TikTok prepares a ‘Project S’ to enter online shopping – 06/22/2023 – Market

TikTok is expanding its online commerce offerings, with its Chinese parent company selling products through the video app, as the group tries to challenge rivals such as Shein and Amazon.

In recent weeks, UK users have begun to see a new shopping feature on TikTok called “Trendy Beat”, a section offering items that have proven popular in videos, such as tools for extracting ear wax or brushing pet hair. clothes.

All advertised items are shipped from China, sold by a Singapore-registered company owned by Beijing-based TikTok parent company ByteDance, according to legal records and people briefed on the operations.

The model, similar to the way Amazon manufactures and promotes its own range of best-selling items, represents a major departure from the TikTok “marketplace.” Currently, it allows other vendors to sell products on the TikTok Shop, who receive a small commission.

On the other hand, ByteDance would keep all profits from sales made through the Trendy Beat feature on TikTok, four people familiar with the transaction said.

TikTok said it is testing the feature. “We’re always exploring new ways to enhance our community’s experience and are in the early stages of trying out new shopping features,” the company said.

ByteDance is seeking new revenue that could justify its $300 billion valuation, making it the world’s most valued private startup, ahead of an initial public offering (IPO) expected in the next two years.

The effort to start selling its own products is known internally as “Project S”, according to six people familiar with the internal deliberations. They added that ByteDance is building an online commerce unit to challenge groups such as “fast-fashion” brand Shein and Pinduoduo’s sister app, Temu, a site that sells cheap goods and has a strong presence on social media.

Project S is led by Bob Kang, head of e-commerce at ByteDance, who recently traveled from Shanghai to coordinate work at TikTok’s London offices, according to two employees. The company said Kang is in the UK for a variety of reasons and reports to the app’s chief executive, Shou Zi Chew.

Project S leverages TikTok’s knowledge of items that are going viral on the app, allowing ByteDance to acquire or produce those items on its own, people briefed on the plan said. The company then heavily promoted Trendy Beat products more than rival sellers on TikTok, the people said.

TikTok said the brand used a network of suppliers to produce items for its Trendy Beat offering. To boost its e-commerce business, ByteDance recruited employees from Shein, two employees said.

“Bob Kang is obsessed with Temu and replicating its success, and he thinks they can do this by inserting themselves into the sourcing and selling process,” said another person familiar with the UK strategy.

ByteDance has been trying to expand TikTok’s e-commerce offerings to replicate its success with Douyin, its Chinese sister app, which achieved sales of more than 10 billion products annually. ByteDance generated $85 billion in sales in 2022, the majority derived from its China business.

TikTok’s marketplace, the TikTok Shop, has seen success in markets across Southeast Asia, including Indonesia and Vietnam, but is still struggling to gain traction in the UK, where it launched more than two years ago, several people familiar with the operations said. .

TikTok underwent a significant restructuring last month in an attempt to refocus its e-commerce efforts on its current markets such as the UK rather than embarking on broader international expansion into other Western markets.

Previous attempts to emulate Shien and Temu’s model have failed. Three ByteDance shopping apps — Dmonstudio, Fanno and If Yooou — have been closed or abandoned, two ByteDance employees said.

“ByteDance realized that they wanted to build their own brand on the TikTok app rather than building a standalone app like Shein and Temu,” said one of the employees.

Trendy Beat’s shopping page links it to a company called Seitu, registered at an address in Singapore. Three people familiar with Project S have said that Seitu is owned by ByteDance and TikTok has confirmed that it is a subsidiary.

According to public records, Seitu is also connected to If Yooou, a retail company owned by ByteDance. Lim Wilfred Halim, head of e-commerce security and anti-fraud at TikTok in Singapore, is registered as a director at Seitu.

Translated by Luiz Roberto M. Gonçalves