Summary
In this episode of the eCommerce Finance Podcast, Stephen Brown and Michelle Barnum-Smith delve into the world of TikTok Shop and its implications for social commerce. They discuss the unique aspects of TikTok as a shopping platform, the frictionless experience it offers, and the significant revenue opportunities it presents for brands.
The conversation also covers the importance of identifying TikTok-able products, pricing strategies, and the evolving role of influencers in this new commerce landscape. With predictions for the future of TikTok and social commerce, this episode provides valuable insights for brands looking to navigate the changing ecommerce environment.
Takeaways
- TikTok Shop combines social media with ecommerce, creating a unique shopping experience.
- Users spend an average of 90 minutes a day on TikTok, making it a powerful platform for discovery.
- The frictionless shopping experience on TikTok is significantly faster than on other platforms.
- TikTok Shop has generated $80 billion in gross merchandise value since its launch.
- Products that are demonstrable and solve a problem perform well on TikTok.
- Pricing between $20 and $50 tends to convert better on TikTok.
- TikTok’s fee structure is more favorable compared to Amazon’s.
- The influencer model on TikTok is evolving into a joint venture relationship with brands.
- Live shopping is gaining traction, but may not be suitable for all brands.
- The traditional influencer marketing model is shifting towards performance-based compensation.
What We Cover:
- 00:00 Introduction to TikTok and Social Commerce
- 03:02 The TikTok Shop Experience
- 05:42 Frictionless Shopping on TikTok
- 08:57 The Impact of TikTok Shop on Sales
- 11:54 Understanding TikTokable Products
- 15:08 The Future of TikTok and Social Commerce
- 22:29 The Psychology of Impulse Buying
- 24:26 Conversion Strategies for E-commerce
- 25:19 Understanding TikTok Shop’s Fee Structure
- 27:36 The Evolution of Influencer Marketing
- 30:03 Transparency in Affiliate Marketing
- 33:10 The Future of Social Commerce
- 35:40 The Role of Live Shopping in E-commerce
- 39:28 Authenticity in Content Creation
- 40:10 Predictions for TikTok and Competitors
Interview Links
Michelle on Social Media
Work with LedgerGurus
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Transcript
Stephen Brown (00:00)
Welcome to the eCommerce Finance Podcast. I’m your host, Stephen Brown, COO at LedgerGurus In this episode, I have Michelle Barnum-Smith from TT Shop Sellers. We’re going to discuss TikTok Shop, the ban, and more importantly, what brands can learn from TikTok and the future of social commerce. All right, Michelle, thanks for joining me.
Michelle Barnum Smith (00:19)
Hey, thanks for having me. It’s about dang time. We’ll just say that.
Stephen Brown (00:23)
Well, this is only episode four, so.
Thanks for, and we’re recording this on January 20th, so this is like a really kind of a timely episode, a quick drop episode. Real quickly, introduce yourself, a little bit about your background.
Michelle Barnum Smith (00:34)
That’s right.
Yeah, so I have been, I don’t know, I guess in the technology space since the year 2000. So if that doesn’t date me, I don’t know what will. And specifically in the TikTok Shop, TikTok world since 2021 and TikTok Shop since 2023. So all things new and social commerce oriented.
Stephen Brown (01:07)
Yeah, and been around ecommerce for years now, specifically. So let’s hit out the gate. January 20th, let’s just talk briefly about the ban. Maybe we’ll kind of run through the timeline. There was a bill that was passed a year ago, Congress in April.
Michelle Barnum Smith (01:10)
Yeah.
Yeah, in April, garbage bill, if I might add, that caused all this process problem in the first place, because they tried to, they tried to ban TikTok by itself with its own law and it didn’t pass. And then they bundled it with a Ukraine aid bill and it passed hugely, basically like 98 % of, you know, so.
Stephen Brown (01:38)
Mmm.
Yeah.
Michelle Barnum Smith (01:52)
So I think a lot of the problems with the ban started with the nature of the bill itself. So, but the good news is ish, depending on where you stand on the issue, despite the court of appeals denying TikTok’s appeal early December and despite the US Supreme Court’s denial and upholding of the ban, President Trump has made essentially promises as of, as of right now, today is the 20th. He was just inaugurated this morning. He made promises that he would apply a 90 day extension to the ban for TikTok. TikTok went dark on Saturday night at 10 50 Eastern time. I watched it. Like I was on TikTok and I just watched features just fall off and it was a little eerie to say the least. And I know we were texting, but
Stephen Brown (02:36)
Yeah.
Mmm.
And now it’s back online, but sort of it’s, it’s still, and it’s still not on the app store. was looking at the app store right before we started recording. It’s still not in the Apple. If you go and search for it, they have a little message that says, you know, learn about the ban. it’s still kind of in limbo, but Trump has signaled that he’s going to broker a deal. And we are not going to talk about the ban. That’s all you could have a whole episode just talking about that. We’re here to talk about the opportunity around social commerce. And I want to pick your brain.
