TikTok's new shopping feature will put the company in direct competition with other big e-commerce players—and that may not be a good thing, according to Forrester Research Retail analyst Sucharita Kodali.
The social media giant recently confirmed that it is testing a new in-app shopping feature called Trendy Beat in the United Kingdom – after becoming the first app to surpass $1 billion in consumer spending in a single quarter. The feature could be used to offer TikTok’s own products and apparel, distinguishing it from the TikTok Shop marketplace it currently offers for creators to sell their own goods.
TikTok’s latest retail endeavor, however, could be a risky bet as it faces competition from companies like Amazon (AMZN), said Kodali.
“It's very, very difficult to make either European consumers or North American consumers purchase from these social networks,” Kodali told Yahoo Finance Live (video above). “That's just not how we shop… it may be a little bit of how we discover, but it's not how we buy.”
Kodali added that one challenge is that TikTok is entering a market that is already well-saturated – including big players such as Amazon, the current e-commerce leader in the North American marketplaces. She said that in order to succeed, TikTok will need to differentiate its inventory from what is available “everywhere on the internet already.”
“A significant part of the success of any new marketplace does have to do with a unique assortment and perhaps, some unique brands,” she said.
TikTok will also have to figure out whether it will outsource the logistics required in order to operate Trendy Beat. Other e-commerce giants such as Shopify (SHOP) have found managing their own logistics difficult, while similar social media platforms like Snapchat and Instagram have not been able to profit off of people’s desire to shop.
Kodali said that TikTok is far from immune to facing these challenge itself. She said that the company may still want to operate the logistics itself in order to exert more control of the shopper experience, but “it’s really, really hard to get right.”
“If TikTok really were serious about it, they would probably just ally with Amazon, and basically, let the new Buy with Prime solution be the TikTok shipping solution,” she said.
No matter how the feature unfolds, it could fall flat in a couple years' time due to the ever-changing consumer base on social media platforms, Kodali explained. In the short term, however, she said it could yield success with members of younger generations which haven't purchased goods on social media apps before.
Jared Mitovich is a writer at Yahoo Finance. Follow him on Twitter @jmitovich
Read the latest financial and business news from Yahoo Finance
