TikTok Shop Rule Change Challenges Chinese Vendors in U.S.

March 28, 2024

Chinese Vendors Face Challenges on TikTok Shop

In a recent turn of events, Chinese e-commerce vendors have expressed their concerns over what they perceive as stricter enforcement of rules by TikTok Shop in the United States. These sellers, who view the platform as a viable alternative to Amazon, are grappling with new requirements that could potentially alter their business operations.

TikTok, which is under scrutiny with the possibility of having to divest its U.S. operations or face a ban, has reportedly been enforcing its policies more stringently. This information comes from a group of five Chinese vendors and the Shenzhen Cross Border E-Commerce Association, which represents 3,000 Chinese online stores. The association’s executive chairman, Winnie Wang, highlighted that TikTok now mandates U.S. entities registered by sellers to be majority-owned (51%) by U.S. citizens and chaired by a U.S. passport holder.

This shift in policy means that many Chinese sellers, who previously used U.S. entities to be recognized as domestic merchants on TikTok Shop, must now re-register as overseas sellers. They argue that this reclassification leads to less visibility and support on the platform, placing them at a competitive disadvantage compared to their U.S. counterparts.

Despite these challenges, TikTok continues to focus on growth while navigating regulatory pressures. The platform has been vocal about the potential financial impact on creators and small businesses if it were banned in the U.S. It is also working to attract more merchants to compete with larger rivals like Shein and PDD Holdings’ PDD.O Temu.

A spokesperson for TikTok stated that the company’s policies and requirements for all sellers, including international ones, have remained consistent since TikTok Shop’s U.S. debut in September 2023. The spokesperson emphasized TikTok’s commitment to customer protection and maintaining a trustworthy shopping environment but did not comment on the alleged disparity in treatment between international and domestic sellers.

Chinese vendors feel targeted by these rules and are contemplating reducing their investment in the platform or seeking U.S. partners. Jackie Bai, a Shenzhen-based e-commerce seller, shared his concerns about dedicating resources to a platform where policies seem to be in flux.

Unlike TikTok Shop, Amazon does not differentiate between U.S. and other sellers, allowing equal access to its ‘seller central’ and an even playing field for competition. However, Amazon has not responded to requests for comment on this matter.

Some Chinese vendors believe that TikTok’s tightening of rules is a response to political sensitivities in the U.S., especially during an election year. While U.S. officials have raised security and privacy concerns about the app’s potential data sharing with Beijing, TikTok has denied any such activities.

Despite these hurdles, Chinese vendors have seen rapid growth on TikTok’s shopping platform since its U.S. launch, with many considering it an essential channel alongside Amazon. The platform’s gross merchandise value hit $1.67 billion shortly after its launch, as per YipitData’s estimates, though TikTok has not confirmed these figures.

With about 50% of Amazon marketplace sellers being Chinese, many based in Shenzhen, these small businesses are now weighing their options as they navigate the evolving landscape of digital commerce on TikTok Shop.

Chinese e-commerce vendors selling on TikTok Shop in the U.S
TikToks U.S. registration rule requires Chinese vendors to undergo a stringent verification process, potentially limiting their market access and exposure. This may lead to increased operational costs and hinder their ability to effectively engage with the U.S. audience on the platform.

Can Chinese vendors adapt to TikTok Shops U.S. rules?

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