ByteDance Blocks Marketplaces, Walmart To Join TikTok – What Does The Future Hold For Social Commerce?

The impending doom of TikTok’s ban in the U.S. has been provisionally saved by Oracle
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and Walmart’s
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latest interception following their announcement of acquiring a 20% stake in TikTok’s global business. Though no actual owner has been named in succession, the joint-venture will create a new US-based company ‘TikTok Global’ in preparation for its IPO-listing (Chinese), thereby placing American investors with more equity in an attempt to control national security concerns. However, ByteDance has yet to negotiate a deal where Trump’s administration will favor before November 12, though has also been met with resistance by China’s Communist Party as of late.

ByteDance Blocks Rival Platforms

Meanwhile, ByteDance’s original short-form video platform Douyin has just announced a ban for live streamers to share links to external third-party marketplace platforms, in particular with Alibaba’s
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TaoBao and JD.com’s listings. Many brands and individuals had reaped success in live streaming, especially over the pandemic period when high streets were closed, pushing a migration towards online shopping atop of China’s already strong e-commerce scene.

According to the Chinese government (Chinese), over 10 million e-commerce live streaming sessions were hosted online during the first half of the year, and iiMedia Research further predicts China will have 524 million online live streaming users by the end of 2020, whereby in perspective, three in five people will become live streamers. The industry generated RMB433.8 billion in 2019 and is expected to double by the end of this year.

Lives streamers are now instead pushed to promote goods on ByteDance’s own e-commerce platform, Xiaodian, which has been in the making since early 2019, hosting near a million of stores since. ByteDance aims to hit a gross merchandise volume of RMB200 billion (US$28.3 billion) by the end of the year.

Previously ByteDance’s revenue was mainly driven from advertisements and its e-commerce business as an auxiliary channel. To further strengthen this division, Douyin has also recently blocked TaoBao’s order management system, Qianniu, from accessing Douyin’s transactional data, and in retaliation, launched their own dubbed Doudian for merchants to manage their operations through their own platform.

Replicating Douyin’s Success

ByteDance has recently revealed Douyin now has 600 million daily active users, comparing to the 50 million active daily users in the U.S., a near 800% surge in users since January 2018. TikTok, originally for the giggles and dance videos, caught the attention of many Western brands as a gateway to penetrate the Gen-Z market.

Right now, brands either place video ads in between user videos, otherwise pay for promoted hashtag challenges that have gone viral on multiple occasions, as seen from E.L.F’s success (#eyeslipface) to luxury player Gucci with its ‘Model Challenge’. Brands also leverage TikTok with their own campaigns as seen with multiple TikTok houses (a house for influencers to live and create content) in the promotion of their brand, as seen with Rihanna’s Fenty Beauty House.

Douyin on the other hand has had many brands onboard their platform with a plethora of best-in-class case studies, as seen with electronics retailer Suning.com where the retailer’s products are available natively within Douyin stores, without the need to switch to other third-party platforms. Independently aside from KOL’s (Key Opinion Leaders aka influencers) previously making a commission from TaoBao links, other local Chinese retailers have used the platform as a tool to empower its staff with their own live-streaming channel during lockdowns.

What Would Walmart’s Involvement Mean?

With Walmart now in the picture, many have speculated the impact and benefits the grocer will achieve upon acquiring a minority stake in the social media platform. Cited by Kantar research, the average Walmart American customer is a 46-year-old Caucasian, therefore the TikTok partnership will serve as a bridge to expand its consumer segment towards the Gen-Z TikTokers, where the average age of those are between 18 to 24 years old.

This is not the first time the grocer has acquired another business to build up its synergy as seen with Jet.com’s and Flipkart’s acquisition back in 2016 and 2018 respectively, in hopes of boosting its own e-Commerce operations.

In its recent fiscal Q2 earnings announcement, the retailer saw its e-commerce sales within the U.S. surge 97% owing to the pandemic panic buying and sales spurred by the stimulus checks, atop of their new premium delivery scheme.

Key Takeaways

The U.S. and China markets have a different stance to eCommerce, with the latter more advanced due to its higher smartphone penetration rate though is also met with high competition in the domestic social commerce space. In China, social media is well woven and synchronized with other ecosystems whereas the U.S. remains to be siloed until most recently when Instagram had just launched checkout in-app.

The traction brands get from TikTok shows an endless list of successful case studies due to the fickle Gen-Z consumer hopping onto the latest trends, paired with the platform’s favorable and personalized algorithm with high recommendation accuracy. TikTok’s persuasion power is high, anything hyped or trending within the platform goes viral and sold out within a matter of seconds – from squishy night lamps to reversible Octopus plushies, this partnership will enable Walmart to take on the distribution and as a platform for its vendors to leverage its exposure and users.

Moreover, Walmart can have the upper hand in becoming a sole and exclusive retailer for TikToker’s merchandise line within its offline space, in line with the increasing trend of DTC brands opting to distribute at pharmacies instead of traditional department stores. Apart from advertorial revenue, Walmart will essentially have visibility on user insights and data they can leverage in the build of their e-commerce throne in the making.

The tactic of one platform cutting off the link and tendency to other systems access is not new, one that’s frequently practiced with China players. Though initially odd as it may be, Walmart’s stake in TikTok may well benefit the retailer in its aspiration to out beat Amazon
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on top of its recent aggressive e-commerce efforts, especially now with a social media platform of its own.

Like Douyin who had blocked third-party marketplaces ahead of the 6.18 shopping festival, Walmart can equally achieve an impactful sales strategy for Black Friday Cyber Monday, especially with the Gen-Z teens with a staggering estimate of US$323 billion worth of purchasing power. Although Walmart’s involvement with TikTok may be a smart solution to create actionable insights out of its data, but it is to be noted that the security-savvy Gen-Z is equally as weary on tracking and hyper-personalized advertisements.

Granted the whole ordeal of TikTok’s sale is still rather vague and met with resistance, any retailer that can get their hands on the landmine of TikTok’s data and userbase will undoubtedly have the upper hand and the key to phase out the archaic Amazon.