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TikTok Shop sellers in the US will soon see the platform take a bigger commission cut as it works to expand its fast-growing e-commerce business.
TikTok told sellers this week it’ll start increasing its commission from 2% to 8%, in addition to charging 30 cents per transaction, The Information reported.
The social media platform will also pull back on the subsidies it was offering some merchants, which allowed them to sell products at often extremely discounted prices, a source told the outlet. The Information reported in August that TikTok was expecting to lose more than $500 million in 2023, partly due to these subsidies.
The commission bump will be implemented gradually, with a 6% rate taking effect on April 1 before the 8% rate goes into effect on July 1. TikTok will take a smaller cut for more expensive items and some sales over $10,000. These changes are more closely aligned with, though still largely lower than, Amazon’s 8% to 20% commission, the outlet noted.
TikTok Shop, which debuted in September, has featured major brands such as Nyx and E.l.f.; its most popular categories include apparel, skin care, and hair care, Retail Brew previously reported. The shopping service has already established a $3 billion run rate in the US since its debut, putting it in potential competition with Amazon, as well as Shein and Temu.
A Bloomberg report this week claimed the company is hoping to grow its US e-commerce business to $17.5 billion this year, having held meetings in recent weeks to discuss the year’s sales goals. The outlet also reported that TikTok plans to expand TikTok Shop to Latin America this year. TikTok, however, told Bloomberg that the US merchandise sales figures it reported were “inaccurate.” The platform’s retail arm was on track to bring in ~$20 billion in global sales last year, thanks to sales in Southeast Asia, Bloomberg previously reported.