TikTok's e-commerce division has matured significantly but remains unable to operate completely independently.

ByteDance made substantial investments in live-streaming e-commerce just before the 2020 618 shopping festival, simultaneously establishing e-commerce as a first-tier department. Over five years, TikTok's e-commerce annual transaction volume has caught up with JD.com, yet several core functions of the e-commerce business, including its primary revenue source - e-commerce performance advertising operations - still remained under the commercialization department, requiring cross-departmental collaboration.

According to exclusive information obtained, ByteDance transferred sales and industry operations teams specializing in e-commerce performance advertising, including KA (key account) direct sales, from the commercialization department to the TikTok e-commerce division on September 1st. Sales and operations teams focusing on brand advertising remained within the commercialization department.

In April this year, product and product operations personnel from ByteDance's e-commerce advertising platform Qianchuan were transferred from the commercialization department to TikTok e-commerce. Similarly, product and operations staff from the local services marketing platform were moved from the commercialization department to the life services team. The commercialization department retained algorithm personnel.

Following these rounds of adjustments, TikTok e-commerce now possesses a more independent organizational structure and expanded authority. It can comprehensively determine the allocation ratio between e-commerce transactions and e-commerce advertising within its assigned traffic based on Gross Merchandise Value (GMV) and e-commerce advertising revenue targets. Previously, with Qianchuan under the commercialization department pursuing advertising revenue while TikTok e-commerce focused on GMV, these separate metrics conflicted despite e-commerce advertising's ultimate purpose being transaction facilitation. Now, with GMV and e-commerce advertising revenue considered as an integrated whole, this theoretically improves TikTok traffic utilization efficiency and enhances merchant experience.

TikTok e-commerce achieved approximately 3.4 trillion yuan in payment GMV in 2024, securing a solid position among China's top four e-commerce platforms. In the first half of this year, TikTok e-commerce's GMV approached 2 trillion yuan, with second-quarter growth rates nearing 40%, significantly outpacing Taobao, Pinduoduo, and JD.com. Meanwhile, TikTok e-commerce's advertising revenue growth exceeded 40%, further solidifying its profitability advantage over other e-commerce platforms.

TikTok e-commerce participated in the industry-wide low-price competition during the first half of last year, causing significant GMV growth deceleration and some impact on advertising revenue. After abandoning this strategy by year-end and refocusing on brand merchants, growth momentum recovered. A TikTok e-commerce insider revealed that the platform increased its traffic allocation to e-commerce content and advertising in the first half of this year, now exceeding 10%.

With 800 million Chinese users opening TikTok daily (including Lite and Huoshan versions) and averaging 2 hours of usage, the platform's e-commerce exposure significantly surpasses that of Taobao and Pinduoduo. This represents both the foundation of TikTok e-commerce's rapid growth and its competitive moat. However, ByteDance's substantial investment in this business aims beyond merely achieving third or fourth place in the industry.

**TikTok E-commerce Gains Complete Advertising Products and Commercialization Team**

TikTok merchants seeking to sell products can obtain exposure opportunities from three traffic pools: M1 (organic traffic allocated based on content popularity), M2 (transaction traffic influenced by GMV per thousand impressions), and M3 (advertising traffic that merchants can actively purchase).

Among 100 TikTok videos viewed by users, approximately 9-12 originate from M2 and M3 traffic pools containing e-commerce content. This represents the upper limit TikTok's team has set for e-commerce content to protect user experience. Previously, M2 traffic allocation was managed by TikTok e-commerce while M3 was handled by the commercialization department.

Since April, with the e-commerce advertising platform Qianchuan integrated into TikTok e-commerce, both M2 and M3 traffic pools are now allocated by the TikTok e-commerce department. Post-adjustment, Qianchuan bears responsibility not only for e-commerce advertising revenue but also collaborates with other TikTook e-commerce teams on GMV, merchant and user experience, and merchant advertising ROI metrics.

In May, Qianchuan unified its promotion methods under comprehensive promotion. Merchants set budgets and ROI targets (overall payment GMV/consumption costs), while the system promotes products across all scenarios including information feeds, live streaming squares, malls, and search. This signifies further traffic integration across the platform and labor savings, as merchants no longer need specialists to create separate campaigns for each scenario or manually adjust bidding - algorithms generate automatic pricing recommendations based on set targets, with merchants simply approving or declining suggestions.

