Marketplace Briefing: Despite Trump’s claim to save TikTok, brands are still wary
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
President-elect Donald Trump has pledged to rescue TikTok from a potential ban in the U.S. that would go into effect as soon as January. But some brands and sellers that rely on the app to make money are divided on how a Trump administration would alter the viral video-sharing app’s future.
Over the last eight months, Trump has repeatedly said he is opposed to a U.S. ban on TikTok, an app he himself once tried to shut down in the U.S. In March, Trump told CNBC, “The thing I don’t like is that without TikTok, you’re going to make Facebook bigger, and I consider Facebook to be an enemy of the people.” In June, Trump joined TikTok, which has 170 million American users, and has already racked up more than 14 million followers to date. In a video posted on June 23, Trump said, “I’m going to save TikTok.”
In April, President Joe Biden signed a bill into law that requires TikTok’s Chinese parent company ByteDance to sell to a non-Chinese company by Jan. 19 — a day before Trump’s inauguration — or face a U.S. ban. In May, ByteDance sued the U.S. government, arguing that the divest-or-ban legislation violates the First Amendment. But an intense hearing in federal court in September has cast doubt on the company’s chances, even though most Americans are opposed to a ban, Modern Retail previously reported. Both TikTok and the Justice Department have asked for a ruling by Dec. 6 in order to give the U.S. Supreme Court time to consider an appeal before the law’s Jan. 19 deadline to sell takes effect.
Even as its future in the U.S. hangs in the balance, TikTok has courted 500,000 merchants, including top brands like Estée Lauder, to grow its e-commerce platform TikTok Shop. The video-sharing app initially wooed brands by subsidizing hefty discounts. Now, TikTok Shop is encouraging brands to invest in livestreaming to grow market share. And while many brands have been investing more heavily in TikTok as a sales channel, they’ve operated with a fear that the platform could be gone in a year’s time.
Many brands that spoke to Modern Retail were already cautiously optimistic that TikTok would somehow avoid a shutdown in the U.S. That’s due in part to the platform’s popularity among Americans, as well as companies, including small to mid-sized businesses. Yet, brands have been bracing for a potential ban of the popular video-sharing platform, from tapping new social media channels like YouTube Shorts and Instagram Reels, to expanding into brick-and-mortar retail. While some brands say Trump’s support is a silver lining for the app’s future, it remains to be seen if he’ll actually deliver.
“If the president is not on board, or his administration is not on board, then I feel like it won’t happen,” said Judah Bergman, the CEO of Jool Baby, which sells baby products, including swings and changing pads on TikTok Shop.
TikTok did not respond to a request for comment.
Selom Agbitor, co-founder and chief revenue officer of Mad Rabbit, a tattoo care brand, is optimistic that the ban won’t go into effect by Jan. 19. But in his view, that has less to do with Trump and more to do with the platform’s sheer size and scope, especially when it comes to businesses. Indeed, TikTok itself has pitched itself as a sales driver for small to mid-sized businesses in the U.S. as part of its defense against a possible ban.
“I don’t think Tiktok is going anywhere,” Agbitor said. “There’s a lot of brands that are doing extremely well because of TikTik and TikTok Shop.”
Still, Agbitor said Trump’s TikTok-friendly stance “is definitely a positive.”
As such, the brand is doubling down on the video-sharing app, particularly its e-commerce platform TikTok Shop. For example, Mad Rabbit has upped its sampling efforts on the platform — that is, sending out free product samples to TikTok creators to increase organic posts on the app and grow its TikTok Shop sales. In the last month, Mad Rabbit sent out 600 product samples per week, up from about 100 a week before.
Mad Rabbit has also diversified beyond TikTok, posting content to other social media channels like YouTube Shorts, in case TikTok is shut down in the U.S. The brand also started selling in 1,800 Walmart stores a year ago.
Trump has not offered details on how his administration would carry out his pledge to save TikTok. But his administration faces limited options, according to law professor Eric Goldman of the University of Santa Clara. First, he could push Congress to repeal the law. But that may be easier said than done, even though Republicans have won full control over Congress for at least the next two years. That’s because the law passed with wide bipartisan support. Alternatively, Trump may encourage his future attorney general to refrain from enforcing it. (Independent of Trump, the Supreme Court could also simply declare that the law is unconstitutional.)
“Beyond that, Congress has spoken, Trump has no further authority to lift the ban,” Goldman said.
Whatever happens, brands and merchants that rely on TikTok to make money are confident they’ll have enough time to come up with contingency plans in the meantime.
“I think that this is going to be a very long process. I don’t think it’s going to be here one day and gone the next, although you never know,” said Samantha Diamond, co-founder and CEO of Bird&Be, which sells prenatal vitamins and at-home fertility tests. “But I do think that brands will have time to prepare.”
