Home Money TikTok Shop’s Era of Super Subsidies Is Ending

TikTok Shop’s Era of Super Subsidies Is Ending

0 comment
TikTok Shop’s Era of Super Subsidies Is Ending

The days of buying ultra-cheap stuff on TikTok Shop may be over.

Costs from today TikTok fees sellers will increase from 2 percent to 6 percent of the price of each order. In July they will rise to 8 percent. The changes could mark a pivotal moment for people shopping on TikTok and for the platform itself, potentially driving up prices and testing consumer loyalty to the social app’s e-commerce game.

TikTok Shop launched in the US in September with remarkably low prices compared to other online stores, thanks to subsidies given to sellers and buyers. Influencers and entrepreneurs embraced the opportunity: TikTok saw a wave of sellers that surpassed the growth in the number of vendors at competitors like Shopify and Amazon, according to a March issue report of SamenWeb, which keeps track of web traffic. But since its inception, TikTok Shop has hosted deals that seem too good to be true, like deeply discounted (and possibly counterfeit) snail slime skincare products and Stanley cups, as well as jewelry, socks and other knick-knacks for less than $1.

After a successful holiday shopping season, TikTok Shop’s rate increases have the platform trying to prove it can become a sustainable, habit-forming mainstay in e-commerce. “The real test of (TikTok Shop’s) longevity and sustainability will be when these incentives start to roll back,” said Jasmine Enberg, chief social media analyst at Insider Intelligence, a market research firm. “Many of the sellers who have found success on TikTok Shop are smaller businesses that have really benefited from the incentives.”

If TikTok Shop continues to raise its rates, those sellers could struggle, Enberg predicts. TikTok did not comment on the rate changes for this story.

TikTok Shop’s seller fees are still lower than many fees Amazon sellers, which vary per type of product. The lowest is 5 percent for inexpensive clothing, but is generally between 8 and 20 percent for jewelry and fine art. But TikTok Shop is a different beast than the everything store. While many people turn to Amazon to search for necessities, buyers on TikTok Shop often find products they didn’t know they wanted through influencers and algorithmic discoveries – more similar to Temu or Shein.

TikTok sellers face the added challenge of making their pitches stand out from the parade of loud, viral video content the app offers. Influencers and brands selling through TikTok Shop need to convince people scrolling for entertainment to stop and shop. People are often “in the app to do something completely different,” says Michael Yamartino, an e-commerce expert and CEO of Route, a platform that helps brands ship orders.

Sellers who respond to higher costs by raising prices may find that they have lost a key ingredient necessary for success in TikTok’s e-commerce model. To grab the attention of TikTok users and get items into their virtual shopping carts, “you have to be loud,” Yamartino says. “You have to be shockingly cheap, shockingly attractive and super trendy.”

You may also like