TikTok’s Commerce Offering: A ‘Nice-to-Have,’ Not a ‘Must-Have’ for Advertisers Targeting Gen Z

TikTok has indisputably become a powerful influence on Gen Z purchasing habits, but a recent report suggests that its commerce offering may not yet be an essential tool for advertisers.

According to a study by Insider Intelligence, Gen Z adults are nearly as likely to make purchases on TikTok as they are on Instagram or YouTube. The report indicates that 71% of this demographic use Instagram for purchases, followed by YouTube and TikTok at 68% each, with Facebook (62%) and Snapchat (55%) trailing behind. Moreover, Gen Z seems to favor TikTok (43%) over traditional search engines (38%) for online product searches. As a result, TikTok is currently experimenting with search ads.

Despite these promising indicators, TikTok’s journey to become a fully-fledged marketplace has encountered some obstacles. In 2021, TikTok introduced ‘Shop,’ its e-commerce feature allowing users to place orders directly through the app via livestreams and other functionalities, initially launching in the UK and Indonesia.

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However, by the summer of 2022, plans to expand live e-commerce initiatives to Europe and the US were scrapped, in part due to user disinterest in live shopping. Subsequent testing in the US showed similar difficulties in attracting sellers onto the platform. As of March 2023, fewer than 100 merchants were selling directly on TikTok Shop. Consequently, the platform’s full roll-out to all sellers has been postponed, though the company has disputed this characterization.

One possible explanation for this lukewarm reception is the difference in shopping habits between US and Chinese audiences. While live-shopping is predicted to be a $235 billion market in China this year, accounting for 45% of the country’s social commerce sales, a Morning Consult survey found that over 80% of US adults didn’t attend a shoppable livestream in 2022. Such statistics do not seem favorable for the US success of TikTok Shop, particularly given that live-shopping is touted as its key offering.

“TikTok is a must in brands’ and retailers’ social commerce and advertising strategies, especially those targeting Gen Z. But for most merchants, TikTok Shop may not be worth the investment right now,” the report concluded. Despite its popularity, TikTok Shop is currently viewed as a “nice-to-have,” rather than a “need-to-have” for marketers.

In efforts to bolster its commerce capabilities, TikTok is trialing a visual search function tool outside of the US, which would enable users to take a photo and search the platform’s shopping inventory based on the image. While this feature is potentially exciting, it remains to be seen whether it will be enough to cement TikTok’s status as an essential e-commerce platform.

By: Tyler Whitlow