TikTok as a Social Commerce Platform

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This article is an excerpt from a technology decision analysis for my M.S. program.

TikTok as a Social Commerce

Starting from 2019, TikTok has been delving into the social commerce market following other social media platforms such as Facebook, Instagram, and Pinterest. In 2019, TikTok simply allowed users to add shoppable links to their bios. However, starting in October 2020, TikTok officially took off its social commerce entrance by forming an unprecedented partnership with Shopify.

TikTok invested in social commerce technologies with three approaches: 1) Tech-Partnership With Commerce Platforms, 2) Development Of In-App Shopping Features, 3) Investment Of Next-Generation Shopping Features.

1) Tech-Partnership with Commerce Platforms

Like other social media platforms, TikTok announced tech-partnerships with multiple eCommerce platforms. In October 2020, TikTok and Shopify proudly reported their partnerships. With their technology integration, Shopify merchants can reach TikTok’s younger audience by posting their products directly from Shopify. For example, Shopify merchants can connect their TikTok for Business accounts with Shopify accounts and sell products on TikTok via in-feed shoppable video ads. Moreover, everything is managed via Shopify’s dashboard, including ad creation, targeting, optimization, and tracking. TikTok also partnered with a commerce platform Teespring to allow creators to create and sell merchandise directly from the app.

2) Development of In-app Shopping Features

In addition to the tech-partnership, TikTok has started to develop in-app shopping features to streamline customers’ shopping experience. For example, as an advanced form of shoppable link in bio, TikTok developed the “Shop Now” button which enables users to shop the selected item without leaving the application. The “Shop Now” button had been adopted by Levi’s collaboration with TikTok’s creator in April 2020. Moreover, TikTok announced to add an automated commission tool that lets its most popular users share links to products and automatically earn a commission based on generated sales.

3) Investment of Next Generation Shopping Features

To compete with existing social commerce platforms, TikTok is continuously developing next-generation shopping features such as live streaming and augmented reality experience. In December 2020, TikTok collaborated with Walmart to pilot test live streamed video shopping. During the live streaming shopping event, products were shown by the influencers and watchers were able to tap on the products, add to their cart, and make payments. Alternatively, watchers were also allowed to add products and make purchases after the live streaming event was over.

Disruptive or Sustaining?

According to Catching the Wave, an article that was written by Joseph L. Bower and Clayton M. Christensen, technology innovation can be categorized into two: sustaining innovation and disruptive innovation. Sustaining innovation allows companies to maintain a steady rate of product improvement while disruptive innovation often forces companies to sacrifice performance along dimensions that are important to current customers and offer a very different package of attributes that are not yet valued by those customers.

TikTok started as a social media platform with a mission to “inspire creativity and bring joy”. Its majority of users are aged between 10 and 29, comprising about 61% of the total users. The value creates for them is entertainment which TikTok’s existing features such as “response” and “duet” are for. On the other hand, TikTok’s new adventure of social commerce does not fully address its existing users’ needs. In fact, social commerce features such as “Shop Now” and live streaming do not necessarily offer entertainment, but rather provide a new way of shopping. Thus, TikTok’s adoption of social commerce technology is disruptive innovation.

If so, why is TikTok investing in a disruptive innovation when even leading companies fail to find the right market for the disruptive innovation?

Shaping Strategies

TikTok, in fact, is formulating a shaping strategy of the e-commerce industry by investing in social commerce technology. There are four elements of shaping strategies: Shaping View, Shaping Platform, Shapers Acts and Assets, and Participants. The most important quality of Shaping View is introducing a long-term direction and business opportunities to not only its own company, but to a broader economic, cultural, and technological forces. For example, TikTok is introducing a new e-commerce experience by integrating video-sharing and commerce. Users are gaining information about the products while entertained and merchants/companies are increasing their sales through a new advertising channel.

TikTok, the application itself is the Platform. In order for the shaping strategy to succeed, companies must provide at least one type of leverage to Participants. There are two types of leverages: development leverage and interaction leverage. Development leverage allows Participants to reduce the investment required to build and deliver products or services; interaction leverage reduces the cost and effort to coordinate participants’ activities. TikTok’s social commerce enables participants, both merchants, and buyers, to achieve their needs with lower effort and cost. For example, merchants can simply integrate in-app shopping features into their advertisement posts which are delivered to a wide range of audiences based on the configured target. On the other hand, buyers have access to extensive products as they explore entertainment. In other words, TikTok is reducing promotion efforts for merchants and product search efforts for buyers.

In order for a shaping strategy to work properly, the Platform requires a vast number of Participants who highly concern about the Acts and Assets of the shaper. Among many, the most important Acts of the shaper is the promise of a non-compete environment. In other words, Participants would be attracted to the Platform only if it does not compete directly with the Participants in terms of profitability. TikTok, for example, does not compete with its merchants in selling goods.

Conclusion

TikTok is now available in 154 countries worldwide and 75 languages. In the US alone, TikTok is estimated to pull in $500 Million in revenue in 2020. TikTok was able to grow internationally only with social media features that evoke the virality of content. 2021 will be the year of TikTok’s growth based on its social commerce technology investment. Considering its solid platform (in terms of the application itself and billions of users) and prospective shaping views, TikTok’s recent technology decision of adopting social commerce will become a boost of its profitable growth and a foundation of succeeding as a shaping leader.