Cross-Border Update: Bytedance & TikTok

Original image Gr0gmint, CC BY-SA 3.0 via Wikimedia Commons

In the summer of 2022, I wrote extensively about cross-border e-commerce from China. Since there have been many developments in this area, I will publish a series of articles on the initiatives of various companies. In the previous article we looked at Alibaba’s overseas platforms. Today we have a look at what Bytedance has been up to with TikTok and other initiatives.

Last summer I wrote about TikTok’s ventures into e-commerce in Indonesia and the UK and how a mixture of cultural clashes and lack of success of live commerce in the latter country resulted in Bytedance (temporarily?) abandoning further roll-out plans in Europe. While companies like Shein have been successful selling inexpensive items, TikTok users in the UK didn’t consider TikTok to be a reliable sales channel and the low prices didn’t help increase their trust. Long delivery times and hassle of returns and refunds were other factors for the lack of success among the Brits. 

In August LatePost reported that despite these difficulties TikTok’s e-commerce business had reached a GMV (Gross Merchandise Value; the value of goods sold) of $1 billion in the first half of 2022; almost the same value as the GMV for the whole of 2021. Most of these sales originated in Indonesia, where the monthly average GMV was $200 million, while the UK remained at $24 million per month. LatePost also claimed that in Indonesia the average unit price is $2-$3 and the majority of buyers are 18-24 years old. 

Indonesia’s GMV might seem high, but the GMV of market leader Shopee was $60 billion in 2021. And all of these figures pale in comparison to more than $200 billion (1410 billion RMB) that was sold through Douyin, the Chinese version of TikTok, in China last year.

TikTok’s e-commerce expanded further into South-east Asian markets by opening businesses in Thailand, Vietnam, Malaysia, the Philippines, and Singapore. New sellers did not have to pay sales and payment commissions for 1 month. Together these countries made up 50% of TikTok’s GMV in the region.

TikTok keeps struggling to convince international brands to sell on its platform. On one hand brands think the production costs for live commerce are too high, while they also worry that presence on TikTok might harm their brand reputation. At the same time, these brands are the most interesting for TikTok than unbranded or unknown brands because those spend little on advertising in TikTok. 

In a market where many advertisers were decreasing spendings, merchants and anchors in China continued to place advertisements on Douyin to attract users to watch short videos and live broadcasts and thereby sell more goods. In May 2021, this part of revenue accounted for about 10% of Byte’s domestic advertising revenue; in the second quarter of this year, this proportion has exceeded 40%. This has taught Bytedance the importance of so-called ‘internal circulation’.

TikTok was planning to grow its e-commerce business to $2 billion in 2022 and $23 billion in 2023. In August, LatePost reported that TikTok had set an incredibly ambitious GMV target of $470 billion in five years. In order to achieve this, TikTok would need to expand to more 10 major markets before the end of 2023. According to sources of the Financial Times, TikTok was planning to expand its e-commerce business to North America, Spain, Ireland and Brazil (TikTok’s third largest market) in the next few months. It is already recruiting staff in these markets.

TikTok Shops US

As far as e-commerce is concerned, TikTok has previously been taking it slow in the US. It set up partnerships with Shopify and Walmart, creating traffic to webshops outside the TikTok app or small storefronts in the app. But after two years of cautious preparations, November finally saw TikTok launch the in-app TikTok Shops in the US, aiming for a GMV of $2.8 billion in 2023.

Pandaily reported how several local merchants in the US had participated in tests for TikTok Shops, with the requirement that goods should be delivered locally. TikTok is also allowing merchants from other countries, as long as they have goods in overseas warehouses. TikTok has also been publishing job openings related to logistics, indicating it is planning to open a US distribution centre.  All considered, the company seems to aim to shorten delivery times and no longer primarily depend on shipments from China. Semafor speculated that supporting local small businesses might also create more goodwill for TikTok among US officials. It also reported how TikTok registered ‘Fulfilment by TikTok Shop’ as a trademark, echoing the same service by Amazon. 

According to figures by DataPortal there were 140 million TikTok users in the US in July 2022, making it its biggest single market. It remains to be seen if the company learned from its lessons in the UK and will be more successful rolling out e-commerce to these US users.

TikTok Shops Brazil

Brazil has 150 million internet users, one third of which use TikTok every day. Its logistics and payment infrastructure have improved in the past years, making it one of the fastest growing e-commerce markets with a 2021 value of $34 billion. A source in TikTok told LatePost that TikTok gave Brazil a higher priority now that both short-video competitor Kuaishou and fast-fashion platform Shein are actively expanding there (more on this in a later article). LatePost reported that TikTok is following the same strategy of starting with local commerce in Brazil.

