TikTok hints at US product fulfillment centers — here’s what it means for marketers

TikTok hints at US product fulfillment centers — here’s what it means for marketers

Earlier this week, Axios reported that TikTok is making plans to build product fulfillment centers in the U.S. in pursuit of its closed-loop social commerce ambitions. Not yet formally announced, the ByteDance-owned platform began posting job openings pointing to its goal of offering merchandise storage, delivery and customer service returns. The move could represent a significant new e-commerce player in the U.S., if successful. 

“It’s not a huge surprise to me — every social app’s dream is to own commerce end-to-end,” said Rob Jewell, chief growth officer at Power Digital. “This is something TikTok has demonstrated it can do.” 

International playbook

It makes plenty of sense that TikTok would want to try to dominate social commerce, the market expected to top $1.2 trillion by 2025. Details of what’s next are scarce beyond a few LinkedIn posts, first discovered by Axios, but the consensus seems to be that the platform is gearing up for an international commerce system equipped with custom clearings, supply chain systems and international warehousing. Other responsibilities would include management of returns and working with vendors on transportation of goods. Several postings are for roles located in Seattle, Washington. 

While social commerce is relatively undeveloped in the U.S., ByteDance already has some experience under its belt. Douyin, the Chinese counterpart to TikTok, has introduced similar e-commerce integrations that have been well received, growing its market share in China’s e-commerce market from 0.5% in 2019 to 5% by 2021. The company has also been testing the concept in the U.K. and Indonesia prior to directing some focus to the U.S. 

“There’s not a playbook that TikTok can copy from anyone else in the U.S., but I do think they have a playbook of what’s working internationally and in China that they can take to the U.S.,” Jewell said. 

The current darling of social media in the U.S., TikTok already commands 197.8 million viewing hours by its users every day. Primarily viewed by brands as a way to tap into its Gen Z-heavy user base, integrating what would satisfy the final stages of the cohort’s customer journey could further incentivize marketers to look to the app.

“We already know the average TikTok user doesn’t like to leave TikTok. They like to keep going on their 90-minutes-a-day average,” Jewell said. “If they nailed this, it could increase conversion rates.”

If successful, the move is likely to boost the app’s share of shoppers, which could prove enticing for marketers. While growing fast, only 23% of social media commerce buyers are predicted to make a purchase from TikTok this year, per Insider Intelligence, compared to 40% on Instagram and 61% on Facebook. The TikTok number is expected to jump 10% by 2025, but news of the facilities and other moves, like a social commerce scaleback by Meta in efforts to grow its ads business, could also lend a helping hand.

But a lingering hesitancy to buy on social media is hard to ignore, and could prove to be a roadblock. In a January study by Accenture, over half of respondents reported that they doubt the reliability of social commerce when it comes to protection and proper refunds. Though, Jewell points to third-party commerce platforms, like Shopify, that have grown successful despite being less traditional. With social commerce, it’s a matter of who’s going to make the first move.

“The risk is really that the U.S. consumers don’t want to buy on a social app because it’s never been done before, but I just see that as a small risk,” he said. “I think to a lot of consumers, they might not even know the difference, if it’s done well.”

The heavy load of bolstering trust with consumers falls on TikTok, Jewell said, and the platform has already made a start. Last year, it partnered with Shopify to bring shopping capabilities to the app in ways that utilize its highly specific algorithm. Most recently, it added three new commerce solutions ahead of the holidays meant to further streamline the process and this week announced a plethora of new offerings for its second global product summit. Its ad business continues to rise, despite lagging behind Google and Meta, and is projected to triple this year.

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