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Will TikTok Shop Dominate Social Commerce in 2024?

TikTok Shop is anticipating $20B in revenue for 2023. That’s a grand goal, especially considering that, according to Insider Intelligence, social commerce will make up only 5.9% of U.S. retail eCommerce sales this year. TikTok Shop: The Rise of Social Commerce However, TikTok could be on to something. In 2022, the State of Social Commerce Annual […]
Written By Todd Piechowski
Published on November 14, 2023   |5 minute read

TikTok Shop is anticipating $20B in revenue for 2023. That’s a grand goal, especially considering that, according to Insider Intelligence, social commerce will make up only 5.9% of U.S. retail eCommerce sales this year.

TikTok Shop: The Rise of Social Commerce

However, TikTok could be on to something. In 2022, the State of Social Commerce Annual Review by SimplicityDX stated that social media is the most important new customer acquisition channel for many brands and represents up to 30% of eCommerce site revenue.

Furthermore, In a recent 2023 report, DigiDay & Klaviyo reported that DTC brands see Social Media influencers as the top channel for driving their DTC marketing outcomes. And they predicted it will be even more important in 2024.

Lastly, and just last month, Envision Horizons Gen Z Report showed that 72% of Gen Z consumers are discovering new products on TikTok, over 60% on YouTube and lastly over 50% on Instagram.

If that’s the case, why has social commerce not led revenue growth for these platforms? Meta has arguably the largest “social commerce” platform with their Facebook marketplace but their shop has been underwhelming at best. In a 2022 survey, only 10% of users stated they had recently bought something from Facebook Shop. I have to imagine that even that 10% experienced some confusion as to the difference of purchasing on Facebook shop vs. Facebook Marketplace. Additionally, Instagram recently closed shop (literally) and pulled live-streaming from their platform.

Amazon’s Social Commerce Efforts

Even on the other side of the coin, Amazon hasn’t been able to crack the “social” component of the social commerce code despite huge efforts over the years. Let’s remember Amazon Spark, Amazon Live slow to make a meaningful impact, Inspire being a slow burn, Posts and on and on. Perhaps building the social component after the fact is not most conducive to organic buzz and ultimately, adoption.

Amazon App
Amazon Spark – photo courtesy TechCrunch

Why have consumers historically been so adverse to purchasing on social platforms? Some research from SimplicityDX says that 1) consumers prefer to finalize shopping on trusted brand websites (data & privacy is enhanced), 2) that the flow is too problematic on social websites and 3) the fear of having to return an item or 4) interact with the brand is confusing or difficult.

That leads us to 2023 and the rise of TikTok Shop and their reported effort to reach $20B in sales for the year. Touted by some as a “Place to Hawk Junk”, TikTok Shop has seen impressive growth since just launching earlier this year. The evolution is clear: while in 2022 only 9.6% of users made purchases through TikTok, that number is predicted to jump to 33.3% in 2023.

Additionally, according to eMarketer, the number of social buyers is growing at a fast enough pace to surpass Pinterest and come neck to neck with Instagram. Social buyers are great, but converting them is what matters. And herein is the reason why TikTok has the recipe to turn social buyers into actual social commerce dollars.

TikTok Social Commerce
eMarketer

What Makes TikTop Shop Different

  1. The affiliate recruitment, payment and promotional flywheel is inherent to the Shop structure. TikTok’s democratized affiliate system is very powerful – ordinary people can easily request free samples, make authentic review videos, and earn commissions. Some products have earned over $10 million just from these affiliate videos.
  2. TikTok has simplified the buyer shopping experience. Discover on social, buy on social has never been as easy on TikTok Shop. The hard landing issue of sending users from social to another (separate) transactional website and lowering conversions is pushed aside. The shoppable button is on the feed and in-app. Of course, this was also the case for Facebook Shop and Instagram, but the plugged in short-form video convincing seems to be moving the needle here. In fact, one reporter said that the new TikTok Shop is “so easy to use [that] it’s actually dangerous.”
  3. Trust & Social proof is baked in, creators are showcasing products in front of the consumer in real time (Live-stream) or in their videos. Couple that with a place to leave product reviews and it’s easy for a consumer to make a quick judgment on product quality.
  4. TikTok is set to spend $500 million in 2023 on TikTok Shop and part of that effort is 1) To offer discounts and promotions to bring in first-time TikTok Shop customers but 2) To improve on an operational system that supports the growth in customer service needs, to vet Shop sellers and to ensure a trusted transaction and fast shipping from within the US only. A good transactional experience, with quality goods is essential for repeat purchases and growth of the platform.

What do you think about the potential of TikTok Shop? Have they finally cracked the code of Social Commerce?

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