Ban on TikTok & the Impact on Ecommerce

The potential ban of TikTok in the U.S. following a bill passed by U.S. Congress and signed into law by President Biden on April 24 could rattle the ecommerce industry, particularly for Amazon sellers who were increasingly using the platform to engage potential customers. With its focus on quick, casual engagement among younger demographics, TikTok has become a major game-changer in the way people shop online, spearheading what is known as a “social shopping” trend in which shoppers use social media sites to find and buy products.

Since TikTok reached the U.S. in late 2018, it quickly grew into one of the most widely used apps in the country, with over 150 million active users in the U.S. alone. ByteDance, the parent company, is Beijing-based, and political and economic tensions between the U.S. and China have led to debate over TikTok and its potential national security implications, casting a shadow of doubt over its long-term future of the app in the U.S.

The bill gives Bytedance nine months to arrange a sale or be banned from the U.S. However, analysts doubt whether Bytedance would be willing to sell TikTok with its core algorithms, which provide tailored recommendations for its users – a key driver of its business value, popularity, and potential as a marketing tool for ecommerce sellers. Assuming Bytedance does not sell, a lengthy legal battle could ensue with Bytedance arguing the ban infringes upon freedom of speech.

Because of the vast popularity amongst Gen Z and Millennial audiences, many ecommerce businesses had begun effectively leveraging exposure on TikTok to reach new consumers and increase sales. According to JungleScout, 40% of Millennials and Gen Z consumers start their product search on TikTok, a figure that lowers to 20% across all generations of consumers. The same study found that products that went viral on TikTok saw upwards of 2,000% revenue growth. More than half of U.S. enterprise businesses use TikTok ads, and over 20% of Amazon sellers planned to expand to TikTok this year.

Sellers flocking to TikTok had been reinforced by ByteDance’s efforts to break into the ecommerce industry by subsidizing sellers to offer discounts on major shopping days, like Black Friday. Prior to the proposed ban, ByteDance projected it would grow its U.S. e-commerce business in 2024 tenfold to $17.5 billion.

Should the ban be finalized, some analysts believe that social shopping may never recover. “TikTok was one of the biggest, strongest, most visible proponents behind social commerce and livestream shopping,” said Emarketer analyst Max Willen, “They were investing tons of money into trying to encourage adoption in Western markets. And if you take them out of the game, it’s quite possible that those ideas never really get any foothold in the US.”

However, it hasn’t been just TikTok paving the way for social shopping. Over half of Gen Z’ers prefer Instagram to search for products, indicating quick, bite-sized social media engagement may carry on whether or not TikTok is actually banned from the U.S.

A potential TikTok ban is good news for Amazon, who maintains their grip as undisputed leader in ecommerce, where 56% of all consumers start their shopping experience. However, this dominance may not last forever. And if brands are looking to maintain a competitive marketing edge with younger consumers, they may want to explore why TikTok had made such an impression amongst younger shoppers, and plan accordingly.