Written by: Gabriella Land
“You need to stop scrolling right now…” the woman on my phone tells me. Another ad appears in bright red reading, “Buy 3 orders, get 50% off”. Within the next 5 minutes of scrolling through TikTok, I encounter the same people trying to sell me the same products. Do I need the “viral” lip stain or a two piece workout set? Likely not, but now, I am rethinking. Maybe I should? This thought sequence is not uncommon for TikTok users. Since the addition of the TikTok Shop feature to the app, which originally just provided users with an endless stream of short videos, whether that be from the large dropshipping corporations or small businesses, it has proven amazingly effective at getting people to buy things. TikTok Shop has immensely reshaped and revolutionized consumer behavior and commerce, contributing significantly to national economies and helping to grow small businesses, with a fascinating strategy unique to the platform.
Launched in 2023, TikTok quickly proved itself successful in providing jobs in various sectors and driving absurd amounts of economic output. Looking specifically at the US, it has contributed to large scale domestic growth. According to the Washington Post, “TikTok…contributed $24.2 billion to U.S. gross domestic product last year” (Lorenz, 2024). Further, the LA Times says that the TikTok Shop marketplace “sells about $7 million worth of products a day in the U.S.” (Ding, 2023). TikTok Shop has clearly become a major component of the national economy and a part of consumers’ everyday lives. TikTok also supports around 224,000 jobs in the US (Lorenz, 2024). What started as a social media platform now represents a major contributor to our national economy and, at the same time, is sustaining many jobs. One may have thought that TikTok is just a silly social media platform for people to watch and upload short videos to, but its significant impact on our economy says otherwise.
Furthermore, a large number of small businesses now rely on TikTok’s marketplace to endure. According to the Washington Post, “TikTok drove $14.7 billion in small-business owners’ revenue in 2023” (Lorenz, 2024). These staggering statistics prove that TikTok plays a key role in small businesses’ success. TikTok provides more affordable marketing options that push users to small businesses, allowing them to reach a much larger audience than in their past. According to one of Tik Tok’s 2024 economic impact reports, 39% of small to mid- size businesses in the US say that TikTok is critical to their business’s existence and 69% say that using TikTok has led to increased sales (Amplitude, 2023). These staggering statistics prove that TikTok plays a key role in small businesses’ success. Moreover, small businesses that have never
been able to reach a global audience can now do so without a ton of marketing spend. TikTok’s addicting algorithm is consequently helping small businesses grow at a rate they have not been able to in the past.
For TikTok advocates or consistent users, these numbers may seem more plausible than to someone who rarely opens the app. So, how does TikTok get people to spend money? What’s their strategy? The most likely cause would be TikTok’s addicting algorithm. TikTok was one of the first social media apps to be truly successful with short-form media. Some may remember Vine, which also used short videos to keep users on the app (TikTok, n.d.). According to one LA
Times report, “TikTok has 150 million users in the U.S., 35% of whom are ages 18 to 24…[and] Teens in particular spend an average of nearly two hours a day on the app” (Ding, 2023). With this many viewers, specifically Millenial and Gen-Z users, introducing a way for people to buy things was both an easy and financially beneficial decision for TikTok to make. Further, while TikTok may lack the consumer track-record of major platforms like Amazon, it still has an immense amount of consistent users who are loyal to the app, as demonstrated by the amount of time they spend on the app. TikTok has also leveraged their live streaming feature (TikTok Live) to boost consumer purchasing activity more than one may have expected. Here, users are often hearing a real person market a product and have the opportunity to interact with a live video, which can be even more engaging to potential buyers. According to Advantage Solutions, “50% of TikTok users have made a purchase after watching a TikTok Live” (Advantage Solutions, 2023). Additionally, both repetition and testimonials are key TikTok shop success strategies. Spending only a few minutes on the app, one quickly discovers that there are certain products that are being promoted more frequently than others. Many viewers are seeing the same items routinely. Viewers are basically guaranteed to see a specific product numerous times within their time on the app, and the manner in which these products are often being pushed is mainly through testimonials. TikTok pays these creators commission for making these videos, which often ranges from $0.20-$7.00, depending on the product.
