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Advertisers are investing more in TikTok Shop two months after the products launched widely in the U.S., despite mostly lackluster results.
TikTok Shop launched officially in the U.S. Sept. 12 after months of testing. The tool lets millions of daily active users buy products directly from the app without having to go to a brand’s website.
Cosmetics brand BK Beauty joined TikTok Shop three months ago after investing ad spend in the single digits on the platform. Since joining, the company has more than doubled revenue, and TikTok Shop sales are exceeding all existing website sales, said co-founder Paul Jauregui. Earlier this month, BK Beauty became one of the top five beauty brands on TikTok, partly spurred by several viral videos about the company’s products that linked to TikTok Shops.
“Overnight, [TikTok Shop] has materially changed our business,” Jauregui said.
But other brands have not had such positive results, with most saying sales are lackluster. Still, two other ad buyers are increasing their investment in the channel to gain first-mover advantage in what they anticipate will be a growing source of consumer demand. For now, the platform is offering incentives such as ad credits, customer coupons and covering fulfillment charges, as well as offering a variety of promotions to gear up for Black Friday.
“We’re willing for it to be clunky, and we’re willing for it to be smaller,” said Darren D’Altorio, vp of social media at Wpromote, who said two clients are live on TikTok Shop, with eight working on getting their shops set up. “The work is worth doing. Consumer behavior and preference will change over time to favor this kind of frictionless experience.”
Mental-health-focused journal company Zenfulnote has generated roughly 45% of its sales from TikTok Shop, according to a TikTok spokesperson.
TikTok has significantly invested in Shop in the U.S., hoping to capture social commerce revenue and replicate the successes in some Asian markets. Experts predicted a social commerce boom following the rise of ecommerce during the pandemic, but the channel has been off to a slow start.
Finding success in virality
Before using TikTok Shop, BK Beauty gave products for free to TikTok creators who would then make organic posts, increasing search and website traffic, but not necessarily correlating directly to sales.
“There was still a lot of friction to get someone to transact,” Jauregui said.
The brand was particularly inspired to try the channel after sales driven by a video of Melissa Murdick, a creator and Selena Gomez’s celebrity makeup artist, posted a video with BK Beauty in August that linked to TikTok Shop.
One of Murdick’s videos posted in September has 2.5 million views and is the second-highest performing for BK Beauty in terms of sales, the brand said. The videos link to a shop where people can buy the product and Murdick gets a commission.
Also spurring BK Beauty’s investment in TikTok Shop is a slew of incentives from the platform, including TikTok paying for shipping and offering discounts to consumers. A $20 brush might retail with a TikTok discount for $7, but BK Beauty gets paid the full $20, Jauregui said.
The creator-centric nature of TikTok can help propel the success of its shopping program perhaps more than competitor Meta, where there may be fewer incentives to buy from the platform, said Matt Bahr, CEO of ecommerce tech firm Fairing, which has had a few clients report anecdotal success with TikTok Shop, including BK Beauty.
When Instagram launched shops it “didn’t have that viral component,” Bahr said. “A lot of people who are selling products via TikTok Shops are able to build those network effects instantly.”
Room to grow
But the viral nature of TikTok can be a double-edged sword. Taylor Offer, CEO of direct-to-consumer brand Feat Clothing, said that TikTok’s algorithm requires making content more often than on Meta platforms, which can be a tough cost to justify while sales are low.
“Right now, TikTok Shops is very small for us. Meta Shops is a lot more,” David Herrmann, president of Herrmann Digital said, adding that brands on average are spending 75% of their TikTok ad budgets on TikTok Shop ad units. “Our plan is to be very aggressive on TikTok Shops in the coming months. It just takes a lot of effort and time to get this set-up.”
D’Altorio said that it’s too soon to know whether his clients’ bets on TikTok Shop will pay off.
“It’s still a small percentage of the total pie,” he said. “There is a first-mover advantage and [it’s helpful to] have some early data accrue as the consumer sentiment continues to embrace this kind of transaction.”