TikTok goes the clock
Focussed shopping and searching make way for inspiration and impulse buying: social commerce is changing the rules in eCommerce. Novel marketplaces, like the TikTok Shop, are creating a shopping experience unlike anything we have seen before, giving brands and e-tailers new, exciting sales spaces in a time of saturated markets. An interview with Dr Nari Kahle, Managing Director at heyconnect, and Felix Hettlage, Managing Director at FIEGE Retail.
Social commerce, often also referred to as discovery commerce, is what everybody is talking about. Let’s start with this: What differentiates social commerce from traditional eCommerce?
Nari Kahle: Apart from the fact that both are rooted in online retailing, pretty much everything. Social commerce creates a brand-new world of online shopping because it is possible to set a totally different stage for the merchandise compared to traditional eCommerce. Also, the buying behaviour of end customers has really changed. My favourite example here, because it is so bold and simple, is the good old cleaning sponge. In the past, I would look at a few descriptive photos of the product in online shops but today, creators, at times even live and direct, will demonstrate how good a certain sponge works when I clean my oven with it or want a squeaky clean shower. I see the specific application, can ask questions in real time about the product, have everything vividly in one app and am given a credible impression on whether an item will add value for me or not. And if I decide to then buy that product on a whim, I needn’t even leave the platform that I’m cruising. With TikTok Shop, for example, everything happens in the app and is bagged, so to speak, with a few clicks only.
What else has changed?
Felix Hettlage: I like to compare this with the time when teleshopping started out in Germany. Back in the 1980s, independent television brought us formats and channels like Telemarkt, Der Preis ist heiß, QVC, HSE or 123tv here in Germany. Naturally, it’s not possible to equate social commerce with teleshopping, and social commerce is clearly more than just teleshopping 2.0 – however, there is still an important commonality between the two worlds: customers no longer need to go to the product. Instead, the product comes to them. This is very much about impulse buying. Meaning you buy things that you were not necessarily looking for or at least didn’t know that you wanted to buy. With teleshopping, the experience was repeatedly about that special frying pan in which supposedly you couldn’t burn anything. In social commerce, the product diversity, on the other hand, is leaning towards the infinite – the reach and the formats which promote countless products at the same time and in totally different ways on social media platforms are very different to those used on TV in the past.
Social commerce logic is thus different from traditional eCommerce logic?
Felix Hettlage: Exactly. I would even go so far and say that social commerce is turning the logic of traditional eCommerce on its head. Social commerce does not wait for demand to arise. It creates the demand itself. Traditional eCommerce, in turn, is much more dependent on customers actively seeking a product. Maybe a customer goes to Amazon looking for a certain item. The next customer will Google the item. Yet another will go directly to the manufacturer’s homepage and look for their preferred items. They may read a product description or a review, possibly browse online for the lowest prices – and then make an informed buying decision. Traditional e-tailing is flanked here by professional and highly analytical performance marketing. Yet, in the end, at its core, it’s always about serving an already existing demand. Social commerce works differently. This is where demand is generated by creating inspiration.
Felix Hettlage, Managing Director FIEGE Retail
Dr Nari Kahle, Managing Director at heyconnect
What scale are we talking about?
Nari Kahle: Let’s take TikTok as an example: in Europe alone, more than 200 million people use the platform every month and TikTok with its TikTok Shop provide a completely integrated and digital shopping experience. In Germany, TikTok Shop has more than 25 million active users already. Over 14,000 sellers are already actively selling on TikTok Shop Germany. The number of orders since the official launch of TikTok Shop in Germany at the end of March has risen on average by more than 40 per cent every month, and currently there is no end in sight to this trend.
Felix Hettlage: Apart from this, TikTok Shop is not only about the potential reach but also about the possibility for brands to enter in a direct contact and exchange with end customers, bypassing an intermediary marketplace. Direct, unfiltered feedback comes not only from Gen Z’ers. While the principal target group, making up roughly two thirds, is currently between 18 and 34 years, even this community is growing just like the Facebook effect showed us before, when it shifted towards more mature users.
Is it possible to define product groups that are particularly suitable for social commerce?
Nari Kahle: One crucial factor is a product’s impulse buying power because buying decisions – especially on TikTok Shop which entices in-app purchases while consuming the videos – are much faster compared to traditional eCommerce. The customer journey is changing and dramatically cut short. With traditional e-tailing, the decision to buy takes on average five minutes; with TikTok Shop, only twelve seconds. This is where TikTok Shop also differs even more clearly from past social commerce experiences, such as those on Instagram or Facebook. The breadth of products that are suitable for being sold via TikTok Shop is therefore larger than one might think at first. Cosmetics and personal hygiene are naturally included in this. But electronics, household appliances, accessories, food supplements, candy, fashion, fitness equipment or DIY products also work very well.
More important than, for example, a brand name?
Felix Hettlage: Yes, the content promoting a product is indeed worth more in social commerce than a brand name. Social commerce is changing the rules in eCommerce in that regard, too. Up until now, the big brands in particular with their big name were able to instil trust amongst their customers. On TikTok Shop, branded products are suddenly facing off with alleged no-name products. And when the content creator of a no-name brand is more convincing, then renowned branded products suddenly have a hard time. The competition is in a way being re-defined.
Nari Kahle: That is also why the trust in the creators is of such incredible relevance. More often than not, their judgement is believed more strongly than the promise given by established brands. They co-impact the success or failure of a brand. Companies therefore bust be willing to surrender trust. That may well be far away from past company standards because this also means giving up part of the control over how a product is promoted. Nevertheless: samples rule. If a company is not willing to distribute a range of free samples to creators, they don’t stand a chance in social commerce.
TikTok Shop is changing the rules of eCommerce because creators are gaining credibility vis-à-vis established brands.
FIEGE is the official logistics partner to Fulfilled by TikTok, or FBT, here in Germany. How does FBT work? And what are the ensuing challenges in logistics?
Felix Hettlage: FBT allows fast and smooth order processing for online sellers, creating a solid shopping experience for end customers because the storage, order processing, packaging, shipping and returns are pooled centrally as one single function. Online sellers may therefore focus on their core business and outsource logistics in an efficient and budget-friendly way. As soon as the products reach the FBT warehouse, TikTok and FIEGE handle the next steps and the fulfilment. For us as a logistics company, this means just as for brands and sellers that we vouch for maximum flexibility, scalability and speed, beyond national borders. Product diversity is huge. Capacity peaks and volumes are difficult to predict. Hypes are at times created overnight because a certain product is suddenly a viral hit and trending: the decisive thing is therefore that we need to be able to respond very dynamically and flexibly to sudden peaks. Late cut-off times are a key requirement in this regard, because this is the only way we can secure the highest possible next-day delivery rate and a positive customer experience for FBT customers.
And what is the role of heyconnect in all of this?
Nari Kahle: We are TikTok’s official service partner and add brands to TikTok Shop in no time. Brands and online sellers will like our offer of low-threshold, modular and fast solutions for social commerce success. This is how they can focus on their core operations, namely their product. As heyconnect, we take care of the rest, from marketplace access to legal responsibilities like Ts&Cs and cancellations, customer service, the handling of customer reviews, drafting product detail pages all the way to fulfilment.
