This article is part of our new editorial package, The Future of Shopping, in which we predict how the retail landscape will be shaped over the next decade. Click here to read more.
It’s got one billion active monthly users, it’s birthed scores of micro-trends and it’s launched a host of mega-influencers. TikTok’s development since 2020, the year it took off, has been explosive.
Besides its influence on content creation and consumption, TikTok is now changing how people shop. Its Shop platform was launched last September — and mass-market brands are liking it, particularly newcomers, not least because of its algorithm that encourages the discovery of unfamiliar brands.
TikTok Shop was launched with minimal seller fees and free shipping. But last month, fees for sellers were raised from 2 to 8 per cent and merchant subsidies were reduced. (This is still much lower than Amazon’s fees, which are around 20 per cent.)
While the low fees lured many brands to the platform, it also caused an influx of low-quality goods on TikTok Shop — off putting for higher-end brands. Eileen Flynn, chief strategy officer at youth culture agency Archrival, told Vogue Business: “With the raised entry requirements for TikTok Shop, we’re likely to see a marketplace that’s more about curated quality, so vendors will be forced to prioritise selling products with bigger margins.”
Social media has become more important to the inspiration phase of the shopping journey. But while platforms and marketers initially thought young consumers would be keen to impulse buy on social channels, 70 per cent of Gen Zs and 69 per cent of millennials say they trust a brand only after carrying out their own research, according to data from Archrival.
Although it remains to be seen whether luxury fashion has a place on the platform, mass and premium brands are finding success on TikTok. The TikTok Shop platform is experimenting with a variety of strategies, from creator commerce to exclusive offers and user-generated content (UGC) to push Gen Z to purchase. Analysts believe short-form video platforms have significant potential as shopping engines — once the kinks have been ironed out.
Here are the three key takeaways for brands looking to engage.
1. The speed of growth is explosive
Globally, social commerce is growing much faster than non-social e-commerce, according to Boston Consulting Group (BCG), which predicts social commerce’s share of the retail market will surge from 9 to 16 per cent in the year ahead. “New marketplace models are emerging with explosive market-share gains,” says Martin Barthel, managing director and partner of BCG Paris. “As short-form video platforms continue to improve their business models — increasing transaction fees and leveraging trends in shopping, gamification and entertainment — they’re expected to become an even more important player [in retail].”
Barthel says social commerce platforms should focus on quality and logistics. “Users are complaining about a sub-par shopping experience while others have noted that social platforms are losing their soul... Brands and retailers must ensure that they are striking a careful balance to drive customer loyalty.”
US-based beauty brand Tarte was one of the first cosmetics brands to join TikTok. lt leverages many of TikTok’s features to drive purchases on and off the app, regularly posting organic content to go viral on For You feeds, investing ad spend for further reach, seeding to TikTok creators, running affiliate programmes and selling directly within the app on TikTok Shop. All of this has paid off, says CEO and founder Maureen Kelly. Tarte regularly lands the number one daily spot on TikTok Shop (including this March).
TikTok’s algorithm converts new shoppers more easily than other social media. “Over 90 per cent of our customers on TikTok Shop are new to the brand, proving that we’ve been able to broaden our reach and recruit a new subset of ‘tartelettes’,” Kelly says. Tarte reacts in real time to popular products, creating exclusive value offerings for the channel that speak directly to its new shoppers. TikTok Shop has driven over 50 per cent growth in Tarte’s total direct-to-consumer business this year to date while also bringing a halo effect back to its retail businesses. “For example, products that are trending on TikTok Shop are growing more than three times faster year-on-year than the rest of the brand,” Kelly says.
Other beauty players are also thriving. L’Oréal has sold more than 1,500 units of its Infallible 24H Fresh Wear Liquid Foundation on TikTok Shop to date, according to the platform. Garnier launched its Vitamin C SPF serum on TikTok Shop after the product became a trending favourite on the platform, so far selling 53,800 serums. Nyx Cosmetics sold 56,900 units of its Professional Makeup Fat Oil Lip Drip Lip Gloss on the platform. Back in August 2023, viral brand Made by Mitchell reported $2 million in sales from TikTok Shop in just one week.
While luxury fashion brands have mostly stayed away from TikTok Shop, British luxury streetwear brand Represent Clothing (@representclo) has witnessed “great success” while testing the platform, driven partly by creator unboxings and UGC, all linked to the Shop. “On paper, it sounds like a luxury fashion brand might want to step away from TikTok Shop where typically the competition has a significantly lower average selling point and, therefore, a lower barrier to entry. We, however, see great synergy with the Represent customer,” says head of marketing Liam Shannon. “There aren’t many luxury brands on TikTok Shop right now, which allowed us to be one of the first and see how that audience reacted to us without vast competition. Those that are already aware of Represent likely wouldn’t shop the brand through TikTok Shop, [but] the new, younger demographic may discover us through this.”
2. Creators are the new distribution channel
Brands want to connect more effectively with consumers in the research phase of the purchase journey. The solution may be creator commerce, where creators link to products within their videos and from their profiles.
While luxury penetration on TikTok Shop may be low, premium players are finding other ways to drive purchases on the app via creators. Some 51 per cent of Gen Zs believe social media influencers create new trends, versus 36 per cent of millennials, according to Archrival research.