Michelle Barnum Smith (02:48)
That it’s back, but it’s glitchy. There’s there’s
Yeah. Yeah. Yeah, for sure.
Stephen Brown (03:16)
you know, whether or not TikTok is around in 90 days, there’s a lot to learn and unpack from TikTok Shop. So let’s go there so that this episode doesn’t age very rapidly. So TikTok Shop, like you’ve presented, I’ve attended a presentation you’ve done and it’s really interesting. Like I’ve got my take, but maybe pitch us what is unique about TikTok Shop and why has it gotten such interest over the last year.
Michelle Barnum Smith (03:48)
Yeah. So a lot of people’s confusion around TikTok Shop is thinking that it’s just like any other marketplace. And when we think of ecommerce marketplaces, of course, the giant comes to mind, which is Amazon. And if we were to compare apples to apples, we would not be comparing TikTok Shop with Amazon. We’d be comparing Amazon with like Walmart.com or eBay or Temu or Shein or some of those. TikTok is, is social media meets marketplace. And thus we get the term social commerce because you have a platform that where people like to hang out. And what I always ask people is like, when was the last time you hung out on Amazon? Or when was the last time you hung out for any period of time for fun at like Walmart? You know, like you don’t generally, right? You’re in and out. You’re there for solution. And you’re there to get your milk if you’re at Walmart.
Stephen Brown (04:36)
Yeah.
Michelle Barnum Smith (04:46)
think the only commerce place, the only retail place that people truly hang out is like Costco. Costco might be the only place that, and maybe I’m a nerd, but I like to hang out there. I don’t hang out there, but I go there for fun. used to be date night with me my husband early in our marriage. But no, TikTok is first and foremost a place of connection and communication and community building. So people on average spend 90,
Stephen Brown (04:51)
Yeah.
Yeah.
Michelle Barnum Smith (05:14)
minutes a day on TikTok and the power of the algorithm is what sucks you in. It gets to know you and then it serves you content to keep that dopamine hit going, right? And that’s what keeps people on the platform is they’re constantly discovering new things to interact with and to learn about or to do or whatever it might be. And now ingratiated into that is new products to discover. Right? And on Amazon, generally speaking, people don’t discover new products on there. They have something in mind that they are looking for. They go and add it to cart and generally, you know, check out and be on their way. It’s not a place of discovery. Amazon typically is not its place of discovery. So those are kind of the two different things and why we’re not, when we talk social commerce, we’re not talking apples to apples. When we compare TikTok Shop with Amazon. We also can’t compare apples to apples between TikTok and Meta, such as like Instagram, Facebook, X, YouTube, because those are social platforms, once again, where people hang out, but generally they’re not the place that people check out. It may be a place of discovery and, you know, essentially the influencer economy really, really truly began with the likes of Instagram, but it’s not where people discover and execute a purchase. Usually that is go to the link in my bio and you hunt around for a while to find the product that they were referring to. You experience all this friction, right? And there’s lots of drop-off that happens between the purchase, the discovery and the purchase. And that’s where the beauty of TikTok Shop really kind of comes in is that it goes from TikTok to discovery or to.
Stephen Brown (07:03)
Well, that’s, that’s what I think is so interesting about it is how they’ve removed the friction. You know, if you look at something like on Instagram or a YouTube, it’s like, here’s an ad. Now I got to bounce out to the, the, the Shopify store or whatever is the platform that we’re using. And TikTok has basically made that transaction all in one place, which really streamlines that, friction. That’s what’s really interesting. On top of that, what you’re saying earlier, you know, TikTok from
Michelle Barnum Smith (07:20)
room.
Correct.
Stephen Brown (07:32)
research, I’m looking at old report, it’s the number one social media platform up until looks like 54. 18 to 54, that’s where the most time is being spent of all the social media platforms. So it’s got a lot of attention, it’s a frictionless experience. Take us through a little bit that frictionless. How do they make that, how does that work?
Michelle Barnum Smith (07:55)
Yeah, I timed it once. I timed going from discovery to checkout back to scrolling and it was 15 seconds from the time that I saw a product that I wanted to purchase, clicked on the product detail page, went to checkout and then back to scrolling. And I wasn’t even trying to go fast. was just like, I’m just curious how fast is this 15 seconds. Comparatively,
Stephen Brown (08:15)
Yeah.
Michelle Barnum Smith (08:22)
doing that same process on Instagram took minimum of 90 seconds. And that was with me really trying to complete a purchase. If I had been annoyed like I truly typically am when I have to go and hunt around and really be committed to finding that product, I would have dropped off over and over and over again. They would have lost my sale over and over and
Stephen Brown (08:50)
So what is TikTok doing to make that happen? How is it that they’re frictionless?
Michelle Barnum Smith (08:57)
Yeah, so I mean, Shop itself is integrated directly within the platform. So there’s a couple of different ways that people can discover. First and foremost is just video showing up in your feed. you’re already, TikTok is a video dominant platform. So you’re already there watching videos. And so then product videos pop up. There’s a little orange shopping cart. Well, let’s ask you the question, Stephen. Didn’t you just tell me that you completed your first TikTok purchase?
