TikTok has turned to tech start-ups to help streamline its struggling e-commerce operations as the fast-growing social media platform increases pressure to diversify its revenue amid a slowdown in digital advertising.
Social commerce, where users can buy items without leaving the social app, has been a huge success in China. TikTok’s sister app, Douyin, saw a 300 percent year-over-year increase in sales in the 12 months to May, with users buying more than 10 billion products.
Chinese company ByteDance, which owns both TikTok and Douyin, plans to expand the model globally through TikTok Shop, which launched last year in the UK and Southeast Asia.
But TikTok’s e-commerce implementation ran into a number of problems. Employees left the department complaining of burnout, brands abandoned the platform due to lack of sales, and customers complained about delivery delays and counterfeit products being sold to them.
TikTok has partnered with several startups in recent weeks to address some of these issues and encourage sellers and buyers to use the platform. This includes ChannelEngine, TalkShopLive, and YunExpress, which specialize in software that integrates shopping technology and fulfills orders.
The decision to outsource some of its operations to third-party companies is TikTok’s latest effort to bolster its e-commerce division, an area of the market expected to become a major source of revenue in the future.
This isn’t the first time the group has outsourced technology for live purchases. In October, the Financial Times revealed that TikTok is partnering with TalkShopLive to provide the underlying technology for its North American live shopping features, which the platform officially launched earlier this month.
TikTok’s doubling comes after the company slashed its global 2022 revenue targets by at least 20 percent in September as it seeks to meet ambitious targets, according to four people familiar with the move.
Social media rivals including Meta and YouTube have been experimenting with shopping features over the past few years in an attempt to diversify their revenue streams.
Earlier this month, the FT revealed that YouTube was testing shopping links on Shorts, its short video offering set up to chase TikTok’s exponential growth. Instagram has also experimented with shopping over the past few years, with limited success.
Many retailers and brands have previously told the FT that they ended their relationship with TikTok Shop because the technology was too difficult to use and the level of resources needed to sell on the app was not worth the payback.
Jorrit Steinz, founder and CEO of ChannelEngine, one of the new software companies partnering with the TikTok Shop, said TikTok recognizes that bringing brands to the platform is a “challenge”.
ChannelEngine offers brands and retailers software to easily sign up for multiple online marketplaces and offers over 1,500 brands selling across 200 marketplaces on its platform.
Over the summer, TikTok’s UK office received around 200 new customer complaints daily from users who purchased products on the app, largely due to shipping issues with customers waiting months for orders to be delivered, according to an employee.
As the holiday season approaches, TikTok is hiring in-house US and UK fulfillment staff to build a “new ground-up fulfillment service” in the US, EU and UK, according to job descriptions on the company’s website.
Kent-based company Zendbox has also launched a service to help sellers fulfill TikTok orders from its warehouse, although it is not an official partner.
“[We] they saw an opportunity, a benefit, and a need,” said Chris Sherlock, director of revenue at Zendbox, who said they saw the feature gradually take off.
TikTok said it has a robust anti-counterfeiting policy, reporting measures, and a clear refund policy where customers can appeal if their products have not been delivered or have been delivered in an unsatisfactory condition.
TikTok declined to comment on the partnership.