Creator Danielle Athena (@danielleathena) joined TikTok during the pandemic. Eighteen months ago, she started posting hair content, showing how she transforms her naturally frizzy locks into sleek blow dries or curls. Brand deals quickly followed, paying her a flat fee to promote hair products and tools.
When TikTok Shop rolled out in the US, Athena began to work on a commission basis, with customers able to buy products on Shop directly from her videos. Her most-viral videos, trying the Tymo Ring (a curly hair straightener) and the Wavytalk 5 in 1 (a hair curling iron set) both linked to Shop, have 48 million and 25 million views, respectively.
While Athena declined to share exact revenues, her income from promoting items on TikTok Shop has been “life changing”, she says. “Before, I would post an ad, and I would not really know who’s actually buying the product for my ad or not. Now I can see directly how many sales it’s making. Now I’m getting the data, I’m paid fairly, and I know what content really works.”
According to analytics platform Kalodata, which tracks TikTok Shop, Athena alone drove around $1 million in total sales for the Wavytalk in a 30-day period from November to December 2023.
More Gen Z consumers are searching for products on short-form video platforms rather than on traditional search engines, says BCG’s Barthel. “Gen Z have grown up on these platforms and are much more likely to trust the reviews of short-form influencers, who review and promote in an authentic and relatable way, rather than traditional written reviews,” he says. “Short-form media platforms can leverage this behaviour by building an integrated shopping experience — enabling Gen Z to have a seamless experience on the platform, from research to purchase.”
Since TikTok discontinued its $1 billion creator fund last year, in favour of a new metrics-based invitation-only Creativity Fund for those making content longer than one minute, many creators are looking for new options.
Creator commerce platform LTK enables influencers to curate shopping pages on the LTK website or app, linked from their social profiles, to drive commission. With over 7,000 brands to choose from, creators can create their own LTK shops based on the products they share on socials. The platform works with brands using AI to help match them with creators that’ll drive the highest conversions on their product placements.
It’s big business. LTK creators drive $4.1 billion of sales annually — and the figure keeps rising, according to founder and CEO Amber Venz Box. “During the pandemic, with the boom of Shopify, suddenly everyone could sell anything online. Consumers increasingly need a guide to shopping, a trusted source that can get you to the right product in the right size. Creators can provide that service, and it’s become culturally normative to shop via them.”
TikTok has adapted to emulate this model. Creators can have a ‘showcase’ section, collating all the TikTok Shop products they recommend in their videos. TikTok Shop has over 200,000 sellers and 100,000 creators participating in the TikTok Shop Affiliate programme, according to the platform. Typically, from a TikTok Shop Affiliate video, TikTok takes a share (2 per cent, soon to be 6 per cent), the creator receives a share (8 to 20 per cent, depending on the brand, creators say), while the brand takes the rest.
According to a report from marketing platform Influencer Intelligence, 62 per cent of survey respondents agree that “social commerce will be the most popular objective for influencer marketing campaigns within the next year”. And 36 per cent of respondents say that “selling products or services has been a measurable objective within their influencer marketing for the past two to four years”.
“We are in the third generation of commerce,” says LTK’s Venz Box. “What we’re seeing now is that the creator is the distribution point. I used to have a jewellery line, and it was all about which stores I could get into. Now it’s about which creators can sell my product.”
Premium haircare label K18, founded as recently as 2020, was bought this year by Unilever, who were impressed by its rapid TikTok growth. K18 launched on TikTok Shop shortly after roll-out. “Social-first marketing means that every campaign starts with the goal of driving virality,” says K18 SVP of global marketing Michelle Miller. “The benefit of our social-first approach is that fans become brand advocates that spread our message. They share their experiences with K18, engage with our social content, and create viral content that outpaces our own.”
The testing is relentless. “We engage with creators that have high GMV and are testing new TikTok Shop media campaigns to enhance purchase volume,” Miller says. The brand works with creators in both organic and paid capacities to “inspire and drive culture” as well as to convert to sales.
3. Leveraging different formats
But will consumers lose faith in creators being paid on commission? To reinforce brand authenticity and balance out paid creator commerce, brands are spotlighting their ‘regular’ consumers by resharing UGC that shows them wearing or using products. “We believe that everyone is an influencer, so it’s about empowering our customers to become active participants in our brand community,” Miller says. “When real people share those real positive brand experiences, it just hits deeper than anything.”
Creators should demonstrate products in real time, either via live or unclipped videos that introduce the product authentically. “I always ask to try things beforehand to make sure it works, and I always show the process end to end so users can see that it actually works, too,” says creator Athena. “I don’t like when a brand makes claims that I know aren’t true… That puts me off working with a brand.”
TikTok’s aim is to develop a closed-loop retail offering that takes the consumer from inspiration all the way to purchase. At some point, the offer may become too irresistible for luxury brands to ignore.
The experience of the beauty sector suggests consumers are prepared to buy high-ticket products via TikTok. Athena makes encouraging commission on the Breo scalp massager, which retails at over $500. And Represent, the British high-end streetwear brand road-testing TikTok Shop, is selling hoodies for up to £175, albeit with the sweetener of free shipping. Time to jump in?
Comments, questions or feedback? Email us at feedback@voguebusiness.com.
More from The Future of Shopping:
What really happened with Matches and where do we go from here?