Stephen Brown (09:22)
Yeah. I did it. I did a test. Yes. I’ve been kind of anti-TikTok, but I got on for some research. Yeah, it was pretty seamless. I mean, it was a pretty seamless experience, you know, to input some stuff for the first time, I’m assuming going forward, it’d be even faster. But yeah, you don’t, there’s no bouncing to a Shopify store, you know, a third party website. It’s all in product. And I’m just curious, like, so is like, yeah.
Michelle Barnum Smith (09:48)
Let me ask you emotionally. know, you know, emotionally did you at any point did you feel like? Skeezed out or like You know What is this? How does this work? Like what was the emotional? I guess gauge there
Stephen Brown (09:59)
It… You know…
I went straight to shop because I have not been on TikTok for, there’s a long litany of reasons why I don’t spend time on there. And so I went straight to the shop instead of waiting for ads to come up and we’re just searching around. It felt a little bit like cheap to me, to be perfectly honest. So I had to search around before I found a product. I was like, okay, this looks like something legit. But I just, you know, I assume that’s just an early stage. You don’t see a lot of like these big brands on TikTok Shop at this point, is that fair? So, but in terms of the checkout experience, it was very slick. And I want to kind of walk through like, so are people like, is TikTok holding the inventory? How are they making this happen? When a seller sets up on TikTok, how is it that they are able to make that streamlined experience?
Michelle Barnum Smith (10:35)
Right, right. Yeah, yeah, absolutely.
Yeah, so let me kind of back up and explain that I help ecommerce sellers expand to TikTok Shop. That’s my main thing. I do that through education. I do that through consulting. We also have like managed services, but we’re a little bit more restricted on that side of things and who we take on. So from that perspective, most of the time I’m not talking.
Stephen Brown (11:02)
Mm-hmm.
Michelle Barnum Smith (11:16)
sellers into selling on TikTok, I’m teaching them how to expand. They’re already selling in various marketplaces, whether that’s their own website or Amazon, and they just want to now take advantage of that more top of funnel traffic with TikTok. So that’s the perspective in which I look at this, right? And that’s the audience that I typically speak to. So when we’re talking about doing so, the easiest mechanisms to use is your own inventory and to use seller shipping. Generally, you’re not going to start off by sending inventory into anywhere. TikTok does have fulfilled by TikTok. That was released in June, July of last year, but it still is technically in beta. They are expanding and they are opening that up, but you have to earn the right to be in FBT, meaning at least $20,000 in sales and through a relatively short probationary period of
Stephen Brown (11:54)
Mm-hmm.
Mm-hmm.
Michelle Barnum Smith (12:15)
you know, 30, 60, 90 days and 500 orders. So once you meet that kind of criteria, then you can send inventory into FBT, but you don’t start there. And especially with Amazon sellers, you can just hook up either, you know, in Shopify as well, whatever, whether you’re using a 3PL or Amazon to fulfill your current, you know, orders through your current channels, those same channels can be utilized to fulfill TikTok orders as well. It makes it very easy.
Stephen Brown (12:24)
Hmm.
So I can connect my Shopify store to TikTok and it talks to it and orders are processed there.
Michelle Barnum Smith (12:46)
Yep.
Yep. And then whatever 3PL is connected to Shopify or if you have Shopify connected to Amazon for order, inventory fulfillment. that’s how all that information is passed through and the orders are automatically sent out.
Stephen Brown (13:05)
So this is the magic in my opinion is the fact that they have, they’ve basically taken all the, a lot of the complexity of buying on a social media platform and just streamlined it and made it really easy. Like you can just buy and then go back to doom scrolling, right?
Michelle Barnum Smith (13:16)
Yeah. Yeah.
Entertainment, connection, dopamine hits, yes.
Stephen Brown (13:29)
How long has TikTok Shop been around?
Michelle Barnum Smith (13:32)
So it’s been in general availability since September of 2023 in the United States. So previous to that, it’s been in the UK for since end of 22. It’s in Thailand, Indonesia, Philippines. It’s been in other marketplaces. This version of TikTok doesn’t actually truly exist in China. It’s most closest, I guess, would be Duoyang. Yeah.
Stephen Brown (13:58)
got an alternate app. TikTok was actually Musical.ly, right? It was that app that the kids used to make dance videos and then ByteDance bought it and rebranded it to TikTok.
Michelle Barnum Smith (14:02)
Yeah.
Mm-hmm.
Yep. So in some way, shape or form, TikTok’s been around for a while, but TikTok Shop itself. You know, yeah.
Stephen Brown (14:19)
It’s fairly new.
So let’s talk some numbers. Like what are you seeing in terms, you know, I’ve seen some dismissal of TikTok. It’s, you know, not that big, but tell, give us some numbers about how much you’re seeing being sold on TikTok. What is the revenue opportunity that you’ve seen?
