The impacts of TikTok Shop on traditional retail

Discover how TikTok Shop is rewriting the rules of traditional shopping and opening up exciting avenues for businesses.

You heard it right, we’re not here to talk about Kesha’s viral debut single, TiK ToK but the burgeoning social media app by ByteDance that has taken the commerce industry by storm – TikTok.

In recent years, TikTok has emerged as one of the most prominent social media platforms, especially among younger generations. Owing to its concise video format and the predisposition to spark viral trends, it has evolved into a nucleus for entertainment, education, and purchases. However, in addition to its social and cultural impact, TikTok is also transforming the eCommerce landscape, posing a challenge to traditional retail models. In this blog post, we will explore the impact of TikTok eCommerce on traditional retail, and how this trend is reshaping the way we shop.

In August 2021, TikTok launched its own eCommerce feature. Also known as TikTok Shop, creators can add links to products in their videos. Users can now purchase products directly from TikTok without having to leave the app. This has opened a new world of opportunities for businesses and influencers, who can now monetise their TikTok content and generate sales in real-time. In fact, many businesses are now using TikTok as a marketing tool to reach new audiences, showcase their products, and drive traffic to their eCommerce sites. With more than 1 billion active users worldwide, TikTok has joined Meta in becoming a significant player in social commerce.

Over billions of active users on TikTok in the Southeast Asia region in the past six months
Source: data.ai

The impact of ecommerce on traditional retailers

There is no doubt that ecommerce platforms, such as TikTok shop, have a huge influence on traditional retailers.

Ecommerce has massively changed the way people go from finding products to transacting. Here are some of the impacts of ecommerce on traditional retail that business owners should understand:

1. Disruption of traditional retail models

In the past, retail was dominated by physical stores, which relied on having on-site locations and traditional advertising methods to attract customers. However, with the rise of eCommerce, more and more customers are turning to online shopping, and this trend has only accelerated with the COVID-19 pandemic.

TikTok eCommerce takes this one step further, by allowing customers to purchase products directly from the app in the comfort of their homes. This has posed a significant challenge to traditional retailers, who now must compete with the convenience and accessibility of TikTok eCommerce.

For example, a customer may see a product they like on TikTok and decide to buy it on the spot, rather than waiting to visit a physical store or searching for the product online. If businesses do not have a strong online presence or use trending social media platforms like TikTok, they are at risk of losing out on potential high-value customers.

2. Establishment of new business models and revenue streams

TikTok is created based on the concept of social sharing, whereby users create and share content with their followers. This aspect has fostered the advent of a new type of influencer – TikTok influencer. Such influencers amass a vast following and thus, have the power to influence their followers’ buying decisions.

Many businesses are now partnering with influencers and creators on TikTok, who can promote their products to their followers and drive sales. This has led to the emergence of a new type of eCommerce, known as "influencer commerce", which leverages the power of social media to drive sales. In fact, many influencers are now becoming entrepreneurs, by launching their own eCommerce businesses and using TikTok as a marketing tool.

3. Increased relevance of content recommendations

The algorithm of TikTok is designed to feed users with content that resonates with them. This spell out the advantage that businesses and influencers should make use of by creating engaging and relevant content so that they have a higher chance of reaching a wider audience. This spearheaded the materialisation of new trends, such as the unboxing of product videos, that have become popular among users.

Although the unboxing trend started in the early 2000s on YouTube, they’re mostly centred around gaming and electronic items. Nonetheless, this trend is resuming its popularity, especially for luxury goods because it is now being leveraged by a new generation of TikTok creators. In fact, this #unboxing hashtag has garnered 44.3 billion views on TikTok since 2018. Here’s a tip for luxury and fashion brands: ensure the legitimacy of your merchandise unboxing in your video so that you can attract the younger generation of consumers!

4. Options to compare product

If people used to do window shopping by walking from one store to another, then the advent of ecommerce such as TikTok Shop has changed that.

Besides being able to make transactions online, consumers now have the convenience of doing product comparisons online. They are now more concerned about reviews, comments, and want exceptional online services.

In addition to comparing product types or quality, consumers can now also compare product prices very easily.

All this convenience will certainly have an impact on physical visits to retail stores because all the information that consumers need is almost all available online.

5. Demand for faster shipping

The advent of online shopping has created a new need for speedy delivery. Companies must adapt by changing their supply chain strategies to accommodate these consumer needs.

This change in strategy also creates new logistics and fulfilment challenges for traditional retailers. For example, studies show that many online consumers want their goods to arrive in no more than 2 days. While the majority of consumers say they will not shop at a place where deliveries are delayed up to 3 times.

6. 24/7 Availability

One of the biggest impacts of ecommerce on mortar and brick stores is probably 24/7 availability. Ecommerce platforms, such as TikTok Shop, allow stores to be open for a full day. The presence of technologies like Chatbot can also help stores to serve customers when human agents are not available.

Traditional retail stores may be able to stay open for a whole day, but it will definitely have an impact on operational costs as it requires more people to split the work shifts.

Challenges of TikTok Shop

Despite the positive influence on businesses and consumers, it is important to note that TikTok Shop is not insusceptible to challenges.

1. Trust and authenticity

With so many businesses and influencers promoting products on TikTok, it can be difficult for customers to ascertain the authenticity of the products that are being promoted or sold. This has led to an upswing of fake products and scams on the platform, undermining customer trust and damaging the reputation of businesses and creators.

2. Limited audience targeting

While TikTok has a massive user base, it may not be the best platform for targeting specific audiences. For example, if you are selling products that are primarily targeted towards older adults like Baby Boomers and Gen X, TikTok may not be the best platform to reach them as the app primarily targets audiences that are much younger such as millennials and Gen Zs.

3. Competing with influencers

TikTok is a platform that is dominated by influencers, and they often have a lot of influence over their followers' purchasing decisions. As a result, it can be challenging for a retail business on TikTok to compete with them without having other influencers promote your brand on their platform.

4. Relatively high content creation cost

TikTok is a platform that relies on video. The cost of creating a video itself is relatively higher than the cost of creating other types of content, such as articles on a website or images on social media like Instagram. The need to post regularly can also make TikTok's content creation costs even higher.

Therefore, businesses that still have a relatively low marketing budget may find it difficult to sell on TikTok.

Leverage TikTok Shop to elevate your business to the next level

The emergence of TikTok eCommerce has transformed the shopping experience of consumers and posed a challenge to traditional retail models. Its potential to disrupt conventional retail and create new business models is both invigorating and tricky for businesses and influencers alike. Nevertheless, a judicious approach towards TikTok eCommerce is essential, with an emphasis on maintaining authenticity and reliability amongst businesses and creators to foster lasting customer relationships. As TikTok continues to grow in popularity, it is likely that its impact on eCommerce and retail will only continue to grow.

Curious about how you can leverage this social platform for your brand or business? Contact our eCommerce growth experts today.

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