Following September's adjustments, frontline sales personnel for e-commerce performance advertising also joined TikTok e-commerce. TikTok e-commerce now possesses a complete commercialization team spanning from advertising platforms to frontline sales and operations.

Many brand merchants advertise on TikTok not solely for transaction facilitation but also invest in non-transactional brand advertising to deepen consumer impressions. This business segment remains within the commercialization department. A ByteDance insider explained that brand advertising delivers exposure rather than transactions, without distinguishing advertiser types, and advertisers may not even operate within TikTok's ecosystem. In contrast, e-commerce and life services business lines are categorized by in-platform transaction methods and advertiser types, making brand advertising unsuitable for inclusion in any single business line.

**Matured but Not Yet Independent**

E-commerce platforms track GMV using different calculation methods. The most lenient includes order GMV (including unpaid orders), stricter versions consider paid order GMV, while the most stringent deducts returns for final transaction amounts. Under the first two metrics, TikTok e-commerce may have reached third place industry-wide, but fourth when excluding returns.

Live-streaming e-commerce's product format inherently encourages impulse purchases, making ordering easier but also increasing return rates. Return costs ultimately transfer to product pricing.

Sol Price, founder of modern retail pioneer FedMart (later merged into Costco), once stated that while businesses want profit margins, retail should "focus on bringing goods to consumers as cheaply as possible" - the only path to competitive victory.

Live-streaming e-commerce involves high intermediary costs, typically requiring 20-30% of product selling prices for influencer partnerships or TikTok traffic purchases. This means identical standard products usually cost more on TikTok e-commerce than on Pinduoduo or Taobao.

Costco maintains only 12% gross margins, leaving just 3 percentage points in net profit after deducting sales, labor, warehousing, and logistics expenses. This American retail giant's marketing expense ratio is merely 0.5%. Meanwhile, Dongfang Selection, primarily operating through TikTok live-streaming sales, extracts nearly 20% in commissions alone, costs that inevitably inflate product prices.

During live-streaming e-commerce's initial boom, new companies invested for brand promotion while established brands explored new channels. Years later, all parties began scrutinizing their investments more rigorously. Even beauty brands like L'Oréal and Estée Lauder, traditionally heavy marketing spenders, have significantly reduced their brand advertising budgets on TikTok this year.

Shelf e-commerce represents TikTok's pathway beyond live-streaming e-commerce limitations: cultivating user habits of actively searching TikTok for purchases rather than impulsively buying during video browsing.

TikTok continues experimenting. In May 2022, TikTok launched a "Mall" entrance on its homepage, featuring pages similar to Taobao and Pinduoduo, while attempting to provide more diverse, competitively priced products and introducing numerous white-label merchants.

TikTook has repeatedly attempted creating independent e-commerce applications. In late 2021, the TikTok Box app launched, targeting young consumers' trendy shopping needs with full-screen selling video content upon startup. However, insufficient user enthusiasm for dedicated selling video consumption meant the app suspended external promotion just seven months post-launch.

In March 2024, TikTok Mall's independent application launched. Upon startup, users enter a shelf interface similar to Taobao and Pinduoduo, requiring additional clicks to access short videos and live streams. This application doesn't support content creation, publishing, or live streaming.

This year, a key priority for TikTok's shelf e-commerce development involves cultivating user habits of searching for products and placing orders, including various prompt word designs to stimulate user search intentions after viewing e-commerce videos.

"If search GMV achieves breakthroughs, it indicates TikTok's shelf e-commerce success," stated a TikTok e-commerce insider.

However, these three initiatives contribute limitedly to TikTok e-commerce's overall sales volume. According to obtained data, GMV generated through "Mall" entrances (TikTok main app and TikTok Lite) and TikTok "Search" entrances account for approximately 25% and 15% respectively of TikTok e-commerce's total volume.

TikTok Mall's independent application currently prioritizes user growth and converting regular users into e-commerce users, with GMV not being the highest priority. The independent TikTok Mall application has surpassed 10 million daily active users, though average order values remain relatively low.

In China's brutal e-commerce industry, achieving over 3 trillion yuan GMV within five years represents unprecedented speed, attributed not only to TikTok's massive traffic but also its rapid e-commerce and advertising product iterations over five years. Through multiple reorganizations, TikTok e-commerce has evolved into a relatively independent business capable of more efficient traffic utilization and growth achievement. However, further advancement and challenging Taobao and Pinduoduo requires overcoming product format limitations.