagement and investment.
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