TikTok has enlisted the help of tech start-ups to improve its struggling ecommerce operations, as the fast-growing social media platform ramps up a push to diversify its revenues amid a slowdown in digital advertising.
Social commerce, where users can buy items without leaving the social media app, has seen massive success in China. TikTok’s sister app Douyin enjoyed a 300 per cent rise in sales year on year in the 12 months to May, with users buying more than 10bn products.
China’s ByteDance, which owns both TikTok and Douyin, plans to expand this model globally through TikTok Shop, which launched last year in the UK and south-east Asia.
But TikTok’s ecommerce rollout has been hit with a series of problems. Staff have left the department complaining of burnout, brands have abandoned the platform due to a lack of sales, and customers have complained about shipping delays and being sold counterfeit products.
TikTok has begun working with a handful of start-ups in recent weeks to remedy some of these issues and encourage sellers and buyers to use the platform. This includes ChannelEngine, TalkShopLive and YunExpress, which specialise in software that integrates shopping technology and fulfils orders.
The decision to outsource some operations to external companies is the latest effort by TikTok to boost its ecommerce arm, an area of the market it is betting on becoming a core revenue stream in the future.
It is not the first time the group has outsourced technology for live shopping. In October, the Financial Times revealed TikTok was teaming up with TalkShopLive to provide the underlying technology for live shopping features in North America, which the platform officially launched at the beginning of this month.
TikTok’s doubling down comes as the company slashed its global revenue targets for 2022 by at least 20 per cent in September as it struggles to meet ambitious goals, according to four people familiar with the move.
Social media rivals, including Meta and YouTube, have experimented with shopping features over the past few years in an attempt to diversify their revenue streams.
Earlier this month, the FT revealed that YouTube was testing shopping links in Shorts, its short-form video offering set up to chase TikTok’s exponential growth. Instagram has also been experimenting with shopping over the past few years, with limited success.
Multiple retailers and brands have previously told the FT they ended partnerships with TikTok Shop as the technology was too difficult to navigate and the level of resources needed to sell on the app was not worth the returns.
Jorrit Steinz, founder and chief executive of ChannelEngine, one of the new software companies working with TikTok Shop, said that TikTok recognised there is a “challenge” to get brands on to the platform.
ChannelEngine offers brands and retailers software to sign up easily to multiple online marketplaces and has more than 1,500 brands selling across 200 marketplaces on its platform.
Over the summer, the TikTok UK office received around 200 new customer complaints each day from users who had bought items on the app, primarily due to shipping issues with customers waiting months for orders to be delivered, according to an employee.
As the holiday season approaches, TikTok has been hiring internal fulfilment staff in the US and the UK to build a “new fulfilment service from scratch” across the US, EU and UK, according to job descriptions on the company’s website.
Zendbox, a Kent-based fulfilment company, has also launched a service to help sellers fulfil TikTok shop orders from its warehouse, although it is not an official partner.
“[We] saw the opportunity, advantages and the need,” said Chris Sherlock, chief revenue officer at Zendbox, who said they have seen gradual take-up of the feature.
TikTok said it has robust anti-counterfeit policies, reporting measures, and clear refund policies where customers can appeal if their items have not been delivered or have been delivered in an unsatisfactory condition.
TikTok declined to comment on the partnerships.
Source: Financial Times