TikTok to challenge Shein and Temu in the US by expanding retail business

TikTok is set to expand its online retail business to the US in early August, according to the Wall Street Journal, in a bid to replicate rivals Shein and Temu’s success in the world’s second-largest e-commerce market. The short video app was thought to be ready to launch the service earlier this year, but delayed the move in May amid concerns from merchants over geopolitical tensions, as previously reported by the WSJ.

Why it matters: The move indicates that TikTok is aiming to earn more revenue from its largest audience market, despite continued threats by American politicians over what they see as the firm’s links to the Chinese authorities. The short video operator has reportedly set a goal for its global e-commerce operation to increase its total sales more than fourfold this year to $20 billion.

Details: On a page called TikTok Shop Shopping Center, users can browse and purchase products, though the model differs slightly from its initial plan to establish a third-party sellers’ platform.

• TikTok will store and ship products for Chinese manufacturers and merchants, from clothing and electronics to kitchen utensils, while also being responsible for marketing, transactions, logistics, and after-sales services, according to the WSJ report.
• Under the so-called “full-service model,” which is currently used by Chinese cross-border e-commerce platforms such as Temu, the popular short-form video streaming platform would only pay Chinese suppliers once US-based clients have placed orders to avoid “inventory buildup.”
• TikTok’s first expansion of its e-commerce outside of Asia came in the UK in 2021, but selling products through live streaming or short videos – a popular approach in China – has not fully appealed to consumers in that country.

Context: The short video app, owned by Beijing-based ByteDance, is used by over 150 million users in the US. However, as TikTok steps up its presence in the country’s e-commerce market, it is facing increasingly strict regulatory scrutiny. The Biden administration in March demanded TikTok be sold or potentially face a national ban in its largest market.

• Last September, Temu launched in the US and quickly found success. But it has been in an intense public dispute with Shein, the low-profile fast-fashion giant established in China, in recent months. Temu sued Shein this month in a federal court, accusing it of violating antitrust laws. This came after Shein sued Temu last December, alleging that it had hired social media influencers to defame Shein.
• TikTok’s entry may escalate this competition further, as some of the professional buyers, warehouses, and order managers recruited by TikTok have been poached from these two competitors, according to the WSJ.