Michelle Barnum Smith (14:29)
Yeah, I mean, since operations, since general availability in 2023, it’s responsible for $80 billion in GMV, gross merchandise value revenue. It’s also responsible for over $8 billion in operational spending as well, just to operate TikTok in the United States. There’s over 7,000 employees, offices in most of the major metros, and so TikTok has invested heavily, ByteDance has invested heavily in TikTok being in the United States, but also as far as the revenue that’s generated is over $80 billion since then.
Stephen Brown (15:22)
What yeah that’s a that’s a starting point yeah
Michelle Barnum Smith (15:23)
So that’s, mean, no small number, no small number guys.
Stephen Brown (15:31)
What are you seeing like when brands go on? Like do you have you worked with anybody that’s just starting on TikTok or is it usually like an app? Really? Well, I’m saying that’s the only platform they’ve sold on. I’m assuming when you’re working with somebody they’ve been on Amazon, they’ve been on Shopify.
Michelle Barnum Smith (15:36)
Yeah, all the time. Everybody’s everybody’s just starting. Yeah.
no, I’ve only worked with sellers who already have inventory, who already have products that they are selling. I haven’t.
Stephen Brown (15:50)
Gotcha. What are you seeing their revenue uplift from TikTok Shop? after, I mean, it’s only been around a little over a year, but like, what are you seeing? Was it 5 % of revenues is coming out of TikTok, 10 %?
Michelle Barnum Smith (15:58)
Yeah, mean, generally it depends. It depends on the product itself. Like not every product is going to be TikTok-able. There has to be something interesting about it to sell it on the platform. But let’s say if we’re comparing somebody’s Amazon brand performance to TikTok brand performance, we’re to see probably like 10 to 15 % additional coming from TikTok. And what we also are not counting in that is TikTok’s lift.
Stephen Brown (16:09)
Mm.
Michelle Barnum Smith (16:36)
halo effect, spillover effect into its other channels such as Amazon. huge.
Stephen Brown (16:40)
I heard about that. Why do think that is? Why is there a halo effect? What’s your thesis there?
Michelle Barnum Smith (16:46)
well because people prefer to check out on Amazon.
Stephen Brown (16:49)
Okay, so they see it on TikTok and they go back to the Amazon where they’re more comfortable. Interesting.
Michelle Barnum Smith (16:53)
Right, right.
So it’s interesting because TikTok has a propensity towards virality. And so if we have a viral event, we absolutely see that similar spike in Amazon sales every single time.
Stephen Brown (17:03)
Mm-hmm.
Yeah.
And, and like, what’s the uplift you’re seeing in Amazon? Is it like, so you’re getting 10 % additional sales on TikTok and as you’re, are you seeing a step function on Amazon as well?
Michelle Barnum Smith (17:21)
at the end. Yeah, absolutely. And it’s gonna, obviously it can vary quite a bit, I mean, we’ve, it’s to the point of it being problematic. Forecasting for TikTok can be extremely problematic if you’re doing well, because, so for example, I had a seller who, he has a couple of viral products on TikTok. They do very well, they sell very well. He also sells them on Amazon.
Stephen Brown (17:30)
Bye, brand. Yeah.
Michelle Barnum Smith (17:53)
he had a product that was just kind of like a status quo product. It was, it was chugging along on TikTok, just fine. And going into Q4, he did his, his kind of standard order based on, you know, previous performance. And then he had a viral event with that where it’s a post that was posted like November 2nd. It hit on the weekend before Black Friday, Cyber Monday and sold out on all platforms. So.
Stephen Brown (18:20)
sheesh.
Michelle Barnum Smith (18:22)
So he sold out on TikTok, he sold out on Amazon and went into Q4 without that product. Plus obviously as an Amazon seller, you are punished for stocking out. Yeah, it’s huge problem for sure.
Stephen Brown (18:35)
Mmm, going out of stock. yeah. Why
is that? Is that due to the influencer model of TikTok that causes that? That kind of, yeah.
Michelle Barnum Smith (18:45)
The virality? No, it’s, it’s, there’s a, how to go viral on TikTok. That’s its own podcast for another day, honestly. And your guess is as good as mine on any given Wednesday. Cause the algorithm is constantly shifting and let’s be, let’s be fair. There is a whole lot of organic manipulation that happens by real people.
Stephen Brown (18:53)
Yeah, yeah, exactly.
Hmm.
Michelle Barnum Smith (19:12)
on the backend. We have relationships internally and they’ll tell us, we’re going to push this product. We’re like, okay. Right. let me just say the seller is now back in stock. It’s January 20th. He went out of stock. He missed December, basically December and January, but he’s back in stock. His product is highly seasonal. It’s a fishing product.
Stephen Brown (19:13)
Yeah.
Okay, they’re kind of, they’re just, they’re doing their thing. I want to go, I want to go, go ahead.
Yeah.
