Could TikTok Shop be the death of ASOS?

Whether you love it or hate it, you’ll know about TikTok.

But aside from its entertaining videos, viral trends and popular influencers, the social media giant now offers a dedicated platform for selling products online – TikTok Shop.

People have been quick to jump on the bandwagon, with 2.8 million UK customers making a purchase on the platform in 2023. Major retailers such as ASOS, Zara and LookFantastic have taken notice too, recognising its potential to drive sales and reach a younger audience.

But with more reliance on the platform, an ASOS Director has speculated that it could potentially cut out regular online stores.

#TikTokMadeMeBuyIt – TikTok Shop’s surge in popularity

With over 1.582 billion monthly active users worldwide, it isn’t surprising that businesses are flocking to the platform to attract new customers.

TikTok Shop launched in the UK in 2023, having seen previous success in South Asian markets. This would continue onto the UK market, with the platform accounting for 68.1% of social shopping gross merchandise value (GMV) in February 2024. 

Moreover, 81.3% of TikTok Shop sales came from existing customers within the same period, with Gen Z adults between 18 and 24 being 3.2 times more likely to purchase on the platform.

As of November 2023, TikTok Shop reported a business user base of nearly 1.5 million, with 38% of SMEs having ethnic minority ownership. Meanwhile, the #TikTokMadeMeByIt hashtag is reported to have 4.1 billion views, with 67% of shoppers saying that the platform had introduced them to new products. 

ASOS says TikTok Shop could cut out online retail

Fashion retailer ASOS hasn’t shied away from selling on the social media giant. With an aim to reconnect with its customers, the company launched its brand on TikTok Shop in March 2024. This new move not only boosted sales but also gained 57% of new customers, exceeding its target of 30%.

However, ASOS Director Elton Ollerhead recently commented that while selling on TikTok Shop has worked well for the brand, it could also be “dangerous” – removing the need for online retailers as shoppers turn to buy products directly from social media platforms like TikTok Shop, Instagram Shops and Facebook Marketplace.

Given the company’s success in launching on TikTok Shop, the platform could continue to see growth in its sales and new customer acquisition. But becoming too dependent on TikTok Shop for sales could potentially reduce traffic to its own website and app, in turn diminishing its control over the customer experience, as TikTok manages both transactions and customer data.

After all, social commerce is already a major part of the UK’s ecommerce market, and its revenue is expected to grow from $6.2 billion in 2018 to over $44 billion in 2027. Additionally, its compound annual growth rate (CAGR) is expected to grow by 21.2%, hitting £15.7 billion in 2028.

The pros & cons of TikTok Shop for online retailers

Selling on TikTok Shop has quickly become a popular way for brands to reach and engage with younger audiences. With TikTok’s massive user base and powerful algorithm, businesses can showcase products directly within the app.

But while the platform offers opportunities for growth and visibility, there are also challenges to consider when relying on TikTok Shop as a primary sales channel.

Pros:

• Increased brand awareness: With TikTok’s huge user base, your brand can attract potential customers, particularly those in the younger demographic. Whether through user-generated content or influencer marketing, it can be a great way to engage with consumers in a more direct and personal way.
• Low commission fees: TikTok Shop is also a favourite among sellers for its low selling fees. According to Statuo, sellers only have to pay a fee of 1.8% for the first 90 days. While this goes up to 5% afterwards, it’s still cheaper than most platforms, such as Amazon, which has selling fees of around 8-15%.
• Seamless checkout: TikTok’s in-app purchases and shoppable posts make it easier for customers to make purchases without leaving the platform. This can reduce abandoned carts or any friction in the buying process, leading to higher conversion rates. A review by The Argus praised the platform for its ease of use, making purchases through social media much easier than its competitors.

Cons:

• Product restrictions: While TikTok sellers can sell a wide variety of products, there are limitations. For example, digital products like eBooks, music and software cannot be purchased on the platform.
• Not suitable for all audiences: Selling on TikTok Shop can be a great way to attract a younger audience (Millennials and GenZ). However, it might not be the best option if your business is more targeted towards an older audience, as just 24% of Gen Xers and 5% of Baby Boomers use the platform daily.
• Loss of brand control: TikTok allows virtually anyone to become a seller, which can be risky for your brand as it could potentially result in unauthorised resales of your products. There’s also a reputational risk as brands have little control over how sellers market their products, or which video creators are being used to endorse them.

While social commerce is growing, it’s unlikely that ASOS and other big online retailers need to panic just yet.

Still, with platforms like TikTok Shop continuing to change the way online customers interact with brands, online retailers will need to navigate between gaining an audience and losing brand control.