Member Research: Why Project S May Change Commerce

In October 2022, 2PM first reported: “A job posting for a business solutions and merchant development manager for a global fulfillment center is a signal that TikTok is planning on becoming an eCommerce platform in addition to a social media app.”

The job description reads: “With millions of loyal users globally, we believe TikTok is an ideal platform to deliver a brand new and better e-commerce experience to our users. We are looking for passionate and talented people to join our global fulfillment centre team, together we can build an e-commerce ecosystem that is innovative, secure and intuitive for our users.”

Fast forward a little under a year. TikTok expects to reach a gross merchandising volume (GMV) of $20 billion in eCommerce sales. One glance at this essay’s header can explain why. Of the many methods of product discovery, Tiktok spans: social networks, mobile apps, video sites, and vlogs – four of the top 15 methods.

The eCommerce age has been defined by marketplaces and not social media companies. Now, as TikTok’s parent company, ByteDance, prepares to continue its “Project S” and introduce “Trendy Beat”, there is potential for another significant disruption in the US eCommerce market. This venture has the potential to attract many top American brands while posing a competitive threat to established giants such as Amazon, Shein, and Temu.

TikTok’s “Project S” is a clear indication of the company’s strategic shift in the eCommerce space. Early signs point to its success in other international markets.

TikTok Shop has been a success for the company in Southeast Asia, challenging regional staples like Shopee and Lazada – at least in the social commerce space.

Trendy Beat is a dedicated section within the TikTok app that will feature its version of trending products. This move marks a departure from its existing online selling platform, TikTok Shop, which allows other sellers to display and sell their products. With Project S, TikTok is emulating the Amazon Basics model by directly selling its own items, which is a significant shift in its eCommerce strategy.

What sets Project S apart is the unique leverage that TikTok has over its rivals. With access to a vast amount of data on viral products worldwide, TikTok can effectively utilize its knowledge to create or acquire popular items for sale. This strategic use of data can potentially provide a competitive edge over other eCommerce giants, allowing ByteDance to meet consumer demand swiftly and effectively.

This move could considerably impact the US eCommerce market. TikTok’s massive and engaged user base, combined with the platform’s ability to drive virality, is a recipe for success in the digital retail industry. If ByteDance can successfully implement its plans, it could potentially attract many top American brands that wish to capitalize on TikTok’s popularity and reach.

Moreover, TikTok’s foray into direct sales could force established eCommerce players to re-evaluate their business models. Amazon and other companies may need to reconsider their ad spends and listings on TikTok if ByteDance’s venture succeeds. Consequently, this could significantly disrupt the current eCommerce dynamics, compelling businesses to adjust their strategies to remain competitive.

TikTok’s Trendy Beat initiative will redefine consumer buying behavior in the eCommerce space if it can achieve the sales velocity that it plans.

By selling products that have already gained traction and popularity on its platform, TikTok is in a unique position to influence what its users buy, transforming passive viewers into active consumers. This could set a new trend in the digital retail space, prompting other social media platforms to follow suit in ways that they likely won’t be able to duplicate.

But TikTok’s ambitious move is not without challenges. The company will need to ensure product quality, address consumer concerns about purchasing from social media, and compete with existing eCommerce platforms with established supply chains and delivery networks. Additionally, the brand will need to navigate the complexities of different market dynamics as it expands globally, particularly in the U.S.

Despite these challenges, the U.S. market could offer ByteDance immense growth potential. TikTok’s popularity among American users is undeniable, and successfully monetizing this user base could result in substantial revenue growth. While the company did not initially plan to expand TikTok Shop to the US market, the trademark application for Trendy Beat suggests a potential change in direction. Financial Times explains:

Previous attempts to ape the model of Shien and Temu have failed. Three ByteDance shopping apps — Dmonstudio, Fanno and If Yooou — have either been shut down or abandoned, two ByteDance employees said. “ByteDance realised that they want to build a self-owned brand in the TikTok app instead of making an independent app like Shein and Temu,” one of the employees said.

In looking forward, the introduction of “Project S” and Trendy Beat presents an enticing potential for TikTok to become an all-inclusive social commerce platform. First-party data collection (i.e. cart data and conversion records) will alleviate some of its political issues by shifting how it collects its valuable data on many of its users. By capitalizing on its unique ability to generate viral content and its colossal user base, TikTok could significantly shorten the path from product discovery to purchase. This minimization of friction in the buying process is likely to increase overall sales volume, boosting TikTok’s profits while providing users with a seamless shopping experience.

From a broader perspective, TikTok’s transition into eCommerce may be indicative of a larger trend within the social media industry. By blurring the lines between content and commerce (a la linear commerce), engaged media companies can leverage their user bases to turn popularity into profitability. As noted by Chris Raven, CEO at business growth agency Heur, this could become a common model for other first-party data collectors if TikTok’s venture proves successful.

Raven begins my explaining what this latest development in ecommerce is: “From what can be gleaned from UK users, ‘Trendy Beat’ appears to sell products made and sold by ByteDance, rather than simply linking to items from other eCommerce brands. When exploring this feature, users will see products that have gained popularity or have gone viral on the app, from pet-hair removers to ear wax extractors.”

As the US eCommerce market continues to expand, American brands and consumers alike are looking for innovative platforms that provide unique shopping experiences. If successfully executed, this new venture could result in a mutually beneficial partnership where brands get access to TikTok’s wide user base, and TikTok benefits from the increased engagement and profits generated by these collaborations.

One potential point of concern: TikTok’s transition to becoming a one-stop-shop for eCommerce could result in a narrowing of choices for consumers, which could be a turnoff for some users. In our October 2022 essay on the topic, I shared:

Like other platforms, TikTok needs revenue from eCommerce to make up for that lost ad efficiency. But unlike others, it’s actually positioned to succeed. And this is what makes Meta’s retreat from eCommerce as shocking as TikTok developing teams around shipping and logistics. It’s the era of first-party data and retail media networks. Amazon has proven that native commerce is the best way to collect it.

Now TikTok has positioned itself for first-party data collection of its own. Success will depend on TikTok’s ability to overcome potential challenges, including consumer skepticism, competition with established eCommerce platforms, political concerns, and the need to ensure product quality and sustainability. Despite these hurdles, “Project S” represents an intriguing development in the evolving role of social media in eCommerce, offering a unique new platform for consumer engagement.

By Web Smith | Edited by Hilary Milnes with art by Christina Williams and Alex Remy

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