Yeah.
Michelle Barnum Smith (19:41)
And already sales are that that post that performed so well for him is performing well again. It’s kind of not at that same viral level, but it picks up the algorithms like, you were relevant before. you’re back in stock now. You’re relevant again. And so you’re going to see that kind of uplift. And with advertising, that helps as well. But that post is going to live on and be functional for a very long time for that brand.
Stephen Brown (19:48)
Cheers.
We’re going to try it again. Interesting.
There’s two things that you’ve talked about I want to go down. The first one is TikTok-able products. What products work well? Have you seen work well on TikTok and what products do not?
Michelle Barnum Smith (20:21)
Yeah, I mean, I have a whole training about this. I call it like the five keys to TikTok ability. like kind of the core three comes down to demonstrability. Does your product demonstrate well? Like, is there something that’s gonna catch somebody’s attention really quick within that like, you know, half a second when somebody’s scrolling that’s gonna like be like, what is that, you know?
Stephen Brown (20:37)
Yeah.
Michelle Barnum Smith (20:49)
And I tell people as they’re doing product selection for their brand, specifically if they’re doing product selection for TikTok, if they’re just like, you know, wandering around the Canton Fair or they’re wandering around on Alibaba and something is like, what is that? That should be like a red, you know, flashing light to them. A green flag will say insane like, hey, that could be TikTok-able because it stops them just like, what is that? You know, what?
Stephen Brown (21:13)
Hmm.
unique.
Michelle Barnum Smith (21:17)
Or is that something different? There’s something about it, right? So demonstrability plays a huge, factor. Does it solve a problem? And is it easy for you to identify what that problem is upfront? You might think that that’s along the same lines of demonstrability, but it’s not. There’s also that like, that’s cool effect, but there’s also that I need that factor, right? Like, I need that. Like that solves something for me. And then price point.
Stephen Brown (21:19)
Mm-hmm.
Yeah.
Mm-hmm.
Michelle Barnum Smith (21:46)
TikTok is very price sensitive. So kind of the sweet spot is between $20 and $50. And luxury items.
Stephen Brown (21:54)
Do you think that’s a factor of the age of the consumers that are on TikTok? Or do you think that’s just?
Michelle Barnum Smith (22:00)
Has to do with emotion. So we’re talking about top of funnel discovery here and interruption marketing. if we are in, I tell people it’s kind of shop, like you’re watching the big game and a pizza commercial comes on and the cheese is gooey and stretchy and the pepperoni is crisp and bubbly and all these things, right? You’re feeling an emotion, right? Now your kitchen is just right there.
Stephen Brown (22:16)
Mm-hmm. Mm-hmm.
You’re like, I’m hungry.
Michelle Barnum Smith (22:30)
you could go and make yourself a peanut butter sandwich. Is that going to satisfy the emotion?
Stephen Brown (22:37)
not as much as a good cheesy pizza.
Michelle Barnum Smith (22:40)
Right, right.
You’re gonna wanna take action and more likely than not, you’re gonna wanna take action based on what you saw and who created that emotion. It’s about kind of satiating that desire. Now, if the pizza then says like yours today for $5 and we’ll be there in 10 minutes, you’re probably gonna convert, right? And you’re like, heck yeah, I am. No?
Stephen Brown (23:01)
Yeah. Yeah. So is it impulse purchases? Is that what it is?
Michelle Barnum Smith (23:08)
Yes, that’s what we’re getting at is that impulse. It’s the I need this, I got to have it kind of thing. And as soon as price gets, plays a factor of creating friction, then you have people who start to shop. And in the sense of, and we don’t want shopping, we want buying, right? We want discovery and checkout. We don’t want…
Stephen Brown (23:14)
It’s affordable.
Michelle Barnum Smith (23:33)
I want to weigh my options and maybe I’ll go to Amazon and see what my different options are, you know, like that type of a thing, right? So price and there’s elements of conversion that can definitely help. But when people are like, I’m not going to be profitable if I sell on TikTok over a certain price point. What I told them was like, look, you can have your retail price be whatever you want it to be, but you need to factor in some converting, you know, what I call like the three converting keys is the first is free shipping. You need to have some sort of free shipping offer. You need to have some sort of strike through or discount that you’re running. And on top of that, you need a coupon. You need to be running something that is actionable on the part of the customer to claim this coupon code, use this promo code, something that’s like sweetens the deal, right?
And all these things, people are like, my gosh, I’m not going to be profitable on your platform. they’re like, listen, set your price whatever you want. Your retail price, can pull out of the sky. I don’t care what it is. Retail price to me is a number that is created backwards. Know your fee structure. Build in this pricing model. Build in your affiliate commissions. Build in ad costs. And then price your product, whatever you need it to be, to be able to have those factors play in.
Stephen Brown (24:43)
Mm-hmm.
Michelle Barnum Smith (24:56)
as well because that is what is going to help you with conversions and once somebody discovers actually converts.