According to LatePost TikTok might not only launch live commerce, but also more ‘shelf commerce’ in Brazil. This traditional search-based form of e-commerce is easier to set up since it does not require finding talented livestream hosts and convincing merchants unfamiliar with live commerce to use this form of commerce. Bytedance has previously already implemented ‘shelf commerce’ in Douyin and TikTok Indonesia.

TikTok Shops Spain

In the previous article in this series we saw how Alibaba had opened a new webshop, Miravia, in Spain. Spain is also a market of choice for TikTok: Brandfactory (link in Chinese) reported that TikTok was recruiting category managers and logistics managers in Madrid. While Spain is not yet listed on the seller portal at the time of writing it might be a matter of time.

Reasons for the choice of Spain that are mentioned by Brandfactory are its strategic geographical position between northern Africa and Western Europe, its well-developed infrastructure, high internet (93%) and online shopping penetration (68%) and a large e-commerce market (€58 billion). Spain is also said to be a relatively TikTok-friendly country, with political parties creating early TikTok accounts and local companies cooperating with the short video app.

In 2022 the Spanish user penetration of TikTok more than doubled from less than 20% in 2020 to more than 40%. According to LatePost (link in Chinese), TikTok’s global penetration rate was less than 20% in October, while Douyin’s domestic penetration rate is close to 54%.

A source of Brandfactory claimed that Spanish users are more open to live commerce, creators are more interested in making such content and consumers like discounts and gifts. As such, they are expected to be more open to TikTok’s approach to e-commerce than the Brits. And finally there is the language factor: with Spanish being the second most spoken language in the world after Chinese it could open a potential of 437 million people worldwide that have it as their mother tongue.

Bytedance’s webshop graveyard

TikTok Shops isn’t Bytedance’s only initiative in cross-border e-commerce. It launched an e-commerce app and webshop called Fanno ahead of last year’s Black Friday 2021 in several European countries (Germany, UK, France, Italy, Spain). Fanno is comparable to AliExpress, selling goods directly from Chinese factories to western consumers. It is reported to have offered 40.000 SKUs. As many new cross-border platforms, it offered free shipping and large discounts.

Initially most of Fanno’s customers were acquired through Facebook and while it did also have a TikTok Shop, it did not convert its customers to the Fanno app. The earliest sellers on Fanno were merchants that had already been active on Amazon, eBay, Wal-Mart, Wish, etc. After initial discounted purchases, repurchases rates on Fanno proved low as customers noticed these items were also available on those more familiar platforms.

According to merchants on Fanno, traffic from different countries was uneven, with the app becoming the third most popular shopping app in Italy while performance in other countries was mediocre at best. As with TikTok Shops in the UK, Fanno customers complained about poor logistical efficiency and rejections of requests for refunds. In May 2022 rumour had it that Fanno had dissolved its team and was shutting down, something Bytedance denied. The Fanno website is currently still accessible, but the handful of review on Trustpilot are far from positive.

In November 2021 Bytedance also launched an e-commerce website called Dmonstudio and started advertising it on Facebook and Instagram. The site sold clothing and accessories in a clear attempt to compete with Shein but was already shut down three months after its launch. Lack of users seems to have been the main reason; according to sources the website only had 8.000 visitors per day and an average of 2 pageviews per visitor.

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In September 2022 news broke that Bytedance had once again launched another Shein-like fast-fashion platform with the peculiar name IfYooou in some Western and Northern European markets. Closer inspection proved that the brand had already been active for a while, with its Facebook page showing posts as far back as March 2022. Ifyoou’s pricing was below that of Dmonstudio and more in line with Shein’s.

Ifyooou mainly sells women’s clothing and items are mostly priced between £5 and £30. It charges 4.99 GBP ($6) shipping costs for orders below 29 GBP, while the maximum delivery time was 15 days. Trustpilot reviews of Ifyooou seemed to be more positive than those of its predecessors.

In November, media outlet Huxiu shared data by internet analytics firm Similarweb, showing that between July and the end of October, Ifyooou’s monthly visits had slumped from 436.000 to 5.000. A former supply chain consultant of Shein told Pandaily that Bytedance was overemphasising web traffic while ignoring the more critical factor of supply chain. Poaching 100 Shein employees and having cross-border ecommerce teams work 996-like work schedules does not seem to have helped either.

The images on Ifyooou’s homepage have not changed for months, still showing summer bikinis. It seems to have become another halted Bytedance project. One has to wonder if the choice of peculiar brand names with strange spelling isn’t further limiting the success of Bytedance’s initiatives. They are difficult to remember in markets where traffic depends heavily on direct traffic and search engines. While writing this article I had to check the exact spelling of Ifyooou several times…

In the next updates we will discuss the cross-border activities of (Ochama),  Pinduoduo (Temu) and Shein.