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The comment section of TikTok is flooded with viewers asking creators about the products they use in their videos. Parent company ByteDance recognizes this interest and aims to capitalize on it. However, it’s important to note that ByteDance’s logistics ambitions will never match up to Amazon.
Last year, global retail ecommerce surpassed $5 trillion, according to Insider Intelligence. This figure is more than double the total from five years ago, and it is projected to exceed $8 trillion by 2026. TikTok is determined to claim a larger share of this market, diversifying its revenue beyond digital advertising, which experienced a slowdown last year. In addition to TikTok Shop, which enables brands to sell directly on the platform, TikTok has now ventured into selling products directly.
By doing so, TikTok is directly challenging Amazon, the leading online retailer in the US. The key to successful social shopping lies in authenticity. Seeing a favorite creator use a product is far more compelling than traditional digital ads. TikTok’s ecommerce aspirations highlight the shortcomings of Amazon, where functionality takes precedence over entertainment. It’s no wonder that Amazon has recently launched its own TikTok-inspired feed, featuring videos showcasing available products. However, even if TikTok manages to create a more enjoyable shopping experience, it faces unique challenges that Amazon does not. For instance, it needs to convince retailer partners that potential political threats to ban or restrict the app are not significant, and it also lags behind Amazon in terms of logistics investment.
While Amazon does not disclose specific per-warehouse costs, it is possible to assess the scale of its expenses by examining the company’s reported losses in 2022, which chief financial officer Brian Olsavsky attributed to capacity expansion. During the pandemic, Amazon doubled its logistics capacity to meet the surging demand. Annual capital expenditure more than quadrupled between 2019 and 2021. In 2021 alone, Amazon allocated around $33 billion for fulfillment centers and transportation. Amazon boasts some of the largest warehouses globally, maintains a fleet of planes, and is even investing in driverless vehicles for efficient transportation. Furthermore, it announced a $1 billion fund dedicated to investing in logistics start-ups, leaving any logistics company partnering with TikTok unable to compete.
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