Amazon Confronts a New Rival: TikTok

By Meghan Bobrowsky, Sebastian Herrera and Georgia Wells | Photographs by Travis Dove for The Wall Street Journal

There's a new rivalry in tech: Amazon versus TikTok.

TikTok made a name for itself in the U.S. as a viral video-sharing sensation. Now it's trying to get its 150 million U.S. users to think of it as a shopping destination.

Amazon, meanwhile, is trying new tactics to maintain its dominance in e-commerce. It has added social elements to its app to entice younger shoppers, and it is building up a network of influencers who hawk items on and off its website.

As a result, the two companies are on a collision course as they vie for position in a huge market. Researchers at Insider Intelligence estimate social e-commerce will grow into a $100 billion market by 2025, from $67 billion this year.

To succeed, each company will need to copy elements of the other's success. TikTok, owned by Beijing-based ByteDance, wants customers to trust it as a safe and reliable place to buy products, the way many already trust Amazon. And Amazon is trying to persuade users to hang out on its app like they do on social-media services.

TikTok launched its shopping feature, called TikTok Shop, last month and is currently selling about $7 million worth of products like hairbrushes, teeth-whitening tools and fall-themed sweatshirts with leaves and pumpkins every day in the U.S., with a goal of reaching $10 million a day by the end of the year, according to people familiar with the matter. Amazon's global online store sales -- a measure of the products Amazon sells directly -- was roughly $603 million a day last year.

TikTok is spending heavily to build a logistics operation, poaching Amazon employees and trying to lure third-party sellers by offering them a bigger cut of sales than Amazon, according to sellers. More than 60% of Amazon's retail sales come from third-party sellers.

"This is a big change of how people shop and so we want to make sure we're getting it right," said Marni Levine, a new TikTok e-commerce executive in charge of U.S. small-business operations who came from Facebook's parent company, Meta Platforms. She declined to comment on whether TikTok sees Amazon as a competitor. An Amazon spokeswoman said social shopping "has grown tremendously over the past five years" for the e-commerce giant.

Customer Trust -- Advantage: Amazon

Amazon has spent years building up trust among consumers, thanks to a relentless focus on customer experience, including increasingly speedy deliveries and a lenient return policy. TikTok still has to earn that kind of trust.

Deanna Arora, a 26-year-old in Seattle, recently made her first purchase on TikTok Shop. She bought a $9 detangling hairbrush that influencers had been posting about and spent much of the time it was in the mail wondering if it was real or a rip-off, despite scouring reviews of the seller in the app.

"I would have trusted the reviews more on Amazon, but clearly I was so entranced by TikTok," she said of her purchase. It's that type of excitement that TikTok is trying to turn into profit.

After the hairbrush arrived, she said she still didn't know if she had received the genuine product or a knockoff, and that there was no good way to tell the difference. TikTok says it has ways for users to verify the authenticity of products purchased on the platform.

Before the U.S., the company launched TikTok Shop in the U.K. in 2021, and created a "partner network" of third-party agencies that sellers could use to promote products. The shopping feature wasn't a hit.

Grace Humphrey, who worked as a content creator for one such agency, said she was paid to make 15 videos a day, and that she was instructed to speak highly of all the featured items, from Apple watches to a bunion corrector.

"The whole point of the whole thing was to build up trust with the U.K. and get as many sales as possible," said Humphrey, who now runs her own social-media marketing agency. But the videos, which felt stilted and forced, had the opposite effect: They made users more suspicious.

"That was their biggest issue," she said. "People willing to trust how legit they are."

Internally, TikTok Shop U.K. was considered a flop, according to people familiar with the matter. TikTok is now trying to revive the business there with new features and more reliable vendors.

Last month, the company launched the shopping feature in the U.S. It vets sellers' identities and relies on established, independent influencers to promote products they choose.

User Engagement -- Advantage: TikTok

TikTok's biggest advantage is its ubiquity in the U.S. The roughly two hours a day on average that U.S. users spend on TikTok leaves other companies jealous. On Amazon, U.S. customers spend an average of about 9.7 minutes a day, according to market-research firm data.ai, which tracks usage on Android devices.

