Social video’s shopping push will be a rare recession winner

Despite pressure on Joe Biden’s administration to ban TikTok, the social video app made a fresh incursion into America earlier this month by bringing its live-streaming e-commerce service TikTok Shop to US consumers. Regardless of its patchy UK launch, parent company ByteDance is committed to becoming a disruptive force in Amazon’s home market after online sales through its Chinese sister app Douyin more than tripled year-on-year to around 10 billion products.

The service works by reinventing the TV shopping channels of old with social media influencers at the helm, who hope to persuade followers and casual viewers to buy products following demonstrations and endorsements. For TikTok, this is where the frontier of online shopping lies. Supported by one of the industry’s most powerful AI video recommendation tools, the viral app can micro-target consumers based on the troves of data collected on their users’ social viewing habits. With each sale throwing off a commission for TikTok, the platform is building a diversified income stream just as digital advertising revenues are poised to decline.

Capitalising on the cost-of-living crisis

Still, TikTok will need to navigate one of the bleakest outlooks for retail consumption since the financial crisis of 2008. Storied retailers with promising online businesses have already succumbed to the decline in household spending power. Joules, the UK retailer known for selling spotted wellington boots, has fallen into administration, while the online furniture retailer Made.com collapsed as the cost-of-living crisis triggered a fall in demand for big-ticket items. Yet, consumers still want to spend during a recession, albeit on smaller discretionary purchases that speak directly to interests and needs. Social video platforms like TikTok can tap into the psyche of cost-conscious shoppers by encouraging impulse buys through one-click purchasing. While shoppers with little money in their back pocket may be reluctant to fire up the Amazon store app, they could be persuaded to spend if they are served product deals alongside the latest videos from their favourite influencers.

SVOD services must seize the merchandising opportunity

However, this opportunity is not exclusive to social video. Video streaming operators searching for diversified revenue opportunities should also accelerate efforts to integrate e-commerce applications into their services. Unlike TikTok, SVOD services must focus on the fandom linked to their entertainment IP. There are lessons to be learned from the likes of Future PLC, which has been buying magazines, websites, and price comparison firms and refocusing them as online titles funded by e-commerce referrals. The London Stock Market darling uses data on their highly engaged audiences for niche titles such as PC Gamer and CyclingNews to recommend products that appeal to their passions. Future then picks up a fee from the likes of Amazon if they secure a sale. While applying e-commerce referrals to third-party online stores may be too disruptive for the viewing experience, SVOD services with in-house merchandise operations should be looking to introduce e-commerce referrals to their retail services as a natural extension of their advertising-supported subscription tiers. As TikTok Shop proves, e-commerce is not just a nice to have, but a necessity that can truly diversify revenues at a time when the risk to returns is rising.