Park Sang-hyeop, e-commerce client partner at TikTok Korea Global Business Center, said, "What matters most on TikTok Shop ultimately lies outside TikTok," adding, "It is important to think about what ultimate goal you want to achieve through TikTok Shop and why you are doing TikTok Shop, including entering major retail channels."
Park stated accordingly in a lecture titled "The conditions for chosen K-brands, the growth structure built by TikTok Shop" at the 14th Consumer and Retail Forum held at the Westin Josun Hotel in Jung-gu, Seoul, on the 16th.
According to Park, TikTok Shop is discovery-based e-commerce where everything from product discovery to purchase happens inside the TikTok app. Users discover products through shoppable videos, brand shop pages, live shopping, and the Shop tab, and can complete payment inside the app without moving to an external site. In the United States, a significant portion of TikTok Shop purchases occur via shoppable videos. Park said, "U.S. users watch TikTok for about 90 minutes a day," and added, "If a product looks good while they watch content, it leads directly to purchase."
K-brands are also growing rapidly. According to the presentation, last year the growth rate of gross merchandise value (GMV) for Korean brands on U.S. TikTok Shop rose 458% from a year earlier. The number of Korean brand TikTok Shops tripled, and average GMV per shop doubled. Park said, "In the United Kingdom as well, K-beauty brands quickly became top sellers," adding, "TikTok Shop is expanding not only in the United States but also to the United Kingdom and Europe."
However, Park said TikTok Shop is not an easy market. TikTok Shop divides sellers into five stages by sales scale, and you need to generate a monthly transaction amount above a certain level to move up to a higher tier. Park said, "When Korean brands enter with aggressive goals, some reach Tier 3 (monthly GMV $65,000) in three months, and then reach Tier 5 (monthly GMV $600,000) within another three months," adding, "Conversely, some fail to reach Tier 3 and give up midway."
The key is affiliate operations. Park described TikTok Shop's affiliate program as "a structure similar to group buying in Korea." A brand lists a product and offers a set commission, creators produce content introducing the product, and sales occur. Inside TikTok Shop, you can track which product sold in which creator's which video, and commissions are paid based on performance.
Park likened creators to "salespeople." Park said, "You have to build a vast sales force through affiliate creators for TikTok Shop to run consistently," adding, "If this structure is not built, you will be stuck at Tier 1 or Tier 2." Park added, "When a good video goes up, other creators see that 'this product seems to be selling well,' and higher-tier creators join, creating a virtuous cycle."
Park continued, "Brands should not only think about how to generate more sales, but also think about how to train people to sell our products well," and added, "Countless brands are thinking about how to create our videos differently and more abundantly than other brands."
Top-tier creators have significant influence. Park said, "Creators also have tiers, and creators at L3 or above account for only 11% of the total, but sales generated from their videos reach about 75%." A case was introduced in which a creator with about 20,000 to 50,000 followers sold $250,000 to $300,000 worth of a specific brand's products in one month. Park said, "Even without an extremely large follower count, purchases occur if the algorithm exposes the product well."
Still, the cost structure is not easy. Park said, "Competition on TikTok Shop has become really intense," adding, "Sample shipping, creator commissions, platform fees, logistics, and ad spend all stack up as expenses."
Even so, brands are jumping into TikTok Shop because of the "trickle-down effect." Park said, "Some users purchase on TikTok Shop, but others see the product, think it looks good, search on Amazon, or buy directly," adding, "When TikTok Shop sales increase, Amazon sales go up together, and later, based on the viral effect created on TikTok Shop, it can lead to offline sales." If the goal is to enter major U.S. retail channels such as Sephora, Ulta, and Target, investment in TikTok Shop should be seen not as simple selling expenses but as market entry costs.
Park said, "If your thinking is to test it and proceed only if it seems okay, it is better not to start TikTok Shop," adding, "If you do TikTok Shop, you should aim to reach Tier 4 or Tier 5 within six months." Park continued, "What matters most on TikTok Shop is that the product must be good, and it is important how you can show those strengths," and added, "In the end, brands must set clear goals and design content and creators, advertising, and external sales together."