TikTok’s marketplace, known as TikTok Shop, represents the platform’s biggest bet as a new source of revenue growth. Initially available to some users in the United States, it currently resembles a storefront for low-cost Chinese products.
The Shop feature of the app, which originally started as a social media platform, prominently displayed among the “For You” and “Following” feeds where users watch videos, presents an endless scroll of “recommended” products, according to an initial version reviewed by Bloomberg News.
This scrolling includes items such as a $2.99 Nike hoodie, which the report suggests appears to be counterfeit, to a $6.99 statue of a “mischievous dwarf” sitting on a toilet. Much of what is listed, including a financial planner and a waist-shaping vest, is noted as being shipped from China, the home country of TikTok’s parent company, ByteDance. This could reignite regulatory concerns in the U.S. if it means user data is in the hands of Chinese sellers.
TikTok Shop aims to compete with Amazon (NASDAQ:AMZN), with a sales target of $20 billion in goods for this year, according to Bloomberg News.
Internally, this effort has been discussed as a “community commerce” endeavor, aiming to capitalize on the app’s potential to bring people together through their specific interests.
However, the initial version of the experience does not show any evidence of the highly personalized algorithm that TikTok is known for in its video feed, which has been instrumental in its success in capturing user attention.
Instead, the Shop faces the same challenges as an open marketplace that Amazon has faced. The categories and subcategories of products are filled with overwhelming choices: the Home and Kitchen section displays a 37-cent mini trash can next to a $16 computer desk and a three-piece polyester satin sheet set for $8.43.
Misspelled brand names and unlikely prices on many listings raise “red flags” regarding potential sales of counterfeit products.
TikTok stated that the article is “misleading” and does not “represent the TikTok experience.”
The marketplace highlights prices, which are notably low and listed in a large font. Coupons and free shipping offers are highlighted in red and green, respectively. TikTok creates a sense of urgency by listing how many times a product has been sold and a countdown timer showing hours, minutes, and seconds remaining for a sale.
No brand is listed until you click on a product. Most product names seem more geared toward search engines and algorithms than human shoppers.
The most prominent section is for “Deals of the Day.”
“Even in testing, there are over 200,000 verified U.S. sellers on TikTok Shop selling legitimate products, including over 150,000 beauty products that have been validated through our process and represent some of the biggest names in the industry,” said a TikTok spokesperson.
In June, someone familiar with the company’s strategy for the U.S. marketplace said the company was focusing on American sellers. That strategy seems to have changed. A quick search reveals several Chinese brands on TikTok Shop that Amazon removed from its platform due to counterfeit issues according to customer reviews.
Guangdong SACA Precision Manufacturing was removed from the e-commerce giant in June 2021. Products from its Taotronics and VAVA brands are currently available on TikTok’s marketplace in testing. The same goes for the highly successful headphone brand Mpow, whose parent company, Shenzhen Qianhai Patozon Network & Technology, was also removed from Amazon.
In its terms of service that a user can click before completing a purchase, TikTok says, “We do not make representations, warranties, or guarantees, express or implied, that any content in the TikTok Shop is accurate, complete, or current. We have no visibility or control over the content on the websites or resources available through them, and you acknowledge and agree that we have no liability for any such content.”
When a user makes a purchase on the Shop, purchases from multiple sellers can be made simultaneously in the same checkout. TikTok processes payments through its app, as reported by Bloomberg News, meaning the company will also collect additional information about users, including card details, billing address, and delivery address.
This could eventually lead to further regulatory scrutiny for the company. TikTok has faced pressure from federal, state, and local governments in the U.S. due to its data privacy practices. The app’s Chinese ownership has raised national security concerns about whether Americans can be tracked or influenced on the platform.
The company has stated that it is working to isolate sensitive data from its American users so that only U.S. employees can access it through a separate unit called USDS.
“TikTok US protected user data is stored in the U.S. and managed by USDS, and we work with third-party payment platforms to facilitate transactions on TikTok Shop, with all data managed by the payment partner,” said a company spokesperson.
Legislators have been particularly sensitive to location data collection by apps. Prior to the launch of TikTok Shop, the company stated that it had updated its app to no longer collect precise or approximate GPS data, only approximate location information.
However, TikTok Shop appears to share some user data with its sellers. In TikTok’s Buyer Policy, the company states that “sellers are independent controllers of the data they collect about you through the TikTok Shop, and TikTok is not responsible for their compliance with applicable law.”