To prove itself as a legitimate ecommerce platform, TikTok must gain regulatory trust and ensure the safety of user data, say analysts at GlobalData.
Short video app TikTok, owned by ByteDance, is set to compete with the likes of Amazon, Shein, Sea Group’s Shopee, and Alibaba’s Lazada, with its live streaming ecommerce business. However, its new initiative comes at a time when the company is under scrutiny over data privacy concerns in the US and Europe.
Pinky Hiranandani, Principal Analyst at GlobalDat, said: “Security and trust are vital for ecommerce transactions. TikTok must implement strong security measures to protect user data from unauthorized access, including end-to-end encryption of sensitive data and complying with the General Data Protection Regulation (GDPR) in the European Union and the California Consumer Privacy Act (CCPA) in the US. Also, the upcoming Digital Services Act in the EU requires platforms like TikTok to limit disinformation and better protect children online.”
TikTok Shop, the company’s ecommerce platform, which allows users to discover and purchase products directly from TikTok videos, has gained popularity in the Southeast Asian market backed by its large and engaged user base. In 2022 alone, TikTok Shop expanded to Malaysia, Singapore, Indonesia, the Philippines, Vietnam, and Thailand.
While its main focus will be on markets such as Indonesia, TikTok is planning to expand its ecommerce business in the US and the UK. However, the company is already facing setbacks in the US and Europe (the UK, Denmark, and Belgium), with lawmakers banning the app on government devices. In May 2023, the state of Montana made the landmark move to ban the app completely. Although such bans may not prevent TikTok or any other social media company from accessing a user’s personal data, having a comprehensive federal data privacy law in the US will help.
Hiranandani continued: “Moreover, competition in the ecommerce space, especially in the US, is intense given the scale and reach of domestic giants such as Amazon and Walmart. TikTok aims to build on its massive user base and partnerships with brands and influencers to drive ecommerce sales. It is attempting to mimic Amazon by producing in-house products and building a sales pipeline, as well as charging vendors a commission to showcase products on TikTok Shop. However, the Chinese company will require significant investment in its platform and infrastructure to compete with its rivals.”