In a bid to keep users engaged for longer and to create shopping experiences that would appeal to younger users, Amazon has been integrating more social features into its app.

One, called Inspire, shows users a TikTok-style feed of photos and videos featuring products customers can purchase through the app. Amazon recently began to allow shoppers to upload content themselves on the Inspire tab and also added a "share" button that allows users to share the content and products they see. The company said customers have viewed over one billion Inspire posts since the feature launched last year.

Amazon this week also revealed that it is testing another social-type feature in its app, one that allows users to get feedback on products they're interested in from people they know.

Getting customers to care about new social features like Inspire, however, is a tough task, said Daniel Buchuk, a researcher with Watchful Technologies, which tracked Amazon's testing and launch of the Inspire tab.

Most Amazon customers are used to going to the app and website to shop for items they already have in mind, he said -- not to browse an endless feed of products.

The company has created a way for social-media influencers to promote Amazon products and earn commissions from sales they generate through personalized "storefronts." The challenge for Amazon is that this approach relies heavily on influencers posting on platforms like TikTok and Instagram. Influencers say Amazon's efforts like the Inspire function haven't grown attractive enough to focus on.

Delivery Logistics -- Advantage: Amazon by miles

TikTok has a long way to go to build a logistics apparatus that can rival Amazon.

Krystal Sprouse, a regular Amazon shopper, recently heard about a vinyl edition of Taylor Swift's album "Reputation" for sale on TikTok's new shopping platform for $26, a bargain for a record that can be hard to find and sometimes sells for double the price.

Her shopping experience wasn't nearly as seamless as on Amazon. The package from TikTok took a week to deliver and was damaged when it arrived.

She'll probably try TikTok Shop again, she said, but she's not in a hurry.

"I'm impatient, so I prefer to have the option to have Amazon deliver the next day," said Sprouse, who is 31 years old and lives in Richmond, Va.

Amazon has spent years building infrastructure that can ferry packages almost anywhere in the country in two days or less. Last year, it delivered more than 13 million packages on an average day in the U.S., according to data the company provided.

Sellers say TikTok is telling them they must ship products to customers within three days of receiving an order or face delays in receiving payment. The company is also putting all new sellers on a probationary period and requiring them to maintain low rates of refunds and negative reviews.

Furthermore, TikTok is building its own distribution networks to be able to ship items itself, something no other social-media platform has done.

TikTok's U.S. e-commerce operations have recruited workers with experience in supply chains and logistics, including executives from Amazon and eBay. Its U.S. team has grown to more than 300 people.

When TikTok started rolling out the program, it prioritized recruiting sellers from Amazon; as of last month the app had 200,000 sellers. Amazon's U.S. marketplace has an estimated one million active sellers.

Influencer Army -- Advantage: TikTok, but Amazon is slowly gaining

The two companies are also fighting over influencers.

Amazon has made strides since 2017 when it launched an influencer program, luring creators with financial incentives. For some, the payouts have become enough to replace a normal full-time job, as it did for Michelle Lei, who quit her role as a software engineer last year to become a full-time Amazon influencer.

She said she can earn thousands of dollars a month, including one-off commissions from brands. She promotes home-decor products on sale at Amazon through her TikTok and Instagram channels.

The number of views of TikTok videos promoting Amazon Prime Day sales has doubled every year since 2019, to over 400 million for this year's event in July, according to research firm Marketplace Pulse.

Amazon recently started offering influencers more analytics and tools to make it easier for them to track online traffic and sales, and now hosts retreats for influencers.

But influencers are TikTok's bread and butter.

Kayla Ruliffson, 20, promotes makeup and skin-care products to her 100,000 TikTok followers. She first came across TikTok Shop while she was making a video about a skin-care product in July. The app prompted her to tag the product, then linked to a place to buy it in the app.

Ruliffson said she made $3,000 within a few days.

A month later, she uploaded a video promoting a teeth-whitening tool on TikTok Shop. With that video, she said she earned more than $20,000. Her payouts from Amazon had never totaled more than $1,000 a month before.

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October 20, 2023 21:00 ET (01:00 GMT)

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