Stephen Brown (25:05)
I want to take, take a little bit apart what you just said, the fee structures. So everybody knows that Amazon is squeezing the heck out of sellers. How does TikTok Shop compare? How does TikTok compare in terms of fee structures?
Michelle Barnum Smith (25:19)
Yeah, so the first 90 days when a seller is just starting on the platform, their fee, their referral fee is like 2%. You have a 2 % referral fee in the first 90 days. After that, it goes up to whatever it currently is. For a long time, it was 6%. I know they have plans to go up to 8%. And then if you’re using FBT, then there’s different, fulfilled by TikTok, their shipping platform, there’s fees there as well, but not anywhere close to what Amazon is charging.
Stephen Brown (25:26)
Jeez.
There’s fees. What about advertising? you paying for advertising or is it just the algorithm feeding you up your ad? You can.
Michelle Barnum Smith (25:53)
You can pay for advertising, and I recommend you do, but it’s not the same, once again, if we’re talking apples to apples, it’s not PPC style advertising, it’s more meta style advertising, like discovery-based, interruption-based advertising that you would do on Instagram or Facebook.
Stephen Brown (26:03)
Hmm. And what are you seeing like a fee as a percentage of revenue on TikTok Shop for advertising?
Michelle Barnum Smith (26:13)
I don’t, we don’t speak in those terms. It’s not a tacos or an ACOS, you know, scenario. It’s an ROI and a ROAS based scenario. anywhere from, and most of time TikTok’s ads are based on an ROI target. If I were to show you TikTok’s platform today, ad platform, it would look a lot like the, you know, Meta’s business manager or Facebook ads manager.
Stephen Brown (26:17)
Hmm.
Mm-hmm.
Michelle Barnum Smith (26:42)
structure. you have to kind of flip. Once again, this isn’t, we’re not speaking Amazon, Amazon marketplace to marketplace, you know, terms. We’re talking more like meta. If you’re running Shopify ads or something like that. So I’ve seen, I’ve seen ROIs all across the board, but you can adjust them based on the performance of your content. I like to, I like to say like hit, get a lot of content out there.
Stephen Brown (26:46)
Yeah.
Yeah.
Michelle Barnum Smith (27:09)
TikTok is content voracious. You can’t just show up with five videos and expect, no. Like TikTok, you need to show up with like 50 videos a month between branded content or creator content. But for a lot of brands that feel that way where you’re like, well, guess what? That’s what the creator economy is. And that’s the beauty. That’s the true beauty of TikTok and where social commerce really, really brings to bear because
Stephen Brown (27:14)
You gotta be cranking them out. Yeah.
Cheers.
Mm-hmm.
Michelle Barnum Smith (27:36)
The influencer, working with influencers previously was like this pedestal peasant scenario, right? Brands would go, right? Brands would go, you know, beg these influencers like, please, can I have the opportunity to work with you, please, you know? And these creators would like deign to make you a video or two for $2,500 or something like that. And then you were left with, did it do something?
Stephen Brown (27:43)
Yes, I want to go down this path.
Yeah.
Michelle Barnum Smith (28:04)
Was there, how do I measure any value in this? You those kinds of things, especially if we’re talking like Amazon sellers where Amazon does not share data and is not allowing you to, you know, have any kind of attribution. The brand referral links are absolute crap. And, you know, there’s no closed loop systems. With TikTok, TikTok has turned, flipped the script. So it is very much…and like an even playing field between brands and creators. And it turned it into a joint venture relationship where creators can see the, I mean, their affiliates, they get commission from selling products and if they perform well, they earn more. So it kind of creates this natural drive in them to find brands to work with and to work hard for them and vice versa.
It’s easy for brands to see the high performing creators. We’re not making decisions based on vanity metrics like followers. In fact, follower account really has very little influence on reach on TikTok. Every single video on TikTok has the same opportunity to kind of get out there to go. And the goal isn’t necessarily to go viral, but to hit and to convert. So when we’re sorting through affiliates, we’re really looking at their GMV history to see what kind of sales they’ve generated and making our decisions based on that and who we’re working with. So it’s really kind of flattened that from the pedestal peasant kind of scenario to joint venture relationships. And that’s the beauty of social commerce in action that TikTok has created.
Stephen Brown (29:28)
yeah.
I want to, I want to go a little bit deeper on this because this is what economically, this is what gets me really interested. You know, the old model. I go pay somebody who’s got a million followers. I have no idea what the impact is. I just had to pay him a boatload of money with TikTok Shop from what I understand and correct me if I’m wrong. You it’s more like direct affiliate marketing. Like they, you know, when they’ve sold something, they get paid when you get paid. And to take it a step further.
Michelle Barnum Smith (29:49)
Mm-hmm.
Absolutely.
Stephen Brown (30:08)
isn’t it true that you can see what their sales histories are as you’re curating those? So it’s transparent. And do they get to see what the brand’s sales are as well? So the transparency, this is what I love from a financial standpoint is they’ve created a more equitable platform for influencers and Gone is this. I want to see this spread to all the social media platforms because this legacy model just doesn’t make economic sense.
