Ecommerce: TikTok’s high views are no match for Amazon’s logistics

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TikTok’s comment section is filled with viewers asking creators where they bought the shirt/bag/lipstick they are wearing in the video. Parent company ByteDance wants to cash in on that interest. Its ambitions for logistics will never catch up to Amazon.

Global retail ecommerce topped $5tn last year, according to Insider Intelligence, more than double the total five years earlier. It expects the market to exceed $8tn by 2026. TikTok wants to take a bigger share. This will diversify the private company’s revenue from digital advertising — a sector that slowed last year. In addition to TikTok Shop, which lets brands sell directly on the platform, it has begun to sell products directly.

This is a direct challenge to Amazon, the leading US online retailer. The holy grail of social shopping is authenticity. Seeing a favourite creator use a product is more compelling than digital ads. TikTok’s ecommerce ambitions highlight the failures of Amazon, where functionality overrides entertainment. This explains why Amazon launched a rather lacklustre TikTok-style feed of its own, with videos of products available.

But even if TikTok is able to create a more enjoyable shopping experience, it faces problems Amazon does not. It has to convince retailer partners that political threats to ban or limit the app are not serious, for example. And it is years behind Amazon’s investment in logistics.

Amazon does not provide details on per-warehouse costs but it is possible to extrapolate some sense of the expense involved by looking at losses the company reported in 2022, something chief financial officer Brian Olsavsky linked to capacity expansion. During the pandemic, the company doubled its logistics capacity to meet rising demand. Between 2019 and 2021, annual capital expenditure more than quadrupled. In 2021, Amazon spent some $33bn on fulfilment centres and transport.

Amazon has some of the biggest warehouses in the world, a fleet of planes and is investing in driverless vehicles to ferry goods around. Last year it announced a $1bn fund to invest in logistics start-ups. No logistics company that TikTok partners with can compete.