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As e-commerce and social media converge, content platforms and e-commerce platforms need to learn how to leverage each other.

Recently, Amazon and TikTok announced an important cooperation to provide users with a more convenient shopping experience. After the cooperation, TikTok users can browse and purchase products on the Amazon platform directly in the TikTok application without leaving the application.

Before this, the rapidly expanding TikTok e-commerce and the largest e-commerce platform Amazon were undoubtedly competitors, and they also faced difficulties: under the decline in consumer power and fierce market competition, the growth of Amazon's e-commerce business slowed down year by year; after TikTok e-commerce went beyond Southeast Asia, it also faced strict regulatory difficulties in the United States.

In the eyes of industry insiders, the cooperation between Amazon and TikTok is a win-win situation. It not only brings traffic and sales to Amazon, but also provides TikTok with a new commercial monetization channel and a way to ease regulatory pressure. This may be a new development opportunity for both TikTok and Amazon.

A powerful combination

TikTok and Amazon officially announced their cooperation, which is considered big news in the cross-border circle.

According to the announcement, users can see Amazon's product recommendations on TikTok's "For You" recommendation page and link their TikTok account with their Amazon account through a one-time setup. Once the accounts are linked, users can complete their Amazon purchases through product ads without leaving the TikTok app, achieving a faster and smoother experience.

In addition, users can also see real-time pricing, Prime eligibility, delivery estimates and product details in TikTok's Amazon ads, allowing users to quickly obtain key information about the product while browsing short videos.

To use this social commerce service, TikTok users need to link their personal profiles on these platforms with their Amazon accounts. However, TikTok has placed special emphasis on the protection of user privacy in the cooperation, saying that users can choose to unlink their Amazon accounts at any time in TikTok's app settings.

A social e-commerce practitioner told the 21st Century Business Herald reporter that consumers enjoy one-stop service from browsing to delivery, which improves the convenience and reliability of the shopping experience and is more conducive to the penetration of social e-commerce.

Previously, merchants had two main ways to monetize through TikTok: one was a "full closed loop", i.e., a TikTok store, where all transactions were completed within TikTok; the other was a "semi-closed loop", i.e., adding an external link to the "Yellow Car" app to divert traffic to an independent website to complete transactions. Both of these paths are only available in some countries.

In the semi-closed-loop mode, TikTok can be regarded as an advertising platform, while the full-closed-loop mode requires it to have stronger supply chain capabilities. Although TikTok's e-commerce has successfully broken through in the Southeast Asian market, the more important US market has not been smooth. Data analysis website Tabcut shows that from January to May 2024, TikTok's full-closed-loop GMV in the US was less than US$2 billion, and its target GMV in the US last year was only 11%.

For TikTok, this cooperation with the e-commerce platform is an important attempt on its road to commercialization, which will help it explore more profit models and enhance its industry competitiveness.

Zhu Qiucheng, CEO of Ningbo New Oriental Industry and Trade Co., Ltd., told reporters that the move made up for TikTok's supply chain shortcomings.

On the other hand, Zhu Qiucheng believes that this cooperation will also help TikTok ease political regulatory pressure. As a social media platform that has attracted much attention in recent years, TikTok has faced regulatory challenges to varying degrees in multiple markets. Through cooperation with Amazon, TikTok can further consolidate its position in the US market and enhance communication and cooperation with the government and regulators.

For Amazon, it brings a richer source of traffic. "What Amazon lacks is never the supply chain, but traffic," said Zhu Qiucheng. A study by HerCampus found that 74% of Generation Z Internet users search for products on TikTok, and 51% of them prefer TikTok because its video format is more attractive.

However, it remains to be seen how the integration affects user experience and engagement on TikTok, and whether it significantly boosts Amazon’s sales through social channels.

For Amazon sellers, this cooperation does not mean that they can directly advertise on TikTok or promote products through TikTok celebrities. The current cooperation is limited to Amazon's official advertising on TikTok. In the future, if the cooperation between Amazon and TikTok is further deepened, it may provide Amazon sellers with more opportunities to promote products directly on TikTok.

Incremental selection

Indeed, for Amazon, facing external competition and a downward economic environment, finding new growth is urgent.

As an e-commerce giant, although its business scale is already very large, its growth rate is slowing down. Amazon's second quarter financial report for fiscal year 2024 showed that its e-commerce business had net sales of US$55.39 billion, a year-on-year increase of 4.6%, lower than analysts' expectations of US$55.55 billion, mainly because consumers tend to buy cheaper goods in the context of economic downturn.

At the same time, shopping activities through social media platforms are growing rapidly. Market research firm Insider Intelligence predicts that the market size of social e-commerce will grow from US$67 billion in 2023 to US$100 billion by 2025. This shift in growth model has prompted Amazon to look for new ways to grow.

In the past, Amazon has conducted many self-explorations, first launching Spark, an app similar to Instagram, and then launching Inspire, a short video feature that competes with TikTok. However, both have received mediocre responses, failed to impress users, and failed to boost sales. For Amazon, cooperating with giants may be a better way out than going it alone.

In the eyes of industry insiders, this cooperation is undoubtedly good for Amazon. Bank of America analyst Justin Post pointed out that by leveraging TikTok's huge user base, Amazon has the ability to offset investors' concerns about competition from TikTok Shop.

Post added that since TikTok Shop's GMV currently accounts for 2.2% of Amazon's US sales, the strategic alliance could help Amazon regain some lost ground.

Amazon's demands don't stop there. While announcing its partnership with TikTok, Amazon also reached a similar agreement with Pinterest, allowing users to purchase Amazon products directly on the site without leaving the app.

Rick Watson, founder and CEO of RMW Business Consulting, pointed out on the social platform: "Amazon is increasingly looking for ways to expose its products to the Prime audience and attract new Prime members. This may also explain why Amazon is so eager to sell more cheap goods."

In addition to investing in social e-commerce, in the face of fierce market competition, especially the challenges from low-price retailers, Amazon also plans to launch a "low-price store". The plan focuses on selling unbranded goods, mainly targeting fashion, home and daily necessities categories, with prices below US$20.

Zhang Zhouping, chief researcher of Bense Think Tank, told the 21st Century Business Herald that under the current backdrop of global consumption downgrade, Amazon's launch of low-price stores also caters to the context of the times. Low-priced, cost-effective products are very popular in the global consumer market, and Amazon also wants to use this to create more incremental markets.

Previously, Amazon also significantly reduced the sales commission for clothing products, especially for clothing products priced below $15 and between $15 and $20. Industry analysts said that this move can attract more low-priced clothing sellers and improve the competitiveness of the platform.

Whether it is the layout in the low-price market or the cooperation with social media platforms, these are Amazon's initiatives to cope with market competition and economic challenges, trying to continue to maintain its leading position in the highly competitive e-commerce field. Its effects and value will gradually become apparent with the passage of time and the development of the market.