This week, I look at TikTok Shop, which currently leaves brands with more questions than answers about its future strategy. Additionally, spring has officially sprung based on the latest slew of product launches and brand announcements.
Can TikTok Shop truly succeed?
TikTok has a lot going on, with the threat of being “banned” by the U.S. Federal government and the ongoing support to make its dream of TikTok Shop a thing. From March 31 to April 3, TikTok Shop is running a promotion for the U.S. market called TikTok Shop Super Brand Day, a shopping holiday similar to Amazon Prime Day. E.l.f Cosmetics is among the included beauty brands.
While mega brands like E.l.f Cosmetics and Tarte Cosmetics have publicly discussed how successful TikTok Shop has been for their brands, the guaranteed success of TikTok Shop is still in question. According to a January story from Bloomberg, TikTok aims to grow its U.S. e-commerce business tenfold in 2024 to as much as $17.5 billion. In 2023, TikTok was on track to reach $20 billion in global gross merchandise sales, but Southeast Asia contributed the bulk of sales. Meanwhile, The Information reported in Aug. 2023 that TikTok would lose $500 million on U.S. TikTok Shop in 2023.
A body-care brand executive speaking on background noted that TikTok Shop is integrated into the backend of the brand’s Shopify DTC e-commerce site, and they can see that most transactions are one-off purchases. While TikTok Shop is driving a “sizable chunk” of its DTC sales, DTC e-commerce is a small portion of the brand’s overall revenue.
There are a few questions and implications surrounding this type of consumer behavior. Firstly, consistent one-off purchases are expensive to a consumer or a brand when factoring in shipping. TikTok Shop has been subsidizing shipping costs and sales discounts to drive people to shop, according to the executive. But when those subsidies inevitably decrease and go away, the question will be just how sticky the TikTok shopper has become. TikTok previously announced it would increase fees imposed on merchants to 6% of each sale beginning in April and 8% in July in most product categories, marking an end to promotions used to entice sellers.
While TikTok does allow shoppers to buy multiple brands and products in a single checkout experience, another beauty executive said it is hard to get people to buy multiple products unless they’re on the TikTok Shop brand storefront.
“We’re working on encouraging people to buy more products and make sure people understand that they can benefit from that,” said Sergio Tache, co-founder and CEO of fragrance brand Dossier, regarding his brand’s experience with TikTok Shop. “The flexibility of the store has been great, but we don’t control the [sales] funnel, so we need to adapt our [business] to their funnel. We tend to move pretty fast on many things, but we’re moving more cautiously [with TikTok Shop].”
Tache explained that the slower approach is because Dossier wants the shopping experience on TikTok Shop to adequately replicate the experience it offers on its DTC e-commerce. On its DTC e-commerce, people are aware that if they buy three fragrances, they receive a discount, so the average order value is higher than TikTok Shop. But he said he believes TikTok Shop could work out very well. That is, of course, if shoppers adapt to using TikTok Shop regularly and in an economically feasible way. Jeremy Lowenstein, CMO of makeup brand Milani, recently said that Gen Zers want to “turn off” TikTok Shop on their main For You page, citing that people find it annoying and disruptive to their scrolling experience. However, it hasn’t written off the commerce opportunity, per Glossy reporting.
Executive moves:
- Maya Kosovalic, vp of digital innovation and e-commerce at NYX Professional Makeup, joined the board of AI-powered marketing and communications firm Rad AI.
- IFF announced Ana Paula Mendonça as president of Scent, effective April 1. In Mendonça’s new role, she will lead IFF’s industry-leading Scent business unit, which includes fine fragrance, consumer fragrance and fragrance ingredients.
- LVMH appointed Julie De Moyer as the new chief data and AI officer of the Group. De Moyer previously served at Nike as the director of strategy and innovation, overseeing the EMEA Marketplace for Nike Digital, Nike Stores and Wholesale.
Stat of the week:
New Circana data sheds light on the state of the prestige fragrance category, which is experiencing significant sales growth. According to the data, designer and artisanal fragrance brands account for over 80% of the sales revenue within the U.S. prestige fragrance market and boasted double-digit growth rates in 2023. On that note, seven in 10 fragrance consumers are willing to pay more for higher concentrations, which are stronger, longer lasting and higher priced. This behavior has benefited eau de parfums and parfums, which are outperforming the rest of the fragrance market.
News to know:
- Walmart announced a new cohort to its beauty startup incubator, Walmart Start. The brands include skin-care brand Current State, body-care brand Sundae Body, hair-care brand LatinUS and hair-tool brand Kazmaleje.
- Supergoop expanded its best-selling Unseen sunscreen range on March 27 with the addition of Unseen Mineral sunscreen and Unseen Stick.
- Tom Ford Beauty launched a slew of new products on April 1 including a Soleil Liquid Lip Blush, Soleil Ultra-Shine Lip Color in four shades, and a Soleil Eye Color Quad eyeshadow palette.
- StriVectin, owned by Crown Laboratories, is prioritizing DEI in 2024 introducing new retail tactics, brand initiatives, marketing campaigns and a new inclusive clinical study approach to test formulas on all skin types.
- Burt’s Bees relaunched its limited-edition collaboration with Hidden Valley Ranch on April 1, following the sell-out success in January. And Hidden Valley Ranch is on a roll with new product offerings and collaborations. Both companies are notably owned by Clorox.
- CHI Haircare expanded to Walmart via 600 locations in mid-March and launched on TikTok Shop as of March 26.
In the headlines:
Glossier, Merit and Jane Iredale are exploring sales. Can Walmart court luxury shoppers? Elemis opens its first standalone store. Haus Labs launches in Europe.
Need a Glossy recap?
How Béis crafted a community of superfans. Remedy Place launched a content platform. Mad Rabbit’s CEO discusses the popularity of the tattoo industry. M&A is back, baby. Teenage sisters managed to secure a Target deal.
