This week, TikTok announced that it would be cutting back its spending on the TikTok Shop service.
TikTok informed its TikTok Shop sellers in the US, that the company will be increasing its commission by more than five per cent and raising its charges for each transaction.
The higher commission rates and consumer charges come as the Chinese company sets out to grow its e-commerce business.
TikTok has been setting its sights on growing its TikTok Shop branch since it was set to lose more than $500 million in the US last year, an inside source revealed. According to the anonymous source, the heavy loss was due to large investments in hiring and building a delivery network.
Creating discounts of up to 99 per cent and giving customers free shipping to gain traction also amounted to a huge financial loss.
The changes made to the e-commerce business include hiking the commission it charges on some items from two per cent to eight per cent. TikTok also said that the transaction fees would be upped to 30 cents.
The higher charges will be put in place over time, with an increased commission rate of 6 per cent being implemented on 1 April. The 8 per cent commission hike will go into effect later this year, on 1 July.
By reducing its subsidies and financial support, which allows for shockingly high discounts and goes to those who sell on the app, TikTok will limit offers to trending and best-selling items only – a person familiar with the TikTok Shop changes said.
With Amazon's commission measuring between eight per cent and 20 per cent, despite hiking its charges, TikTok remains the most appealing platform for e-commerce sellers.
Since the e-commerce site opened, less than six months ago, successful sellers have been bragging about how they have earned more than $10,000 within one week of sales on the store.
While being a seller on the e-commerce site, in just four weeks, Jaida, a UGC Creator who recently started working as a TikTok Shop Affiliate, earned more than $20,000 dollars in commissions.
While advising new TikTok Shop sellers, Jaida told the Brands Meet Creators podcast: "If you're not gonna be consistent, don't even think about doing it. The only way you're able to make consistent sales on TikTok Shop is not only posting consistently but also reaching out to these merchants to let them know that you have created content on their product."
"When I first got on TikTok, I started off with a good amount of followers already and that is why I was able to skyrocket my success on TikTok Shop," Jaida added.
In regard to TikTok Creators livestreaming their account to promote products, Jaida said: "I think it is definitely lucrative and you could definitely make more money from doing that."
After launching in September last year, TikTok Shop has already featured major brands on its platform, including sportswear store PUMA UK, beauty giant Loreal Paris, jewellery retailer Sekonda Watches, fashion brand Skinnydip London and luxury outlet Represent Clothing.
According to Statista, health and beauty products account for 85 per cent of sales on the e-commerce site and represent the most popular categories on TikTok Shop in the US.
The most popular beauty brands that currently appear in the store include L'Oreal Paris, Maybelline, Olay and Revlon.
As food-tasting videos and challenges continue to trend on the TikTok app, food made up 11 per cent of sales and was ranked the second best-selling category on TikTok Shop – Statista reported.
According to TikTok, to balance the bump in seller fees, the brand will reduce its cut for more expensive items and for transactions of more than $10,000.