Even though Bird&Be is based in Vancouver, Canada, the majority of its customers live in the U.S. TikTok, as a platform, also drives about 12% of the company’s overall revenue, according to post-purchase surveys the company conducts. Most of Bird&Be’s TikTok followers are in the U.S., too.
Bird&Be leverages its TikTok presence to educate followers about fertility and prenatal care, a topic that’s already lacking given that 50% of counties in the U.S. don’t have access to an OG-GYN, and more than 80% are turning to social media like TikTok for health answers, Diamond said. The company posts content across multiple social media channels, but if TikTok were to be shut down in the U.S., Bird&Be would “lose that audience and opportunity to educate” at a time when “the state of reproductive health in the U.S. is very dire,” she said.
Not all brands are optimistic that a Trump presidency will work out for small business owners on TikTok. NightCap, a West Palm Beach, Florida-based brand that sells $11.99 scrunchies that double as drink covers, went viral on TikTok in 2020, driving thousands upon thousands of dollars in sales for the brand. But the brand has since learned that going viral can be a double-edged sword, as hundreds of counterfeit versions have popped up on TikTok Shop for as little as $1.99 a pop since the app’s e-commerce business launched last September.
The problem is so widespread that influencers frequently tag knock-off products by accident, according to Michael Benarde, NightCap’s co-founder. He said e-commerce platforms, including TikTok, will often only remove patent infringement if you have a court order, which can cost tens of thousands of dollars. Each listing requires its own order. He said he’s given up on pleading his case to the powers that be at TikTok.
“I really don’t see TikTok as much of a value add anymore,” Benarde said. “I would almost prefer that they banned it.”
— Allison Smith
Amazon’s Temu competitor has finally arrived
After months of speculation, Amazon has finally unveiled its new low-priced marketplace. Called Amazon Haul, the offering lives on the Amazon app and features a steady stream of low-priced items like phone cases, organizers and other doodads. This comes after the company began soliciting sellers from China to list products with category-specific price caps. For example, jewelry was limited to $8, and sofas were given a maximum price of $20.
It’s only a day into its launch, but the Amazon seller community is already aflutter. Perhaps the biggest surprise is Haul’s look. “I thought it would look more like Amazon,” said Liran Hirschkorn, CEO and founder of Incrementum Digital. “It looks a lot more like I’m looking at Temu.”
Indeed, Haul’s landing page is an endless scroll of products featuring a wide range of discounts and pleas to click, like “crazy low” and “best seller.”
“To me, that’s a shift,” Hirschkorn said. “It’s Amazon kind of saying Temu is working, so let’s just copy it. Temu is kind of gimmicky.”
What’s more, Hirschkorn sees the potential for Haul to hurt some U.S.-based sellers. “U.S. brands see this as ‘here is another way Amazon is going directly to China and taking sales away from me,” he said. Still, he reasoned, “If Amazon doesn’t do this, potentially those customers will go to Temu.”
Others aren’t as charitable.
“U.S. sellers are really confused about why… they are not allowed to compete,” said Lesley Hensell, co-founder of Riverbend Consulting. Amazon has spent many months specifically reaching out to Chinese sellers to build out the new platform’s listings. Products are reportedly being shipped directly to customers from a warehouse in Guangdong, China.
In Hensell’s estimation, Haul sends sellers mixed messages. Over the last few years, Amazon has been pushing more sellers to focus on building their brands on Amazon rather than selling individual commoditized products. “It’s going to hurt so many sellers that have built established brands,” she said. “You work so dang hard to be price competitive in an inflationary environment and now they’re bringing on generics.”
Like Hirschkorn, she thought the look of Haul didn’t fit Amazon’s usual look. “I think it looks cheap and garbage-y,” she said. “It’s like if you took a Neiman Marcus and stuck a dollar store in the middle.”
Right now, Haul is in beta, but it launched at a fortuitous time with the holidays right around the corner. “It’s a great time for Amazon to test this when they have the most traffic on the site,” Hirschkorn said.
Still, like other Amazon experiments, if it doesn’t catch on, it could fade quietly into the background. And some people are rooting for this to happen.
“I hope this dies a fiery death,” said Hensell.
— Cale Guthrie Weissman
Marketplace news to know
- Singles Day happened earlier this week, and Alibaba said it brought in a record number of shoppers and saw “robust growth” in sales.
- Wonder, the food delivery startup from Marc Lore, acquired Grubhub for $650 million.
- Amazon has continued to open new Fresh stores, with eight new locations unveiled over the last two and a half weeks.