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Executives at TikTok and its parent company ByteDance are salivating over e-commerce.
It’s been a gold mine for TikTok’s Chinese sister app Douyin, with the company reporting in May that it sold more than 10 billion products in a single year.
But turning the platform’s US audience into that kind of cash is a different game — dominated by Amazon and its massive fleet of warehouses. As TikTok takes its initial steps into the physical side of e-commerce, several logistics experts told Insider not to expect the company to follow Amazon’s playbook.
TikTok has been experimenting with shopping features in the US since 2020 and recently moved to get into the shipping side of the business. It plans to hire more than a dozen US-based staff to work in areas like fulfillment and supply-chain logistics, according to current listings on its jobs portal. And several of its new Seattle and Los Angeles-based job posts, first spotted by Axios, tell applicants they’ll assist with the “planning and solution design of fulfillment centres [sic],” without specifying a location.
The move has sparked speculation that TikTok is planning to take on Amazon. Logistics experts say that would be a huge mistake.
“If you want to be anything like what Amazon has built you are $100 billion behind,” Matthew Hertz, cofounder of e-commerce logistics consultancy Second Marathon, said.
Rather than emulating the US’s biggest e-commerce success, TikTok is more likely to build a service with Chinese exemplars in mind, according to a logistics executive with knowledge of the company’s priorities, and industry analysts. International online sales and influencer-tailored services could be focus areas, as well as TikTok’s potential strategic advantage.
A TikTok spokesperson declined to comment on its US logistics plans, telling Insider it’s focused on “providing a valuable shopping experience in countries where TikTok Shop is currently offered across Southeast Asia and the UK, which includes providing merchants with a range of product features and delivery options.”
TikTok announced in September 2021 plans to offer a full-service e-commerce solution that would include shipping and fulfillment, with the rollout of its social commerce product, TikTok Shop. In July, China-based tech news site LatePost reported that TikTok planned to launch warehouses in the UK in a project referred to internally as “Aquaman.”
TikTok isn’t the only social platform looking to break into e-commerce. Competitors like Instagram and YouTube are also testing in-app commerce solutions, though neither company is attempting to handle warehousing or shipping on behalf of their sellers.
TikTok’s move into fulfillment isn’t new for its parent company ByteDance, which already offers its own logistics solutions within Douyin’s massive e-commerce business. Features released on Douyin can often be a harbinger of what’s to come next on TikTok, experts have told Insider.
“You cannot underestimate the size and power and potential that they have,” said Kevin Collins, president of ACI Logistix, referring to ByteDance.
The social-media giant’s first priority is to provide Chinese brands with a faster shipping pipeline to US consumers, which could involve stateside warehouses, said the logistics executive familiar with TikTok’s plans, who spoke anonymously to protect business relationships. Speedy cross-border shipping has stumped many players eager to succeed in both countries.
“Historically, US e-commerce has never been great in China and vice versa,” the logistics executive said.
Shein is one Chinese company that has managed this transition successfully, by focusing on the niche but fast-growing field of cross-border e-commerce logistics. Shein’s US president George Chiao told the Wall Street Journal in September that three US warehouses would shave three to four days off normal shipping times of 10 to 15 days.
In China’s $2.6 trillion e-commerce market, two-day delivery is table stakes, so meeting that speed for US customers from any global merchant would be the eventual goal for TikTok, the logistics executive said.
“Building local warehouses to support cross-border trade makes a lot of sense,” said Jason Goldberg, chief commerce-strategy officer at Publicis Groupe.
But, he added: “That’s way short of, ‘Oh my gosh, TikTok is going to compete with Amazon.'”
TikTok is uniquely placed to master the idiosyncrasies of influencer logistics.
With high spikes and low lulls in order volume tied to influencer-created and promoted products, logistics specialists have emerged within this unusual subset of US fulfillment businesses to handle the inconsistency and unpredictability of influencer-driven sales.
TikTok’s data on how its users engage with influencers and their product drops could give the platform a leg up in predicting demand for these kinds of sales.
“It’s almost going to need to be a collaboration between the data scientists and TikTok and the influencers’ knowledge of their own audience,” said Rick Watson, CEO of RMW Commerce Consulting. “If the forecast is wrong, then it’s a disaster. It doesn’t matter that you have fulfillment if there are no people in the facility to handle the demand or you didn’t buy enough inventory.”
Several of TikTok’s open logistics and fulfillment roles have the primary goal of researching and developing a plan for a US network, which suggests the company has not entirely decided on a strategy.
The job descriptions though, indicate that a full-scale operation is in the plan. A Seattle-based job for a Logistics Solutions Manager lists “inventory movement among different warehouses” and “direct line-haul,” as desired skills. Moving inventory between warehouses via truck (line-haul) suggests a fairly complex operation that many warehouse operators take years to reach.
Hertz and Collins said TikTok would be better off taking a stepwise approach that includes working with third-party logistics providers.
Many e-commerce businesses graduate from one company to another until “one day you no longer go through a third party because you’ve learned at each of those iterations,” said Collins.
Tech companies have previously stumbled when they tried to run too fast in this direction.
Japanese e-commerce company Rakuten acquired two US fulfillment companies in 2019 only to combine them and sell them back to the founder of one this year. EBay set out to offer logistics services through a network of partners in 2019, but the program never launched. Shopify has been through multiple iterations and plans to spend billions to create a fulfillment network that experts say will still not come close to Amazon’s footprint or capability.
“There are so many cautionary tales,” said Collins.
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