Years of ongoing concerns about national security and data privacy have led Congress to pass a measure that would ban the widely popular Chinese-owned app TikTok in the U.S. The bill, recently signed into law by President Biden, mandates that TikTok’s Beijing-based parent company ByteDance sell the social media platform by Jan. 19, 2025, with the potential for an extension. If ByteDance fails to comply the app will face a nationwide ban, removing it from all U.S. app stores and preventing any updates in 2025.
The Implications of a TikTok Ban
TikTok boasts over 170 million active users in the U.S. According to a report by Oxford Economics, the app added $24.2 billion to the U.S. GDP last year, generated $14.7 billion in revenue for small business owners and supported 224,000 jobs. Therefore, a potential ban would have significant economic repercussions, particularly for the growing community of creators, small businesses and major brands that rely on its short-form videos and TikTok Shop, an in-app ecommerce platform launched in the U.S. last September that enables direct purchases from influencers.
The social media platform’s ecommerce business continues to thrive amid the conflict. According to the first TikTok Shop safety report, the platform had over 15 million sellers worldwide by the end of 2023, with more than 500,000 merchants selling to American consumers. In alignment with the platform’s growth, TikTok Shop has improved its safety measures by removing 2 million sellers who didn’t meet its standards and investing $400 million in platform security. The platform’s livestream shopping feature is particularly appealing to Gen Z consumers, who are most likely to shop on TikTok.
In response to the new law, TikTok, ByteDance and many of the app’s content creators, along with the U.S. Justice Department, have asked the U.S. Court of Appeals to make a ruling by Dec. 6, 2024. This would allow for time to seek review from the U.S. Supreme Court if needed before the final deadline. Additionally, TikTok users and content creators attempted to block the law that could ban the app by arguing the impact it will have on American life. TikTok and ByteDance then filed a lawsuit, arguing that the law violates the U.S. Constitution in a number of ways, including the protection of First Amendment free speech.
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Diversifying Marketplaces and Channels
Should a TikTok ban occur, other channels will undoubtedly absorb the traffic, which is one of the reasons why businesses should diversify their sales channels. Many firms already sell products on multiple marketplaces such as Walmart, Ebay, Amazon and Etsy, but expanding sales across an increasing number of marketplaces can effectively drive growth both domestically and internationally while also mitigating the demise of any individual channel.
The Logistical Impact of a TikTok Ban
The operational and logistical impact of a TikTok ban could be profound for sellers that have heavily invested in the platform as a primary sales channel. Merchants that rely on TikTok Shop for their commerce operations would need to swiftly transition their focus to alternative platforms. Given the unique nature of TikTok Shop as a potentially viral selling proposition, this abrupt shift could disrupt the status quo of a heavy user, as sellers would need to adapt to different platform requirements, fulfillment processes and promotional strategies.
For merchants using TikTok Shop to sell directly or drive traffic to other channels, overstocking could become a significant challenge specifically because of its unique nature. High sales volume on TikTok Shop does not necessarily guarantee similar success on platforms like Facebook or Instagram. Consequently, merchants will need to adjust their inventory intake, refine forecasting models and explore alternative methods to move stock and avoid accumulating holding costs. Additionally, the absence of Fulfilled by TikTok (FBT) may require scrambling to find new fulfillment partners.
Overall, the ban would necessitate rapid strategic adjustments to minimize operational disruptions and ensure continuity in sales and service delivery.
What Should U.S. Businesses Do?
Whether or not Congress ultimately bans TikTok, one thing is clear: diversification and agility will be key. Developing a multichannel strategy is crucial for U.S. businesses to ensure they are not overly dependent on any single platform. By expanding their presence across various social media networks and ecommerce channels, companies can reach a broader audience and mitigate potential disruptions.
Regardless of the platform being used, modern customers demand a seamless, speedy shopping experience coupled with high-quality products and services. As retailers expand, meeting these expectations becomes more challenging, which is why connectivity and agility will be cornerstones for stability in ecommerce.
Data privacy concerns are nothing new, and as social commerce continues to grow there will likely be similar instances in the future. By capitalizing on connected commerce, online retailers can establish an infrastructure that empowers growth rather than one that hinders it.
The current situation with TikTok is a lesson to all businesses, individuals and corporations that use social media to sell their products. Staying agile and proactive is crucial in an ever-changing digital landscape. Despite the challenges posed by a potential TikTok ban, businesses that adapt, diversify and innovate will continue to thrive.
Rick Kelley is the Chief Revenue Officer at Linnworks, which helps businesses more easily sell across multiple ecommerce channels with its suite of technology solutions that offer integration support, automation and a single view of inventory. Kelley is a seasoned revenue generation leader, bringing a rich, 30-year blend of experience in sales, partnerships, marketing, business development and finance to drive shareholder value. His past leadership roles include serving as VP of Sales at notable firms such as OneRail, ParkourSC, FourKites and BluJay Solutions.