Michelle Barnum Smith (30:39)
It doesn’t. And the beauty of it as well is that creators want this model on the other platforms too. The problem is the other platforms don’t really play well with other marketplaces. Amazon and Facebook or Amazon and Meta are trying this kind of integrated relationship. It’s such garbage from a user experience standpoint. Instagram is just rolling out their Instagram influencers program that’s native integrations to Shopify.
Stephen Brown (30:45)
Hmm.
Yeah.
Yeah.
Michelle Barnum Smith (31:08)
like your website, those types of things, but it still doesn’t have the true closed loop systems that TikTok has natively and what really empowers that kind of feedback loop system. Because obviously there’s like the level of coolness of being able to see like how an affiliate is performing, but what’s really crazy is that when you have a brand, when you have a product that just takes off, we call it the affiliate snowball effect because all of a sudden you go from trying to talk affiliates into representing your brand, going through and getting your samples and creating content to now affiliates are banging down your door because they see this as a viral product, a high performing product, a product that they want to help represent. So then you start getting just like a ton of organic interest in your brand just happening on its own.
And TikTok just released a cool feature called refundable samples. So instead of you, and this is not something that if you’re just getting started would apply to you. This would be best after you have a product that’s performing well. But they have to make at least, they buy the product and then they have to make at least three sales to get, to receive a refund on their purchase. So, you know, no more does the business have to fund the samples and seeding a bunch of samples. Now these creators are like, I was going to buy it and I’m going to create some content around it and try to earn some sales so I can get that money back. So it’s even better. Like the system that started out really great and now it’s even better. It’s really inspiring for sure.
Stephen Brown (32:44)
Mmm.
Yeah. Yeah, yeah.
Do you think this model is gonna spread? I mean, there’s multiple aspects of TikTok Shop, but do you think this model is gonna spread into meta and YouTube? Like, what’s your thoughts?
Michelle Barnum Smith (33:10)
yes, they would be like YouTube already has like a right. Right. But here’s the problem is the trust, the trust aspect. Like people hate meta. People hate Zuckerberg, right? Like the, and why I asked you what your emotional reaction was to shopping on TikTok and checking out on TikTok is because every time I try to do a native checkout,
Stephen Brown (33:13)
I mean, Zuckerberg’s the biggest copycat there is in social media, right?
Michelle Barnum Smith (33:39)
Because technically this has been around on Meta properties for a while through a Shopify catalog upload integration between Meta and Shopify. But the ick factor is so intense. I would rather just buy on the brand’s website than check out through Meta and its properties. And it’s notorious people just hate Facebook. YouTube lends itself to long form content.
Stephen Brown (33:57)
Yeah.
Michelle Barnum Smith (34:08)
which means not phone-based, but maybe TV-based watching. I know I watch YouTube predominantly on the big screen, not the little screen, right? Yeah, YouTube Shorts, which is its own crazy world, but the integrated YouTube shop aspect of it is not, like, it’s there, but it’s not predominant. Like, TikTok really made a switch from being a social media platform
Stephen Brown (34:08)
Yeah.
but you do have YouTube shorts.
It’s not seamless.
Michelle Barnum Smith (34:37)
to a shopping platform very quickly. It was like, hey, yeah, you can still find great recipes and follow cool creators and all these things. But like, y’all are here to buy, by the way. Like, here’s some choppable posts. and lives, lives are huge on TikTok because live shopping is huge in China. So yeah.
Stephen Brown (34:53)
Yeah.
Yeah.
Let’s about live shopping. Here’s a great analogy I heard a few weeks ago. Like TikTok is like QVC plus Netflix plus Amazon, right? So the QVC part is the live shopping, right? Live shopping has been around for decades, You know, QVC and Home Shopping Network and stuff. I saw kind of a push on Facebook a couple of years ago, but I don’t see it anymore but it’s huge in Asia. And what are you seeing? Is this a wave of the future? Are we going to see live shopping?
Michelle Barnum Smith (35:40)
shopping’s never gone away. Live shopping has never gone away anywhere. It’s always, but it hasn’t been necessarily like a predominant category of buying, we’ll say, for people. I know brands that all they did was that is like their main thing is live selling on Facebook. That’s all they do. And they make grundles of money doing it. So it’s not that it necessarily went away. just kind of pulled back from the way that most US mainstream consumers buy, and especially younger generations, right?
Stephen Brown (36:05)
Hmm, yeah.
Yeah.
Michelle Barnum Smith (36:19)
the Gen X, the Gen Y, Millennials, maybe there’s some dabbling. Definitely the older generations are more exposed to live shopping. Yeah, know, HSN and QVC and even like the old school infomercials, right? Like we’re used to that or at least experienced it. And so it’s not foreign in the sense of like, what’s this, right? But now it’s introducing a whole new generations to live shopping and live buying and kind of that back and forth that happens live between the sellers and the buyers. It’s all very interesting how it’s playing out. And sometimes I personally am like a Zeniel, I’m like 1980s girl. And so there’s part of me that recognizes it for what it is and is also like, icked by it, right? Like I’m like, this is weird. I don’t like.
