Amazon's next big competitor is already here. It just doesn't look how you thought it would.
Thanks to COVID-19, e-commerce has grown a decade in just a few months. Chief among the winners is Shopify, an e-commerce platform that helps businesses set up digital storefronts in an effort to compete in the digital marketplace.
Shopify is eating into Amazon's market by allowing merchants to develop their own storefronts without having to go through Amazon and risk things like having a product stolen, taking too much in commission or diluting their brand. But Shopify's success is no secret, and the comparisons to Amazon are made quite frequently.
What did come as a surprise, however, was Tuesday’s news that Shopify and TikTok were teaming up. The two companies announced a deal, which will allow Shopify merchants to access TikTok’s advertising services via Shopify, giving them access to TikTok’s young, highly engaged audience.
While at first surprising, the deal immediately makes sense. TikTok has become the social media app of the pandemic, attracting new users at a breakneck pace. The app’s Twitter following is a whopping five times greater than Shopify’s, and those millions and millions of users represent some of the most coveted age ranges for advertising. By giving its merchants access to TikTok’s massive audience, Shopify is also giving them yet another edge over Amazon.
But more than all that, Shopify and TikTok are taking a step towards what may end up as the future of online shopping.
In May, investor Connie Chan laid out a prediction on Twitter which the TikTok/Shopify deal has proved correct.
“The next big Amazon competitor is likely going to look like a social or video app, not a shopping app,” Chan wrote, laying out her reasoning in a followup tweet:
"1. Social = followers = built in distribution
2. Social = user intent is discovery and inspiration (perfect for product recs!)
3. Video = a great way to sell things (unboxing, demos, context)
4. Live = limited time offers, interactive q&a”
Reading this, it’s easy to see how TikTok fits into Shopify’s mould. The app is famous for its “For You” algorithm, which delivers highly targeted content to its users and is a huge part of the app’s wild success. Those same tools can be used to deliver highly targeted advertisements, giving Shopify merchants a direct line into the veins of potential buyers by reaching them in naturalistic, organic ways. Users don’t have to go to an online store to peruse around when an ad for a product they may enjoy appears on TikTok, or if their favorite influencer flaunts it on TikTok’s live streams. They discover the product just by using the app, not by looking for it.
This naturalistic discovery is crucial, according to Chan. “For Amazon to fight against this shopping revolution, it’s going to need to change from a text-centric, search-driven platform to one that delivers on discovery -- users have to want to open the app without a specific intent to buy. Imagine going to the mall without an agenda.”
“Shopping is fun in real life,” Chan elaborated. “You can go with friends, treasure hunt for bargains, discover new products, [and] better understand a brand’s vibe… Livestreaming e-commerce actually comes close to replicating all that fun. The shopping revolution will COMBINE e-commerce and entertainment, where both are equal in importance. Toss in gamification, and boom.”
In other words, TikTok and Shopify’s deal doesn’t move the needle forward because it’s something wild and new; it moves the needle forward because it most resembles the traditional shopping experience. Rather than looking for something specific the way you do on Amazon, TikTok’s features allow for merchants to have customers discover their products the way they would by rifling through a rack at a clothing store. The future is just the past with a twist.
About the Data:
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