The Journal. - TikTok Wants to Be More Like Amazon. Amazon Wants to Be More Like TikTok.

Episode Date: October 27, 2023

TikTok is launching its Shop feature in the U.S. after mixed success in other countries. Meanwhile, Amazon’s Inspire feature brings short-form video to its shopping app. WSJ’s Meghan Bobrowsky on why the two companies are taking pages from each other’s playbooks.  Further Listening: -How TikTok Became the World’s Favorite App  -The Billionaire Keeping TikTok on Your Phone  Further Reading: -Amazon Confronts a New Rival: TikTok  Learn more about your ad choices. Visit megaphone.fm/adchoices

If you spend any time on TikTok, you've probably noticed that there are a lot of videos about amazing things you can buy. There are unboxing videos where people show off all the new clothes they bought. Okay, guys, so I just received two very exciting packages, and I'm going to give you a little haul. There are videos about cat toys. I got this flabbing toy from my crazy cat. Let's see what it does. So much stuff you probably didn't even know existed, but now feel like you desperately need.

This is a human-sized dog bed that comes with its own blanket, and it's machine washable, so it's easy to clean. In the past, if you wanted to buy what you saw, you had to leave TikTok and find the product online. But now, TikTok is making it easier to buy stuff directly on its app. And so what TikTok is trying to do is cut out that middleman. They're trying to cut out Amazon and say, okay, you discovered this product here. Well, you can actually just buy it here. And, you know, with a click of a button, make it so easy for them to do that. And so that's exactly what TikTok's trying to do.

That's our colleague Megan Bobrowski. She says TikTok has big ambitions when it comes to online shopping. I think they're sort of looking for their next big bet. And they sort of see it, e-commerce, as the natural next step for them, given the situation that happens where people discover products on TikTok and then go to Amazon to buy them. And so I think they just see this as the next sort of like natural evolution for them. And, you know, there is a lot of money to be made here if they can't pull it off. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson.

It's Friday, October 27th. Coming up on the show, TikTok's new storefront and the power of social media marketing. Discover more value than ever at Loblaws. Like price drop. Hear that? Loblaws lowers prices every four weeks on a selection of items. So you can save more. Whether it's pantry staples or seasonal favorites,

you can look forward to new discounts throughout the aisles at Loblaws to get your essentials at great prices. It's your cue to stock up and save. Look for new value programs when you shop at Loblaws, in-store and online. People realized pretty early on that social media is a powerful tool to sell stuff. There's a whole economy that's built up around it. And it's not just super famous influencers like the Kardashians who do it. There are tons of smaller accounts that promote products.

There's the interior design account Arfo Farmhouse, which has a partnership with the Home Depot. I am here to tell you that the Home Depot is having their first ever Decor Days event. And there's Loki the wolf dog, a dog with nearly 2 million followers that has a partnership with Toyota on Instagram. There's just something about a person you follow talking about a product they love that just really makes you want to buy it.

So there's this sort of like parasocial relationship that forms between people and influencers they follow. You know, influencers are showing you their life. Maybe you follow them. You get to know them a little bit. You sort of develop this trust with them. And so you, you know, like you're more likely to trust what they want to sell you or what they are saying they use to look a certain way versus like a traditional ad. Like you have no personal

connection to that. I'm often amazed by the times that I see somebody who I don't even know them on social media, but if they're just talking into the camera and they're saying, I had this experience and I did this thing and I bought this product and it changed my life. And it's really amazing how I'm like, oh yeah, that must be great. I probably should buy that thing too. Yeah. If it's someone you follow and it's a product they actually use, it's a product they actually like, and then they're advertising that and saying, hey, like this is the hair product I use versus the skin product I use. Here's where you can buy it. Shopping on social media is expected to become a $100 billion market

in the U.S. by 2025. TikTok is trying to capitalize on this by creating TikTok Shop. Last month, the company launched the shop feature for users in the U.S. Can you just tell me, like, what is TikTok shop? Explain what it is and how it works. Yeah, so TikTok shop, if you open your TikTok app, at the top, there's normally a following tab for you to see people you follow. And then there's like a discovery tab for you to see content from new people.