Additionally, to earn commission, the eligibility requirements are easy to meet: you just need to be an adult with a minimum 5,000 followers (Ding, 2023). This relatively easy requirement gives incentive for more and more creators to make videos about the products. More recently, there is a clear trend of people solely doing reviews on TikTok as their content niche. While there are other platforms to buy discounted or cheap items, like AliExpress or Temu, TikTok Shop has created a much more reliable feel through incentivizing TikTok creators to truly convince app users that certain
products will meet their needs.
These testimonials are also very effective, as it feels more real and creates trust with consumers. From a creator’s convincing tone of voice to them showing a “before and after” use of a product, consumers are more likely to trust and buy the product. This marketing is different from ads on TV or billboards and often creates a parasocial relationship between TikTok viewer and TikTok seller. A consumer may feel as though they are friends or “really know” a TikTok creator. So, when they are told that they need to buy a product, it feels like a friend making a recommendation, which is generally more persuasive. TikTok has also done a great job of getting major influencers and sometimes celebrities to endorse products sold on TikTok Shop. If a billboard says to buy something, it’s likely not as convincing as your favorite influencer telling you, “You must buy this product now before it sells out again!” TikTok Shop’s success depends largely on these parasocial relationships.
Similar to other social media, TikTok’s algorithm creates feelings of insecurity for viewers, which also supports their marketplace success. For instance, if a viewer sees a person with what appears to be “flawless” skin telling viewers that they need to buy a certain face cream to achieve this same skin, viewers that struggle with clear skin are more likely to buy the product. Buyers who might feel insecure about something about their physical appearance or just want to look “fashionable” may be more easily influenced to purchase something if a person they envy or admire is telling them to.
Lastly, the ease of TikTok Shop is hard to beat: You watch a 15 second video of an often attractive and very convincing person, telling you about a product that TikTok’s algorithm has chosen just for you based on content you have viewed. Then, it can be bought with just a few easy clicks, and now a package is on the way to you. TikTok has removed lots of purchasing barriers, creating a seamless connection from seller to consumer.
TikTok Shop has truly revolutionized the e-commerce industry, and may pose a threat to larger online shopping companies. Adopting strategies from utilizing highly convincing testimonials to just having an easy purchasing process, the platform drives growth for not only big companies, but small businesses, too. Once solely thought of as social media or entertainment, TikTok Shop has seamlessly blended entertainment and e-commerce to become a key player in the online shopping market.
References
Advantage Solutions. “Here’s Why Brands Should Be Paying Attention to Tiktok Shop.” (2023, December 6). Advantage Solutions. advantagesolutions.net/news/heres-why-brands-should-be-paying-attention-to-tiktok-shop/#:~:text=Some%2055%25%20of%20TikTok%20users,U.S.%20social%20buyer %20th is%20year.
Ding, J. (2023, December 3). “Why TikTok Is Dangerously Good at Making You Spend Money.” Los Angeles Times. www.latimes.com/business/story/2023-12-03/why-tiktok-is-dangerously-good-at-making -you-spend-money.
Lorenz, T. (2024, March 13).“TikTok Claims Its Contribution to the Economy Is Huge.” The Washington Post. www.washingtonpost.com/technology/2024/03/13/tik-tok-economic-impact-report/.
Mayes, T. (7 Feb. 2023). “The Rise of Short Form Social Media.” Amplitude.
thisisamplitude.co.uk/the-rise-of-short-form-social-media/.
TikTok. (n.d.). “TikTok’s Impact on US Economy and Small Business.” TikTok Economic Impact. tiktokeconomicimpact.com/tiktok-economy-impact/.
TikTok Newsroom. (2023, September 12). “Introducing TikTok Shop.” TikTok Newsroom. newsroom.tiktok.com/en-us/introducing-tiktok-shop.