In today’s Finshots, we talk about TikTok's attempt to make it big in the social commerce business.

Before we begin, if you're someone who loves to keep tabs on what's happening in the world of business and finance, then hit subscribe if you haven't already. We strip stories off the jargon and deliver crisp financial insights straight to your inbox. Just one mail every morning. Promise!

If you’re already a subscriber or you’re reading this on the app, you can just go ahead and read the story.

The Story

In 2021, a social commerce project codenamed Magellan XYZ emerged in Indonesia. And guess how it promised to sell products on the platform? Live streaming!

Influencers could simply go live and talk about brands. Maybe show a beauty product or a bag or sneakers. Users scrolling the app could stop, watch the live video, and if they liked the product, could simply click ‘buy’ and execute the transaction on the app. It was like HomeShop18, but in real-time on your phone instead of a recorded broadcast on the TV.

But guess who was behind Magellan XYZ?


Yup, the Chinese social media company had captured the world of short-form video and they wanted a piece of the e-commerce pie too. And Magellan XYZ was officially called TikTok Shop! It was the first TikTok Shop in the world. The company believed this live version of social commerce could shake up the status quo. Now if you’re wondering what social commerce is, it simply means buying stuff on social media. That’s it.

And there’s a reason why everyone’s eyeing social commerce. See, 4.5 billion people in the world use social media today. That’s over half the global population. And since they spend nearly 3 hours a day on it, it’s basically how they discover new products and brands on the internet. Also, people seem to trust influencers more than friends and family when it comes to product recommendations.

So it’s the perfect storm for social commerce.

Now if we’re being honest, this wasn’t TikTok’s first rodeo with social commerce.

Back in 2019, TikTok had dabbled with shopping features. Creators could talk about products in their videos. And add a link to buy it. But the difference was that it would take prospective shoppers outside the app. They would be directed to a different website to make the purchase. And that created some friction in the process. Also, another risk was that people might get distracted by shiny new things on the other website and not flip the app back to scroll on TikTok.

Then they began integrating with Shopify. If you were an entrepreneur who’d set up a store through Shopify in the US, you could feature your products on your TikTok account. If users liked what they saw, they’d be redirected to your Shopify page at the click of a button. But again, the problem here was that people would leave the TikTok app. Shopify’s social commerce sales would rise but TikTok could lose out on revenues.

So a couple of years ago TikTok decided that it needed full control over everything — the discovery, buying and payment. It would all happen within the app. This way TikTok would get paid a commission for the sale and pass on a cut to the influencers too. That’s how TikTok Shop was born. And because it seemed to be working in Indonesia and other parts of South East Asia, TikTok decided to expand.

Now there are no prizes for guessing which market it wants badly — the US!

Yup, TikTok has just officially launched its TikTok Shop. And it’s hell-bent on getting its 150 million monthly active US users to shop. After all, Americans probably have bigger pockets than their Asian counterparts. So that’s more money for TikTok too.

But the burning question is — can TikTok knock Amazon off its e-commerce perch and disrupt the market?

Well, let’s just say it’s not going to be easy.

For starters, social commerce experiments haven’t worked in a big way in the West yet. See, TikTok actually launched its live shopping feature in the UK last year. But apparently, it didn’t see much success. People didn’t seem to enjoy live shopping on a social media app. And maybe that’s why, in the US, even Instagram pulled the plug on its live shopping feature this year.

Secondly, Amazon isn’t going to roll over so easily. Just a while after TikTok Shop announced its grand entry to the US, Amazon announced that it was integrating directly with Instagram. That means if a user sees an ad while scrolling through photos on Instagram, they can just hit buy and purchase within the app itself. They won’t be redirected to Amazon. And that makes shopping more seamless.

And finally, there’s also the regulatory troubles TikTok will have to deal with. Lawmakers have already been crying for TikTok to be banned. They’re worried about its links with China. That the data of US users are being sent to the Chinese government. Now add a layer of shopping to it and you can imagine the worries will grow even more. Especially with all the sensitive payment information involved. And in the meanwhile, Indonesia has actually banned e-commerce transactions on social media. So TikTok Shop had to suspend operations. It wasn’t because of a link to China but there’s no saying what regulations can crop up.

So yeah, you see why most people are sceptical about TikTok Shop being a credible threat to Amazon. And guess we’ll just have to wait and see now.

Until then…

Don't forget to share this story on WhatsApp, LinkedIn and X (formerly Twitter).

📢Finshots is now on WhatsApp Channels. Click here to follow us and get your daily financial fix in just 3 minutes.

Ditto Insights: Why Millennials should buy a term plan

According to a survey, only 17% of Indian millennials (25–35 yrs) have bought term insurance. The actual numbers are likely even lower.

And the more worrying fact is that 55% hadn’t even heard of term insurance!

So why is this happening?

One common misconception is the dependent conundrum. Most millennials we spoke to want to buy a term policy because they want to cover their spouse and kids. And this makes perfect sense. After all, in your absence you want your term policy to pay out a large sum of money to cover your family’s needs for the future. But these very same people don’t think of their parents as dependents even though they support them extensively. I remember the moment it hit me. I routinely send money back home, but I had never considered my parents as my dependents. And when a colleague spoke about his experience, I immediately put two and two together. They were dependent on my income and my absence would most certainly affect them financially. So a term plan was a no-brainer for me.

There’s another reason why millennials should probably consider looking at a term plan — Debt. Most people we spoke to have home loans, education loans and other personal loans with a considerable interest burden. In their absence, this burden would shift to their dependents. It’s not something most people think of, but it happens all the time.

Finally, you actually get a pretty good bargain on term insurance prices when you’re younger. The idea is to pay a nominal sum every year (something that won’t burn your pocket) to protect your dependents in the event of your untimely demise. And this fee is lowest when you’re young.

So if you’re a millennial and you’re reading this, maybe you should reconsider buying a term plan. And don’t forget to talk to us at Ditto while you’re at it.

Just head to our website by clicking on the link here

Click on “Book a FREE call”

Select Term Insurance

Choose the date & time as per your convenience and RELAX!