And now there's an additional tab that says shop. And so if you click on that, you will be taken to a page that has a bunch of products listed on it. And in some ways, it kind of does look like Amazon. Like you can search for products, you can scroll, you can click, and they've sort of built this marketplace within TikTok. Have you bought anything on TikTok shop? I have not yet. Have you? I have actually. I didn't even realize I had forgotten about it, but I bought this like drain funnel that like says, if you get clogged drains

in your sinks, which I got this ad right around the time that I did, it's like this funnel that you can put in your sink drain. That's supposed to like funnel all the hair and other gunk just down one of the sides so that it doesn't get caught on the inside of the sink. Do you have a lot of hair? Thankfully, I do have a lot of hair. So yeah, I guess it does work because I got influenced. Even though I bought it on TikTok, TikTok isn't actually selling me the drain funnel. The guy who makes the drain funnel is.

TikTok is just providing a storefront and taking a cut at the sale. They are just serving as like the marketplace right now. They are working on setting up warehouses to eventually be able to ship stuff. But right now, sellers are shipping their own product and keeping their own product. And in an effort to compete with Amazon, they are telling sellers they have to ship items within three days of receiving an order. What kind of businesses are selling on TikTok? I think there's a lot of small businesses actually who make like kind of like crafts or homemade goods and like something that I've seen a lot of over the past month have been these like

fall themed sweatshirts and so it'd be like a sweatshirt with like Snoopy and then a bunch of like fall leaves or it'd be like um there's one this is not fall themed but there's a sweatshirt that had pickle drawers on it and this went viral and sold out and inspired like copycat shops to make like fake versions of this. A sweatshirt with pickle jars on it? Yeah, it's actually, it's pretty cute. Like, again, it's one of those things where like I would maybe consider buying it. But it's gone like insanely viral. And I spoke to the woman who runs this shop that makes this sweatshirt.

And she said like, you know, they're getting sales through the roof. And so it's sort of like stuff like this, where it's like small businesses or people running these things like out of their homes. Just to summarize, so people that are selling stuff on TikTok, it's their own. The seller has the inventory. The seller is doing the shipping. TikTok is just helping them facilitate the payment and it's taking a little cut. That's correct.

For now, that's what it is. But I think they have bigger aspirations to turn it into more of an Amazon type operation. An Amazon type operation? Like, are they trying to be like an everything store where I'll open TikTok instead of Amazon when I run out of toilet paper and laundry detergent? No, it's not exactly that. I think it's more that you're scrolling and you see something fun that you like. So maybe a more aspirational purchase than a utility purchase.

And the idea is that you're going to see something that you like, like for your instance, was it a drain funnel? So you see this that you like, like for your instance, like, what is it, a drain funnel. So you see this and you would never think to buy this otherwise. It's not like when you think of like, yeah, I ran out of toilet paper, let me go to TikTok. It's more like you're scrolling, you see something that looks really cool that you want, and they're making it very easy for you to just go ahead and buy that thing. making it very easy for you to just go ahead and buy that thing. But social shopping has some limitations, especially if users start to think that influencers aren't being genuine in their endorsements.

That's what TikTok learned when it first rolled out its shop feature in the UK in 2021. The company created a partner network of influencers that sellers could pay to make videos about their products. And they sort of ran into problems. It wasn't super popular. I spoke to someone who they worked with, and her job was to make videos every day promoting these products.

And she would promote everything from Apple Watches to, she told me, a bunion corrector. I don't even really know what that is, but I don't know if I want to know. So she was saying that, you know, like it didn't really work. Like what you really need is to inspire trust and you need to get people to trust this platform. And so in the UK, these brands were just sort of, they were hiring these influencers to make these videos about things that those influencers maybe didn't necessarily actually care about. Exactly. That's exactly what was happening. And like this

woman I spoke to was like, I didn't even really know what this stuff was. And I was told that I needed to speak really highly of all these things. And I think it just like that came across to people that, you know, this wasn't a genuine, these weren't genuine things that she was into. A TikTok executive told the Wall Street Journal that, quote, this is a big change of how people shop, and so we want to make sure we're getting it right. While it didn't go so well in the UK, TikTok's shop seems to be having more success in the US. And one company that's taken notice? Amazon. That's next. We'll be right back. Must be legal drinking age. Please drink responsibly. Carlsberg Canada Inc. Waterloo, Ontario. Need a great reason to get up in the morning?

Well, what about two? Right now, get a small, organic, fair trade coffee and a tasty bacon and egg or breakfast sandwich for only $5 at A&W's in Ontario. In the world of e-commerce, there's one undisputed king, Amazon. The tech giant sells roughly $600 million of goods worldwide every day. Right now, TikTok's shop only gets about $7 million a day in the U.S. Small beans by comparison.

