TikTok’s ecommerce efforts are about to turn a lot more profitable for the social media giant, according to a new report that claims TikTok Shop will soon quadruple its fees from 2% to 8%.
It’s a classic story of online app success: Enter the market with such low fees that no one can turn them down, establish a userbase, and then hike those fees way up — opening up the possibility for another competitor to swoop in and start the process again.
Seller likely won’t be too happy about the change, but the size of the audience on TikTok gives the app a lot of leverage when it comes to retaining sellers: Just last month, TikTok passed the $10 billion mark in global consumer spending, making it the first app that isn’t a mobile game to do so.
Fees Are Going Up, Subsidies Are Dropping
According to The Information, which broke the story, TikTok has just informed its sellers that it will be taking a larger portion of the revenue from sales placed through the TikTok app.
Those fees used to be 2% plus $0.30 per transaction, and later this year, these fees will rise to 8% per transaction for “most items.”
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The exact timeline for the change includes a jump from the initial 2% to a 6% fee starting on April 1st, before reaching 8% on July 1st. However, not all products will be charged 8%: The pricier categories, such as electronics, will have lower fees.
These fees are still staying lower than Amazon’s fees, although this depends on the category. Competition from cheap vendors like Temu may have driven Amazon’s fees down.
Meanwhile, TikTok is also reducing the subsidies it has offered to its merchants in the past, according to The Information. They’ll still offer some subsidies, but limit them to the highest selling products.
Should You Sell on TikTok?
As we explained in the past, the TikTok Shop system is built to handle the major concerns that an online seller has. It handles payments and shipping logistics, taking the pressure off of the seller.
Back when it first launched in the fall of 2023, TikTok Shop came with the low, low fee of nothing. Here’s what we wrote at the time:
“TikTok will likely take a commission from Shop Tab products down the road, but appears to be in growth mode right now: A New York Times article cites one seller who says he is ‘not sure when TikTok might start taking a commission.'”
That’s all changed pretty quickly, and the rapid success of TikTok Shop is likely the reason why: The app has already earned $10 billion, putting it on track to be the most profitable app ever. The current champion, Candy Crush, has lifetime earnings of $12 billion.
As of last month, customers were spending $11 million on TikTok every day. That’s a great audience. Ultimately, however, your success on the app will depend on how well you can capture a paying userbase niche through a series of viral looping videos. That’s not for everyone!
Other Ecommerce Options Include Amazon and Etsy
Granted, the huge hike in per-transaction fees that’s now in the future isn’t a great reason to start selling on TikTok. But the huge customer base is a good one.
Plus, an 8% transaction fee isn’t a terrible one in relation to the competition. Sadly, many of the biggest ecommerce platforms are squeezing their sellers, from the extra 2% per sale charge that Amazon tacked onto sales from users of Seller Fulfilled Prime program last October, to the 2022 Etsy boycott that was inspired by the platform raising its transaction fee by 85% across a five-year period.
If you have the audience you need to turn a profit on TikTok, we wish you the best of luck. But don’t forget to diversify your efforts when possible, to hedge your bets against any one ecommerce platform choosing to boost its fees yet again at any point in the future.
