TikTok is launching an e-commerce business to sell products made in China directly to US consumers from within its mobile app, starting next month.
The effort will see it operate warehouses in China, where it will store and ship domestically-made merchandise directly to customers.
In doing so, it will take on the hugely successful but controversial Chinese online retailer Shin & Temu, which sells cheap clothes, toys, electronics and home goods.
But TikTok hopes to take on those companies by marketing directly to its existing userbase and their more than one billion global users as they browse the app.
The new initiative is separate from the company’s existing and somewhat unsuccessful TikTok Shopping Center, which allowed users and third parties to list their own items for sale on the platform, with TikTok acting as the middle-man.
TikTok is launching an e-commerce business in early August to sell products made in China directly to consumers in the United States from within its mobile app. Photo of its CEO Show Ji Chiu
The new initiative is separate from the company’s existing and somewhat unsuccessful TikTok Shopping Center, which allowed users and third parties to list their own items for sale on the platform.
Now, TikTok will handle all logistics, including payments and shipping and after-sales services, according to The Wall Street Journal. The model will be similar to Amazon’s ‘Sold by Amazon’ program.
TikTok has struggled to grow its TikTok Shop model as users are reluctant to partner with the platform, which has been lambasted in Washington and faces existential threats from regulators.
Entering this new arena could increase pressure from the US government, which Shin and Temu already face.
A congressional report released in June was highly critical of the two agencies, with lawmakers accusing Temu of failing to maintain ‘even the semblance of a meaningful compliance program’.
“American consumers should be aware that there is an extremely high risk that the Temur supply chain is contaminated by forced labor,” the report said.
If the new business is successful, it could attract merchants who have so far been reluctant to list their own items for sale on the TikTok marketplace.
According to the Journal, a TikTok merchant manager told potential users last week that ‘the e-commerce landscape this year is just all platforms adopting this new model.’
“TikTok’s advantage over peer platforms T and S is that we have one billion monthly active users worldwide,” he said, referring to Temu and Shin.
According to market intelligence firm Sensor Tower, these two shopping platforms account for one-fifth of TikTok’s global user base.
It will take on controversial Chinese online retailers Shin and Temu when the new venture is launched
Temur owns Pinduoduo Inc., a popular e-commerce site in China and launched in the US last year
Streamlining the business model, TikTok will operate a ‘full-service model’, sources with knowledge of the venture told The Journal.
This would see TikTok pay Chinese suppliers only after they find buyers in the US and allow them to return unpopular items that aren’t selling.
The reported move comes at a time when TikTok is facing heightened scrutiny from US officials. TikTok Chief Executive Shou Ji Chiu faced questions from lawmakers at the Capitol in March about the app’s potential threat to national security.
The company is fighting to prevent a ban in the country after lawmakers introduced a bill that would give the Biden administration the power to ban apps that pose security risks.
Temur owns Pinduoduo Inc., a popular e-commerce site in China and launched in the US last year. According to data from Sensor Tower, it has grown tremendously since then and has around 80 million monthly users.
Sheen has been around for 15 years, and started by selling wedding dresses, but only expanded mainly into the US market in 2020 with the rise of online shopping thanks to the Covid pandemic.
An investigation published by Bloomberg News last year found that clothing sold by Schein in the United States contained cotton from China’s Xinjiang region.
The U.S. State Department banned cotton imports from the region in 2021 over concerns that the Chinese government was forcing Uyghurs to work in labor camps.
As TikTok competes with internet shopping goliaths by selling significantly cheaper products, it will likely come under similar scrutiny.
Ivy Yang, a technology analyst who previously worked for Alibaba, told The Journal: ‘It’s an uphill battle for TikTok, because not only is the competition fiercer for TikTok if it’s really good, but the challenges are greater.’
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