TikTok is Seeking to Scale its Logistics
The growth of TikTok has been nothing short of extraordinary. The viral video-sharing platform boasts 150 million users in the US alone, and ByteDance (the Chinese parent company) is now looking to replicate Amazon.com’s logistics success in a bid to compete directly in the larger e-commerce space.
During Amazon’s early days partnerships with FedEx and United Parcel Service enabled the e-commerce giant to scale using trusted, expert carriers. Amazon ultimately reached the point where a network of Amazon-specific distribution centers and their own fleet was feasible. Today, Amazon alone represents 40% of the US e-commerce market.
The e-commerce space is crowded and analysts believe TikTok’s move to provide their own logistics services could result in a similar development path as Amazon. Currently, TikTok relies on third-party sellers for fulfillment services but the emergence of TikTok Shop is what ByteDance believes will attract more users coupled with an efficient and reliable delivery service. Newegg and ShipBob, two prominent logistics providers, are in talks with TikTok to handle the storage, picking, packing, and shipping of orders. Private delivery networks will then manage deliveries.
The ultimate success of TikTok Shop, however, will depend solely on the shopping experience. The app is already wildly successful in its algorithm’s ability to target video feeds per user and this has naturally given rise to content creators and similar influencers. With TikTok Shop, users can watch the modeled product and then click a link to purchase, similar to TV home-shopping channels like HSN or QVC.
An unquestionable challenge will be keeping up with inventory once a product goes viral. This is common with well-known influencers and a surge in orders can easily collapse even the most mature supply chains. Another hurdle will be payments. It is infrequent for customers to enter credit card information into social-media apps. This will evolve over time but there will always be a percentage that will not feel comfortable with this model. Lastly, the regulatory hurdles loom for TikTok. There is still a contingent intent on severely restricting to outright banning TikTok in the US. Geo-political events could accelerate legislative positions.