Stephen Brown (37:04)
Yeah.
Yeah. Do you see brands leaning into that in the US, or is it still kind of in the early stages?
Michelle Barnum Smith (37:16)
Yeah, because TikTok is very much promoting it and pushing it and pushing sellers to do it and you get all sorts of benefits for doing it. I personally don’t know any brands, me personally, or worked with any brands that have just knocked it out of the park with live selling.
Stephen Brown (37:32)
Mm-hmm.
Michelle Barnum Smith (37:40)
And I don’t necessarily recommend it to my brands because I would rather invest in these creator relationships that have posts that can live on, right? And through advertising, continue to, you know, continue to, yeah, absolutely evergreen versus like a one and done event. So to me personally, I’m like, okay, these are two strategies that need to be separated.
Stephen Brown (37:50)
Evergreen.
Michelle Barnum Smith (38:06)
for a brand and live selling. But I’ve also known of and heard of, know, brands that do very, very, very, very well. I think a good example of this is a local to us brand here in Utah called Just Ingredients. They have really killed it on TikTok Shop with live selling. They have done just massive amounts of sales with TikTok Shop through live selling. But is it for everybody?
Not so much. So my recommendation to most brands if they’re interested in live selling is to work with a live selling agency where all they do is have hosts in studios where you can send your products to them and have them represent your products as opposed to you building out. I think this is the problem is most brands think like, my gosh, I gotta have this like, you know.
Stephen Brown (39:04)
Yeah. TikTok’s about authenticity.
Michelle Barnum Smith (39:28)
One of the things that I tell people from like a content production standpoint, when I say, hey, at least 50 posts a month and they like the color drains out of their face and like low production, like, like this is the beauty of it. It doesn’t have to be this high production Instagram, you know, post or, you know, reel or something like that. So this is often it’s all about the authenticity and and TikTok. The TikTok audience can smell in office inauthenticity a mile away and they don’t and it doesn’t resonate with them anyway. So that’s that’s the beauty of it for sure.
Stephen Brown (39:36)
Alright, let’s, I want to wrap things up with a couple of quick questions. We’re going to do the crystal ball. I’m not going to hold you to these predictions and, and if you’re listening, you shouldn’t hold us to them either. Is TikTok around in 90 days?
Michelle Barnum Smith (40:10)
Yes. And I think that the way that the deal is structured is actually for the best because a 50-50 split means that the algorithm has the highest chance of staying with the platform versus a full divestiture. The algorithm stays with China and does not stay with TikTok.
Stephen Brown (40:30)
And just to elaborate what you’re referring to is Trump came out and said he wants a 50 % ownership by the United States entities and that that’s gonna be how he’s gonna keep it around in the United States. All right, next question. Will Meta and Google replicate TikTok Shop in the next, let’s give them 24 months. Do you think you’re gonna see comparable experiences on those two in the next two years?
Michelle Barnum Smith (40:55)
Meta’s already started. They just rolled out a new feature that has been on TikTok for a while and they rolled it out the night the ban went live.
Stephen Brown (41:05)
Interesting. What was that feature?
Michelle Barnum Smith (41:06)
It’s the thoughts, a little bubble that’s on your stories or on your profile. We’ll just say that on your profile.
Stephen Brown (41:10)
huh. Okay. But do you think they’re gonna have a TikTok Shop? So you think they’re gonna replicate what’s going on here in some fashion?
Michelle Barnum Smith (41:23)
They’re going to, are leaning Instagram influencers is, I think it’s live and that’s based on Shopify integrations. So that’s kind of one of the missing pieces that Meta hasn’t had previously is that closed loop system instead of the pedestal peasant scenario, the JV, the joint venture more style business model between affiliates and brands.
Stephen Brown (41:45)
Yeah.
Maybe that brings up my last question. Do you think the traditional affiliate model where influencer model goes away, where you’re just throwing money at somebody with a bunch of followers and this new model, do you think this is going to become the future.
Michelle Barnum Smith (42:07)
Yeah, absolutely. There’s always going to be some sort of brand deal scenario with large content creators whose sole focus is entertainment. There’s always going to be some level of brand deals that happen at that level. But I think the everyday creator who wants to monetize, it’s not going to be about building your followers and having crazy videos. It’s going to be about shoppable posts and shoppable content.
Stephen Brown (42:39)
Awesome. If somebody wanted to connect with you, Michelle, what’s the best way to do it?
Michelle Barnum Smith (42:42)
LinkedIn is a great way to do it. can also email me at michelle@ttshopsellers.com.
Stephen Brown (42:48)
Awesome. Thanks for joining me on the episode and go TikTok!
Michelle Barnum Smith (42:53)
That’s right.