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Will 2024 be the year of TikTok Shop?
The video app has big ambitions to grow its storefront, which rolled out for US users in September 2023. Already, the orange “eligible for commission” tag has become ubiquitous while scrolling the app: products like clothing, eye treatments, wellness supplements, phone accessories and even noodles are heavily promoted across the platform.
Most items are cheap to buy — in the $4-25 range, fit for impulse purchases — and quality can be dubious, with multiple listings for the same item appearing across the platform at different price points. This is, in part, thanks to the extremely low barrier to entry at launch: anyone with a verified account could list goods subject to just 2 per cent commission fees. This ushered in a slew of dupes and fake products, alongside random items such as pickle kits, purple toothpaste and ice trays.
Moving into this year, TikTok Shop is showing signs of maturing. This month, the company said it will raise commission fees from 2 to 8 per cent per transaction (which is still low compared to other industry players, which can charge up to 20 per cent) and has also started reducing merchant subsidies. In 2024, TikTok wants to grow its Shop offering. Ahead of the product’s first full year up and running, the vision is to onboard more brands – both large and small – and to continue to evolve the Shop feature. TikTok’s wider ambition is to develop Shop into a large-scale closed-loop social commerce offering. (TikTok doesn’t disclose revenue figures, so it’s difficult to pinpoint just how large that scale will be.)
Commerce has long been a difficult bridge for social platforms to cross. This time last year, Instagram removed its Shop tab, scaling back its commerce efforts. TikTok’s approach has been to go all in — making big investments in order to own the path to purchase, stemming from the inspiration and recommendations rampant on the app. TikTok Shop is easy to use without leaving the app because it has integrated prepayment tools (a common Insta Shop critique was that users had to input payment details). TikTok also incorporates reviews from TikTok users and search engines to boost trust. Last June, the company inked deals in the US to open a string of warehouses where it could manage order fulfilment and fast shipping — something social media companies have typically shied away from.
By handling its fulfilment and logistics, TikTok is positioning itself to compete with Amazon, says Permele Doyle, co-founder and president of influencer marketing agency Billion Dollar Boy. This is likely to appeal to sellers (because it’s less work for them) and appeal to consumers because of the ease and convenience. But the “Amazon Prime Effect” is a double-edged sword, says Biz Sherbert, culture editor at creative agency The Digital Fairy. “It can create a level of scepticism with consumers who are aware of the problems associated with logistics controlled by big business, like the labour issues at Amazon warehouses,” she says. (Amazon has faced a series of allegations of safety issues in its warehouses. Amazon denies these.) “It can also disrupt the perceived effect of supporting a small business that TikTok Shops often base their marketing on.”
But just because TikTok builds it, doesn’t mean the brands will come — and so far, fashion and beauty brands may be wary of the seller and product landscape.
The increased seller fees could help solve that, upping the quality of TikTok Shop offerings, experts agree. “With the raised entry requirements for TikTok Shop, we’re likely to see a marketplace that's more about curated quality,” says Eileen Flynn, chief strategy officer at youth agency Archrival. Doyle agrees, noting that vendors will be forced to prioritise selling products with bigger margins. Prices may also have to rise in order to accommodate the increased fees, she flags.
Doyle says that the prime TikTok Shop customer is likely to be Gen Z — younger shoppers who are influenced by what they see promoted on the app and more likely to follow the “TikTok made me buy it” mantra. This is a high-priority category of shoppers for fashion and beauty brands, but whether or not TikTok Shop is worthwhile remains to be seen. Do its shoppers care what brands are there?
“Social commerce is more likely to be embraced by younger generations, and impulsive shopping behaviours are commonly seen in these audiences and with in-app shopping,” she says. “These more accessible products can lean into the buying hype cycle, especially for younger consumers with limited disposable income.”
Still early days
Brands shouldn’t launch on Shop for the sake of it. “Brands really need to look at it as an entirely new platform and not a passive add-on in the hope of selling a product,” says Jordan Mulvaney, creative digital strategist at The Digital Fairy. They should think about whether their products align with current hot topics and trends. Mulvaney flags Y2K’s impact on sales of digital cameras and MP3 players, for instance (notably non-fashion).
Because it’s still in its early days, Ted Raad, Trend Management founder and CEO, hopes that TikTok will keep the barrier to entry relatively low. By doing so, it’s more likely to attract major brands that aren’t sold but are open to testing. (Despite the price hike, TikTok Shop’s 8 per cent commission is still well below the majority of Amazon’s cuts, which range from 8 to 20 per cent.)
