Retail Insights: Why you should view the most scaled social platforms as retailers

TikTok and Douyin are disrupting the retail landscape capturing the interest of retailers and brands, primarily due to the sheer size of their audience with a combined user base of over 2 billion users globally. Despite originally being social entertainment platforms, as the platforms have scaled, both Douyin and TikTok are now increasingly prioritizing commerce capabilities, recognizing that many users are seeking inspiration and looking to make purchases while using the apps.

With highly engaged communities, both TikTok and Douyin present significant opportunities for brands seeking to drive online sales by embracing the growing social commerce channel. They also present a threat to incumbent retailers as they account for a growing share of retail sales.

Young demographics are driving the growth of both platforms

While Douyin is only present in China, TikTok is currently operating in more than 150 different markets, with its largest market by users being the US, followed by Indonesia and Brazil.

Southeast Asia presents a significant growth opportunity for TikTok, with nearly half of the region’s population using the app. TikTok is investing heavily in driving growth in the region, announcing a USD 12.2 million investment in June 2023, to help more than 120,000 small businesses transition their businesses online.

The rapid growth of both TikTok and Douyin is being driven by the platforms’ predominantly young user base. This is particularly evident in Southeast Asia, where TikTok continues to grow rapidly, a region where more than half of the population is under 30.

Both TikTok and Douyin are therefore highly influential in informing young consumer purchasing decisions. For many, TikTok is their go-to social platform, with almost 10% of Gen Z users preferring to use TikTok over search engines such as Google when looking for information. Gen Z is also using the app for entertainment while discovering and researching products before purchase.

Douyin is currently the 6th largest retailer globally—and growing significantly faster than other leaders

Based on Flywheel Retail Insights modeling, Douyin currently ranks sixth amongst global ecommerce retailers, behind Alibaba, Pinduoduo, Amazon, JD.com, and Walmart. Over the next two years, Douyin is forecast to grow at a CAGR of 57.0%, significantly ahead of other leading ecommerce retailers, reaching over USD 262 billion in sales and overtaking Walmart to become the fifth largest online retailer globally.

This is a more conservative forecast, based on the assumption that Douyin’s growth will slow versus previous years. However, if Douyin can maintain its current growth rate between now and 2025 (~95% YoY), it could realize up to USD 404 billion in GMV by 2025, still ranking #5 but significantly closing the gap on JD.com.

TikTok Shop is also growing rapidly, reaching USD 15 billion in GMV in 2023, with the majority of sales coming from Southeast Asia, led by Indonesia. While TikTok is not yet approaching the scale of Douyin’s commerce unit, Bytedance has ambitions for it to emulate Douyin’s success in the future, highlighting the opportunity for brands to invest early to grab dividends.

While TikTok and Douyin are currently on a significant growth trajectory, both platforms will face several challenges as they look to grow their commerce businesses and compete with leading retailers and incumbent super apps in China. There are a number of factors that are likely to influence the future growth of these platforms including:

• Consumer willingness to purchase within the platforms
• Government decisions relating to regulation. (This is particularly topical in the US currently with renewed debate following a March 2024 bill calling for TikTok to cut ties with ByteDance or face a potential ban in the market.)
• Difficulty in measuring the full extent of digital influenced sales
• Challenges relating to profitability with TikTok currently heavily subsidizing purchases being made through TikTok Shop.

What does the growth of TikTok and Douyin mean for brands?

As TikTok and Douyin scale, brands must refine their approaches, establishing platform-specific strategies for TikTok and Douyin. At Flywheel Retail Insights, we have identified three key considerations for brands looking to embrace the TikTok and Douyin platforms:

1. Reach users through authentic content that drives brand affinity and is in keeping with the latest trends on the platform. It is important to create native content that resonates with your target audience by speaking their language.
2. Invest in in-feed ads to drive visibility, while seeking to collaborate with Key Opinion Leaders to reach new audiences. It is important to be monitoring and repurposing user-generated content, recognizing its effectiveness in terms of resonating with consumers.
3. Ensure content is entertaining with this being the main driver for many users to visit the TikTok and Douyin platforms.

This analyst update was originally created as part of our TikTok & Douyin Spotlight, 2024, available to Flywheel Retail Insights subscribers, who get exclusive access to market intelligence data, insights, recommendations, and best practice case studies.