But TikTok has something that Amazon doesn't. People's attention. The average user spends about two hours a day on TikTok, compared to less than 10 minutes on Amazon. What does Amazon think of what TikTok is doing? It's funny. Neither of the companies will comment on each other publicly. But that being said, Amazon last year did launch in its app a tab called Inspire that is a sort of TikTok-esque feed where you can scroll through

and see videos and photos of content you might want to buy, things you might want to buy on Amazon. And they put this directly in their app. Wait, Amazon has a feed inside the app that has videos? I don't think I've ever seen this before. I'm going to open the app and see if I can find it. So it's interesting that you say this because a lot of people I spoke to had also never heard of this.

So I think I'm breaking this news to a lot of people, but this has existed since last year. Where is it? So I see on the bottom, there's the home logo. There's a star thing. There's my account. There's a shopping cart. Oh my God, the star thing is Inspire.

Yeah, there you go. Wow, okay. So I'm suddenly inside someone's home, but I don't even know what they're trying to sell here. Like there's a chunky knit throw blanket that's in this shot. I guess there's a washable rug. The videos and the user experience does kind of feel like TikTok actually. Yeah, that's exactly it.

Like do you see it's very similar to TikTok, right? I have to say this content is much less compelling than the stuff that I'm used to seeing on TikTok. It's just like I'm scrolling through ads. Mm-hmm. And so I think TikTok does a good job of, they're doing the same thing, but you don't realize that they're ads. Why did Amazon launch this type of social feed? I think they're just trying to, again, it's like they're not specifically

saying that they're doing this in an effort to compete with TikTok, but they're doing things that pretty well position themselves to compete with TikTok. So it seems a bit obvious, but they want people to spend more time on the app. They want people to hang out on the Amazon app. And I don't know if this is your personal experience. This is definitely my personal experience. It's like, I go to Amazon knowing what I want to buy. I don't just scroll through Amazon mindlessly. How has Inspire been working for Amazon?

Are people using it? So Amazon hasn't released too many stats or details about how it's been doing. But I can say that it definitely hasn't made a difference to their bottom line yet. Inspire might not be that inspiring, but Amazon has a logistical network that gets so many goods to where they need to be so fast that cute little videos might not even matter. And that is where TikTok is also trying to be more like Amazon. The company's also getting into logistics. And this is going to be a big challenge for TikTok,

you know, to rival this sort of operation that they have. And so they're starting off small. They're, you know, not even shipping, for the most part, shipping products, but they're having the sellers ship the products themselves, you know, at this point. You know, they're poaching Amazon employees. they're buying warehouses, they're doing these things, but it's not something, you don't just turn into like an e-commerce powerhouse overnight.

How do you think people are responding to the TikTok shop so far? I mean, is it being well received? It's sort of mixed. I have been continuously polling people to see, I've been polling my Instagram followers to see if they've bought products from TikTok shop. And I did a poll last week and I think it was 90% of people said they had never bought anything from TikTok shop. But every once in a while I'll stumble upon someone who has. And for the most part, they've had a good experience. they've had a good experience. It's obviously still at the beginning stages of this, but I think it really gives legitimacy to this category of social shopping and online shopping that we're going to start seeing more in the next few years. And TikTok, I think, is rightly trying to capitalize on that

and seeing this shift towards seeing things that you like on social media and buying them. If TikTok can shake up this market and disrupt this market, you know, you can, one, it's good for influencers. Influencers can potentially make more money here. It's good for sellers. It's very easy to sell your products. I don't know if it's good for buyers. You might spend more money. So I don't know if that's a good or bad thing, but you might have more things that you like. So, you know, there's sort of like, it starts to take the way that you shop online and flip it on its head.

Can TikTok really take on a behemoth like Amazon? I mean, it seems almost surprising that they'd even want to try that. I think many people would agree. The flip side is, if you look at TikTok, TikTok came in to social media and disrupted an industry that largely had not seen a new competitor in several years. And look what they did.

Look what they did to Instagram. If they were able to disrupt social media, you know, perhaps there's this thought that, like, why can't they disrupt e-commerce? Or, you know, why there's this thought that like, why can't they disrupt e-commerce or, you know, why can't they disrupt something else? That's all for today, Friday, October 27th. Before we go, we wanted to give our sincerest thank you to the hundreds of you who wrote in

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