From September 12, TikTok Shop will end its Storefront service, meaning merchants hoping to cash in on TikTok’s huge userbase and powerful algorithms will have to sell directly on TikTok Shop. TikTok will no longer attract traffic to sellers’ independent websites or other external e-commerce platforms.
The move comes as TikTok aims to establish itself as an end-to-end commerce platform. A key stage in this is the conversion of its current semi-closed loop model to a fully closed loop in which the platform owns all the traffic it generates. As a spokesperson for the platform said, “Our goal is not to showcase other e-commerce sites but to be a one-stop shop.”
TikTok inked an agreement with the Canadian e-commerce giant Shopify in 2020 that allowed Shopify merchants to run and optimize their TikTok marketing campaigns directly from their Shopify dashboards. Then in 2021, TikTok and Shopify expanded their partnership to enable US and UK-based Shopify sellers with TikTok For Business accounts to sync their product catalogues to create mini-storefronts on their TikTok profiles.
Alongside terminating this integrated service, TikTok Shop is also planning to ban links to external e-commerce sites – a strategy already deployed by Douyin (the Chinese version of TikTok) from 2020 onwards.
According to San Francisco-based publication The Information, TikTok Shop is set to make a loss of over 500 million USD in the US market this year due to ByteDance’s aggressive expansion efforts, including significant investments to recruit new staff and offer incentives to merchants.
Creating a fully closed-loop model, in which TikTok owns all traffic it generates, is expected to significantly increase platform revenue in the long term. ByteDance executives hope TikTok will eventually match its sibling Douyin’s profitability by hitting a merchandising volume of 200 billion USD by 2028.