It’s difficult to cultivate a strategy for Shop at this early stage, says Camilla Williams, co-founder of fashion brand House of Sunny, because of how dependent virality and reach are on fleeting trends. “As of now, we believe there isn’t a single, fixed strategy for predicting virality,” she says. Despite this unpredictability, going viral by engaging with emerging trends forms the basis for House of Sunny’s 2024 Shop strategy.
Brands are leaning on TikTok creators to boost their Shop presence. Skincare brand 4AM Skin co-founder Jade Beguelin says that, as a rule, creator videos do better than those from the brand’s own account. The fact that she and co-founder Sabrina Sade are creators themselves has also helped to boost the brand’s Shop presence, Beguelin says. House of Sunny plans to collaborate with content creators with a large presence on TikTok to tap their audiences and reach in a bid to hop on emerging 2024 TikTok trends quickly. 4AM also hopes to get more Shop-embracing creators on board for the year ahead. “There are different commission structures available, if you have the margin available to you, having an open commission for everyone improves the likelihood of some amazing organic content,” Beguelin says. New York-based ready-to-wear brand Figue will also lean on influencers to infuse a sense of relatability into the brand’s TikTok presence.
TikTok content
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Others, such as beauty brand Refy, though, are holding off entirely. “TikTok Shop has been an interesting opportunity for brands as it does drive a lot of coverage from creators you may otherwise never reach through influencer outreach and discovery,” says CEO Jenna Meek. “However, from our experience, TikTok has a bit of work to do to create a seamless shopping experience before we look to adopt it into our creator strategy.”
Is fashion into it?
The price hike may foster a more premium environment, but not everyone is convinced 2024 will be the year Shop takes off for fashion. “Looking ahead, I predict that TikTok Shop will not be leveraged as a core strategy for many brands, mainly due to the fact that promotional cadence and creator partnerships can not be controlled,” says Julianne Fraser, founder of influencer marketing agency Dialogue New York.
TikTok Shop doesn’t yet feel premium, says The Digital Fairy’s Mulvaney. “TikTok Shop is still in its infancy,” she says. “It’s yet to establish any sense of being ‘premium’ due to the low price of products that feel more in line with cheap fast fashion like Shein as opposed to the more expensive items.”
Beauty lends itself more to TikTok Shop than fashion because of the on-average lower prices. 4AM Skin has found success converting existing audiences to buyers via Shop but notes that the lower-priced items tend to do better. “It is definitely more of a lift to get AOV over $75,” Beguelin says.
“As a smaller luxury brand, the challenge is real,” says Figue’s director of social Taylor Jannotte. “I mean, are people really scrolling through TikTok with an $800 blouse on their minds? It’s not like we have the immediate recognition of Chanel or Dior, making it challenging to grab attention and convert without that big buzz.” Figue showcases the brand’s embroidery and the glass beading to give a glimpse into why the product comes with a higher price tag. “Even if they’re not hitting the ‘buy’ button right away, they’re getting a front row seat to the foundation and construction of our product. That is a crucial part of our TikTok social strategy — educating our audience on what makes our pieces stand out, even in a sea of scrolling,” Jannotte says.
Brands are intent on making Shop work in 2024. “Chatting with many industry contacts over the past year, it’s clear that it’s all about entertainment value in the luxury and TikTok scene,” Jannotte says. Figue is leaning into this entertainment-first approach for Shop. House of Sunny saw major growth on the platform in 2023, making Shop a key focus for 2024, says co-founder Williams. The brand sells its clothing on the app (priced mainly in the high tens/low hundreds) and saw success with its ‘high summer’ 2023 collection (TikTok’s ‘tomato girl summer’ era).
There’s potential for fashion on the channel, Mulvaney says. Evergreen categories within fashion, like accessories and clothing, will always have a place because they are key buckets for TikTok creators, she says. “This aligns closely with user behaviour on the platform, with many creators being asked to drop the details of their ’fit — while everyday creators (whether fashion or not) are being influenced and are influencing the fashion world.”
Luxury and lifestyle brands should consider dipping their toes in Shop, Doyle says — noting that they should stick to testing this coming year. “They can consider employing strategies like scarcity selling, exclusive launches with countdowns and limited-edition sales, which have proven to be successful on social commerce platforms in the past.”
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