Will TikTok become the next major cross-border e-commerce platform for Chinese merchants to tap overseas consumers?

Liky Li, a live-streamer based in the southern Chinese city of Guangzhou, often works between midnight and 8am to pitch music boxes and Harry Potter figurines to online consumers in cities such as London and Manchester, instead of those in local locations like Shenzhen or Shanghai.

A former English opera teacher and translator, Li said she is using "Live Shopping on TikTok Shop" - a service under popular short video-sharing platform TikTok - to reach a vast "blue ocean" of unexplored opportunity in cross-border e-commerce.

"Everyone is just getting started, so every step is hard to take, and no one will teach you anything," said Li, citing the belief of her unidentified boss who is a small Chinese merchant on US e-commerce platform She said they are betting on the growing reach of TikTok Live to engage more consumers overseas.

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ByteDance-owned TikTok, which was projected by research firm eMarketer to have 1.5 billion monthly active users worldwide by the end of this year, launched its live-streaming service in 2019 and introduced new features last year. With the ongoing issues in the "made in China, sold on Amazon" business model, analysts expect TikTok to be well-positioned to transform into a major cross-border e-commerce platform for mainland Chinese merchants.

Guangzhou-based live-streamer Liky Li uses TikTok to engage online consumers in the UK. Photos: Handout alt=Guangzhou-based live-streamer Liky Li uses TikTok to engage online consumers in the UK. Photos: Handout>

The coronavirus pandemic has turned live-streaming e-commerce into a mainstream marketing tactic in China, and TikTok has gained enough experience through its parent company in this mature market, according to Zhang Yi, chief executive of iiMedia Research.

China's cross-border e-commerce sector has enjoyed explosive growth since 2020, when the Covid-19 pandemic fast-tracked the adoption of online shopping in overseas markets, such as the US and Europe, where consumers who had favoured the bricks-and-mortar retail experience were forced to make more purchases over the internet.

Beijing-based ByteDance, the world's most valuable tech unicorn, initiated a major e-commerce push in its home market last year through Douyin, the Chinese version of TikTok, as it moved to diversify its sources of revenue. That initiative included the launch of its own mobile payment service Douyin Pay. In December, ByteDance created a stand-alone Chinese shopping app called Douyin Box, similar to its Fanno platform in Europe.

TikTok, which recorded 1 billion monthly active users last September, started testing online retail features in Indonesia and Britain early last year. In November, ByteDance launched a seller's app for TikTok that enables merchants to manage their digital stores. Last August, TikTok partnered with Canadian e-commerce giant Shopify to initially allow users in the US and Britain to buy goods directly through the app.

Chinese exports via cross-border e-commerce have been growing annually at a robust pace. alt=Chinese exports via cross-border e-commerce have been growing annually at a robust pace.>

"[China's] cross-border live-streamers have just begun to develop this field," iiMedia's Zhang said. "They are using extensive and cost-effective [product] inventories across the country to start a new journey abroad."

Chinese exports via cross-border e-commerce grew 40.1 per cent annually in 2020 and 15 per cent in 2021, according to data from the country's General Administration of Customs. The monthly growth rate for Chinese exports, by comparison, was just above 6 per cent from 2009 to 2021.

"Cross-border e-commerce has expanded at an incredible rate," said Li Kuiwen, spokesman for the General Administration of Customs and a director at the Department of Statistics and Analysis, at a media briefing in January on recent trade developments. He said China's total cross-border e-commerce market last year reached 1.98 trillion yuan (US$313 billion).

'Made in China, sold on Amazon' business model runs aground in Shenzhen

That growth raises the stakes for TikTok to develop into a viable platform for Chinese merchants to engage more consumers overseas, while competing against services offered by the likes of Amazon, Alibaba Group Holding, eBay, Facebook and Instagram.

TikTok's rise in cross-border e-commerce comes as merchants belonging to the "made in China, sold on Amazon" community have scrambled to find alternative platforms to sell to foreign consumers. The US e-commerce giant has shut down thousands of Chinese-brand stores on its platform in a clampdown against fake customer reviews and other violations.

The crackdown has affected tens of thousands of Chinese merchants, according to a report last July by the trade group Shenzhen Cross-Border E-commerce Association. It said Amazon's action has prompted various Chinese merchants to start investing more on other international online retail platforms such as eBay and AliExpress - the global marketplace operated by e-commerce giant Alibaba, owner of the South China Morning Post.

Other international platforms that Chinese merchants use to access overseas consumers include Alibaba-owned Lazada Group and Tencent Holdings-backed Shopee, both are focused on Southeast Asian markets. These two platforms also use live- stream shopping to engage consumers.

For online merchants, TikTok provides them with a social commerce business model - combining elements of social media and e-commerce - that has proved popular in China, according to Chen Yanfan, team leader at the Marketing Technology Information Centre of Tec-Do, a Guangzhou-based marketing agency.

