Random Image Display on Page Reload

TikTok Shop’s Era of Super Subsidies Is Ending

Apr 1, 2024 5:00 AM

TikTok Shop’s Era of Super Subsidies Is Ending

The app’s shopping features won over sellers and shoppers by offering deals that can seem too good to be true. Now TikTok is raising sellers fees, which may translate into higher prices.

Pink and silver shopping cart on a light blue background with a dramatic shadow
Photograph: DBenitostock/Getty Images

The days of buying ultracheap stuff on TikTok Shop may be winding down.

Starting today, the fees TikTok charges sellers increase from 2 percent to 6 percent of the price of each order. They will creep up to 8 percent in July. The changes may mark a crucial moment for people who shop on TikTok and for the platform itself, potentially forcing up prices and testing shopper’s loyalty to the social app’s ecommerce play.

TikTok Shop launched in the US in September with strikingly low prices compared to other online stores, thanks to its subsidies to sellers and shoppers. Influencers and entrepreneurs embraced the opportunity: TikTok saw a surge of sellers that outpaced growth in vendors at competitors like Shopify and Amazon, according to a March report from Similarweb, which tracks web traffic. But from the beginning TikTok Shop has hosted deals that appear too good to be true, such as deeply discounted—and possibly counterfeit—snail mucin skin care products and Stanley tumblers, as well as jewelry, socks, and other odds and ends for less than $1.

After a successful holiday shopping season, TikTok Shop’s fee increases see the platform trying to prove it can become a sustainable, habit-forming mainstay in ecommerce. “The true test for [TikTok Shop’s] longevity and its sustainability will be as these incentives start to roll back,” says Jasmine Enberg, principal analyst for social media at Insider Intelligence, a market research firm. “A lot of the sellers that have found success on TikTok Shop are smaller businesses that really benefited from the incentives.”

If TikTok Shop continues to increase its fees, those sellers may struggle, Enberg predicts. TikTok did not provide a comment on the fee changes for this story.

TikTok Shop’s seller fees are still lower than many fees for Amazon sellers, which vary by type of product. The lowest are 5 percent, for low-cost apparel, but they generally range between 8 and 20 percent for jewelry and fine art. But TikTok Shop is a different beast than the everything store. While many people turn to Amazon to search for necessities, on TikTok Shop buyers often find products they didn’t know they wanted through influencers and algorithmic discovery—more similar to Temu or Shein.

TikTok sellers face the additional challenge of needing their pitches to stand out from the parade of loud, viral video content the app services up. Influencers and brands selling through TikTok Shop have to convince people scrolling for entertainment to stop and shop. People are often “in the app to do something completely different,” says Michael Yamartino, an ecommerce expert and CEO of Route, a platform that helps brands ship orders.

Sellers that respond to higher fees by raising prices may discover that they’ve lost a key ingredient needed for success in TikTok’s ecommerce model. To get TikTok users’ attention and items into their virtual carts, “you have to be loud,” Yamartino says. “You have to be shockingly cheap, shockingly engaging, and super on trend.”

TikTok Shop does still offer subsidies to sellers. Shoppers don’t pay shipping on orders of $20 or more. Last week, TikTok was advertising a Spring Sale in the app’s Shop tab, offering discounts up to 30 percent (a combination of TikTok subsidies and sellers slashing prices) and free shipping on some items. Among them: a Duolingo owl head covering, 10 pairs of socks for $3.80, and a set of stuffed capybara plush dolls.

TikTok’s fee changes could be most challenging for small-time or individual sellers that embraced its shopping platform, some hawking cheap or questionable items. The flood of random, kitschy and trendy products has eclipsed some more established retailers and bigger brands.

Paul Jauregui, who cofounded BK Beauty with his wife Lisa, says their company has seen massive success since they started also selling their products on TikTok Shop, selling more than 168,000 makeup brushes and cosmetics on the app. It’s the sort of product primed for TikTok, where beauty content is huge and influencers can easily showcase makeup tools. “When you hit this trend, you’re just carried on this wave that takes you very high quickly,” Jauregui says.

Jauregui still believes in the power of TikTok. For now, BK Beauty will likely absorb some of the additional costs, but the fee changes may affect how the company advertises on the platform or engages in TikTok Shop’s flash sales, he says. “The subsidies have started to fade. We’re still leaning in.”

Amanda Hoover is a general assignment staff writer at WIRED. She previously wrote tech features for Morning Brew and covered New Jersey state government for The Star-Ledger. She was born in Philadelphia, lives in New York, and is a graduate of Northeastern University.
Staff Writer

More from WIRED

Kids’ Cartoons Get a Free Pass From YouTube’s Deepfake Disclosure Rules

YouTube now requires a label for some generative AI content. Animations made for kids are exempt.

Kate Knibbs

Welcome to the Age of Technofeudalism

In Yanis Varoufakis’ latest book, the former Greek finance minister argues that companies like Apple and Meta have treated their users like modern-day serfs.

Morgan Meaker

To Build a Better AI Supercomputer, Let There Be Light

OpenAI and other AI leaders think new leaps in machine intelligence will require new forms of computer hardware. One proposal involves connecting GPUs with light.

Will Knight

Glassdoor Wants to Know Your Real Name

Anonymous, candid reviews made Glassdoor a powerful place to research potential employers. A policy shift requiring users to privately verify their real names is raising privacy concerns.

Amanda Hoover

How I Became a Python Programmer—and Fell Out of Love With the Machine

When I started coding, I was suspicious of all the abstractions. Then I discovered the Django framework.

Scott Gilbertson

Reddit’s Sale of User Data for AI Training Draws FTC Inquiry

The platform says it stands to make more than $200 million in coming years from Google and other companies that want user comments to feed AI projects. Regulators have questions.

Paresh Dave

Beeper Took On Apple’s iMessage Dominance. Now It’s Been Acquired

The app that turned green chat bubbles blue has been acquired by Automattic, the parent company of WordPress.com and Tumblr.

Lauren Goode

Forget Chatbots. AI Agents Are the Future

Startups and tech giants are trying to move from chatbots that offer help via text, to AI agents that can get stuff done. Recent demos include an AI coder called Devin and agents that play videogames.

Will Knight

Credit belongs to : www.wired.com

Check Also

High-tech London, Ont.-area farm delivers fresh produce all year. Could it be an answer to high grocery costs?

At a farm north of London, Ont., researchers with Western University are planting the seeds …