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Expert: TikTok Shop Offers Huge Opportunity for CPG Companies

In September, TikTok became more than a video sharing social media platform. The app known for dance fads, cooking demos, viral challenges and conversation duets is taking on e-commerce.

TikTok Shop, which launched for all U.S. users weeks ago, brings shoppable videos and live streams to the app. For those selling products ranging from keychains to clothes, TikTok Shop can automatically connect videos with e-commerce platforms. The platform also allows product ads to show up in users’ feeds. The company has also created a logistics platform for sellers, helping them pick, pack and ship products sold through TikTok to customers.

According to TikTok, more than 150 million people in the United States use the app. And e-commerce through social media has been growing rapidly. Insider Intelligence predicts social media-related e-commerce sales will add up to $56.17 billion this year.

Mintel found this spring that nearly half of U.S. consumers (47%) have bought something through social media, and 58% are interested in doing so.

TikTok parent company ByteDance has been experimenting with TikTok Shop in the U.S. since last November, when it began inviting a limited number of businesses to use the platform.

When the platform made its wide launch in mid-September, TikTok told TechCrunch it had already signed up 200,000 sellers to use TikTok Shop.

TikTok Shop adds more sales opportunities for both startup and established CPG food and beverage brands, but how that opportunity will play out is not quite clear just yet, said Rachel Vandernick, a consultant at social marketing firm The Vander Group.

“We’re seeing a lot of fluctuation as that opportunity starts to shake out,” she said.

In the weeks since TikTok Shop was established, the social media company has established new regulations on what can be sold through the platform. Through these guidelines, TikTok says it’s trying not to sell products that could pose a risk to customers and users — as well as ensure that no counterfeit products are sold on the platform.

TikTok’s list of prohibited products includes several types of food items. These include perishables, items that need to be stored at a specific temperature, baby formula and food for children under three, food items that are not packaged or intended for retail sale, and anything homemade.

Still, there is a wide variety of food and drink that can be sold on the platform, as well as products that are used to enhance or aid in home cooking. And, Vandernick said, the possibilities are huge, noting:

“As far as traditional CPG brands go, I think everyone’s looking around and going, ‘Could this be the next Amazon for us?’”

Vandernick said the nature of TikTok, as well as the way that TikTok Shop has appeared on the app so far, creates many ways for established CPG companies to reach new consumers. While more traditional e-commerce requires customers to search out a product or brand, social media introduces products into the mix through its algorithm. And on TikTok, videos that link to shoppable content appear in consumers’ regular video streams.

Because of the algorithm, TikTok Shop will highlight shoppable content to highly targeted consumers, Vandernick said. And, she continued, the app creates a high level of interactivity with the audience — without any extra work to gain that interaction on the brand’s part. Vandernick said TikTok Shop could potentially put CPG products in front of a new audience set that they aren’t currently targeting.

However, TikTok Shop isn’t automatically a way that CPG food and drink brands will find success. While the platform is adding a layer of shoppable content, Vandernick said that companies have to be able to fulfill all orders that come from TikTok. Companies – especially smaller and more startup brands – should think about their supply chains, manufacturing levels and distribution channels, she said. If consumers order items they see on TikTok, they have an expectation of receiving the merchandise in a timely fashion.

CPG food and drink companies are slowly approaching TikTok Shop, carefully considering how to best use it.

The shoppable platform has seen its rules change significantly, and pending legislation dealing with data security (as noted by The New York Times) involving China-owned ByteDance may soon alter the way consumers can use TikTok in the U.S.

However, Vandernick said that CPG companies should create structured tests to start using the TikTok Shop and see how it works for them. She recommended brands take a couple of their best-selling products and start selling them on TikTok.

However, she cautioned, companies need to remember that TikTok is a different kind of social platform than more traditional e-commerce sites.

“I think there’s this idea that, ‘Yes, we can sell through TikTok, and that’s amazing, and we’re gonna make so much money off of that,’ without realizing that in order to do that effectively, you have to still create the content,” Vandernick said. “You still have to do that asset management piece of this. It’s not just setting up shop and letting the product sell itself. …Somewhere like TikTok, it’s all still tied to content and tied to creator relationships.”