It is a similar model to what the likes of Douyin, Pinduoduo and Xiaohongshu have developed in the local market, Chen said. He indicated that Tec-Do has received increased inquiries to buy advertising on both TikTok and Facebook.

China's retail social commerce market was expected to reach US$351.65 billion last year, eclipsing the US$36.62 billion total in the US for the same period, according to research firm eMarketer. That means consumers on the mainland spend about 10 times more on social commerce purchases than their US counterparts.

"Many local merchants [have just recently] heard about the overseas version of Douyin, but they didn't even know how to download it, not to mention use it for selling," said Huang Erxia, the live-streaming team leader at Shenzhen-based marketing agency Tituo Cross-Border. TikTok's move to open the UK, US and Indonesia markets to Chinese sellers has raised hopes for these merchants to "get their first pot of gold", she said.

The apps of TikTok and are displayed on a smartphone. Photo: Shutterstock alt=The apps of TikTok and are displayed on a smartphone. Photo: Shutterstock>

Huang said she believes that sooner or later, Chinese sellers will gain broader access worldwide through TikTok, which she expected to be more friendly to Chinese merchants than Amazon. "After all, Amazon's boss is American, but the boss of TikTok is Chinese," she said.

ByteDance founder Zhang Yiming, China's richest billionaire under 40, stepped down as the company's chief executive at the end of last year, relinquishing the role to Liang Rubo.

When asked about the prospects of opening new markets to Chinese sellers, a TikTok spokesman said: "Similar to other global e-commerce platforms, we welcome global suppliers as well as those from China ... As the business evolves, we may consider opening in more select markets in future."

With its broad worldwide audience, popular short video-sharing app TikTok is expected to develop into a major new platform for cross-border e-commerce. Photo: Shutterstock alt=With its broad worldwide audience, popular short video-sharing app TikTok is expected to develop into a major new platform for cross-border e-commerce. Photo: Shutterstock>

At present, TikTok faces plenty of work ahead to help raise awareness and build up consumer confidence for the merchants on its live-streaming service.

Bolade Kerr, a London-based millennial TikTok user, said she initially hesitated to buy fashion merchandise, such as bags, jewellery and clothing, being marketed on the platform.

"The online bidding approach of some shops [on TikTok Live] makes it appealing to buy the items, which also look good and are reasonably priced," Kerr said. She indicated, however, that she was unsure of how trustworthy these TikTok shops are.

Such doubts go both ways, according to Tituo Cross-Border's Huang. Chinese merchants, she said, have often asked whether the platform is reliable, including in terms of delivering the goods.

One of the most important steps, according to experts, is to hire live-streamers who speak good conversational English, understand the products and the company they represent, and more importantly, know their target audience.

Tec-Do's Chen, however, warned that hiring the right talent for certain target markets can be a delicate balancing act. "Domestic sellers may face high human capital cost if they want people with capable language skills ... or live-streamers working in specific markets," Chen said.

Chinese merchants' hiring strategy in that regard will ultimately depend on TikTok's policies, according to Huang. TikTok, for example, requires sellers to have local warehouses in Indonesia. If the cost of skilled talent is cheaper there than in China, then it would make sense to hire local live-streamers for that market, Huang said.

The advantage of Chinese merchants doing cross-border e-commerce today is that the country provides an extensive infrastructure - from production to logistics - to support them, according to iiMedia's Zhang. "China's solid logistics system was built on long-standing export practices," Zhang said.

Asian online shoppers score fast deliveries, avoid US buyers' supply chain woes

Still, many small and medium-sized online merchants may need to get subsidies from either the government or platform operators to help support their cross-border e-commerce ambitions.

China's big e-commerce hubs, including Shenzhen, Guangzhou and Hangzhou, all have policies to fund cross-border e-commerce merchants given this sector's contribution to the local economy, such as in terms of providing employment and generating taxes.

Southern Guangdong province, the nation's biggest manufacturing hub, last November announced the development of 30 new industrial zones dedicated to cross-border e-commerce that can support 100,000 companies.

TikTok, which recorded 1 billion monthly active users last September, started testing online retail features in Indonesia and Britain early last year. Photo: AP alt=TikTok, which recorded 1 billion monthly active users last September, started testing online retail features in Indonesia and Britain early last year. Photo: AP>

Live-streamer Li said TikTok provides coverage for shipping fees. Li's UK customers, for example, can have their shipping fees covered by TikTok when their order is worth more than £3 (US$4.10).

While live-streaming on TikTok has so far been Li's highest-paying gig, she said her physical health has suffered from the irregular working hours. Still, she intends to make live streaming a full-time job for a month - pitching products to thousands of viewers six times a week, for four to six hours a day - starting in March.

"If you manage to establish roots when there is an opportunity, you will survive and get ahead," she said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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