TikTok Shop Rule Change Irks Chinese E-commerce Vendors

March 28, 2024

Stricter Enforcement of TikTok Shop Rules Disquiets Chinese Vendors

In a recent development that has caused a stir among Chinese e-commerce vendors, TikTok Shop has reportedly tightened its enforcement of rules for overseas sellers seeking to establish shops on the platform in the United States. This move comes as the Chinese-owned social media giant, TikTok, grapples with the possibility of divesting its U.S. operations or facing a ban.

According to sources from within the industry, including five Chinese vendors and Winnie Wang, executive chairman of the Shenzhen Cross Border E-Commerce Association, TikTok now mandates that U.S. entities registered by sellers must be majority-owned (51%) by U.S. citizens and chaired by a U.S. passport holder. This shift in policy has prompted concerns among many Chinese sellers who had previously used U.S. entities to qualify as U.S. merchants on TikTok Shop. They argue that the new rules necessitate re-registration as overseas sellers, which they believe offers less visibility and support, thereby placing them at a competitive disadvantage.

The platform, which boasts around 170 million American users, is striving to balance its rapid growth ambitions with heightened regulatory scrutiny. In its efforts to compete with larger rivals like Shein and PDD Holdings’ PDD.O Temu, TikTok has been vocal about the potential economic impact of a U.S. ban on creators and small businesses while also working to attract more merchants.

A spokesperson for TikTok stated that the company’s policies and requirements for sellers, including international ones, have remained consistent since the introduction of TikTok Shop in the U.S. in September 2023. The spokesperson emphasized TikTok’s commitment to maintaining a trustworthy shopping environment and robust customer protection policies.

Despite assurances from TikTok, Chinese vendors have expressed feelings of being targeted by these stringent rules. Some are contemplating reducing their investment in the platform or seeking U.S. partnerships. Jackie Bai, a Shenzhen-based e-commerce seller, shared his concerns about dedicating resources to a platform where policies seem to be in flux.

These vendors also pointed out that Amazon does not distinguish between U.S. and other sellers, allowing equal access to its ‘seller central’ and fair competition. However, Amazon has not commented on this comparison.

Concerns have been raised that TikTok’s tightening of rules may be a response to political sensitivities in an election year in the U.S., although TikTok has declined to comment on this speculation. Meanwhile, U.S. officials have raised security and privacy issues regarding the app, suggesting potential data sharing with Beijing—a claim TikTok has consistently denied.

Despite these challenges, Chinese vendors have seen rapid growth on TikTok’s shopping platform since its U.S. launch, with many seeking it as an alternative to Amazon’s dominance. Chris Pereira, CEO of business consulting group Impact, noted the significant presence of Chinese tech companies on TikTok Shop.

With an estimated gross merchandise value of $1.67 billion recorded by YipitData from September to December 2023, TikTok Shop’s allure is evident. Sellers are attracted not only by an alternative marketplace but also by subsidies on delivery costs.

Jackie Bai’s experience highlights the platform’s potential; his U.S. TikTok shop accounted for a significant portion of his revenues within months. However, recent directives from TikTok may force him to alter his business model and seek local partnerships to maintain competitiveness.

As policies continue to evolve, Chinese vendors on TikTok Shop face a period of uncertainty and adaptation in their pursuit of success in the competitive U.S. e-commerce landscape.

Chinese e-commerce vendors selling on TikTok Shop in the U.S
Chinese vendors are upset because TikTok Shops new U.S. ownership rule restricts their direct access to the platform, potentially limiting their market reach and affecting revenue streams, as they now must navigate through local intermediaries or set up a US entity.

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