utheast Asia, where it has experienced exponential growth. The platform has now established itself as the second-largest e-commerce player in the region, trailing only Sea Ltd-owned Shopee. Cube Asia estimates TikTok Shop’s gross merchandise value (GMV) exceeded US$17 billion in Southeast Asia last year.  Nevertheless, as Shopee enhances its market presence, it remains to be seen whether TikTok can sustain its current growth trajectory and maintain its competitive position in the e-commerce landscape.  What was the appeal? Social commerce has been prevalent in Southeast Asia for more than a decade. However, prior to TikTok Shop, it was primarily limited to social media and content platforms like Instagram and Facebook, where the integration of content and commerce functionalities was suboptimal.  Simon Torring, co-founder of Cube Asia, a Singapore-based e-commerce consulting firm, told Inside Retail that TikTok has successfully bridged this gap, bringing content and commerce into closer alignment, thereby enhancing the user experience. “From our research, we know that a big part of TikTok Shop’s sales growth comes not from cannibalism of other e-commerce but rather from cannibalism of offline channels and new incremental retail spending, which indicates that consumers are finding the experience so novel and entertaining that it’s expanding the total online market in the big trade categories on the platform,” he said.  How does it work? There are several ways for retailers to organize live-streaming events on TikTok Shop.  According to Torring, the predominant model involves brands offering sales commissions to influencers through the platform’s ‘Open affiliate program’ within the application. In this program, brands set commission rates for their products, which can range from a modest percentage to more than 35 per cent. However, it’s worth noting that the average commission rates in the fashion and beauty sectors typically fall between 8 per cent and 12 per cent.  “The influencers can then feature these products through live streams and short-form videos, and any sales generated through their links result in commission earnings for the influencers,” Torring said.  He added while more sophisticated engagement models exist, such as the ‘Targeted affiliate plan’, where brands can propose tailored commission terms to specific influencers, it is the open model described above that has significantly transformed the region’s affiliate marketing economy due to its streamlined nature.  For brands hosting their own live streams to followers, the process can be challenging in the early stages.  “It requires them to find and hire talent to host live streams, which can be expensive and cumbersome, and to determine content and streaming guidelines that fit their brand. These guidelines range from high-level strategies to specific details like the frequency of flash sales and whether hosts can raise their voices or ring a bell,” Torring said.  “Live commerce presents a steep learning curve for most established brands and retailers. It’s an area where many are still firmly in ‘test and learn’ mode. However, there are notable exceptions. L’Oréal, for instance, has fully embraced live commerce over the past couple of years. They now operate established live commerce businesses on TikTok Shop across several regional markets.” He noted that “challenger brands” in categories like fashion, beauty, and personal care are performing well on this new selling channel. These brands, born online in recent years, have organizations and go-to-market strategies uniquely built for social and live commerce. Potential challenges  According to Torring, at its core, TikTok Shop is largely mirroring the strategies and product rollout already implemented by its Chinese sister app, Douyin. “Southeast Asia turned out to be a very good fit for this model because a lot of its core tenets – such as live commerce – were already thriving in the region before TikTok Shop’s arrival,” he said. “The difference is that TikTok Shop provides a more seamless environment to combine the content and commerce features in one place, and that has unlocked a ton of value.” In contrast, TikTok Shop has yet to achieve comparable levels of engagement and adoption in Western markets as it achieved in Southeast Asia or China.   “In the US, where TikTok Shop launched last September, the situation is quite different. The percentage of GMV derived from live streaming is much lower than in Southeast Asia. Instead, it appears that the ‘Shop tab’ is driving significantly more sales,” Torring explained.  “The United Kingdom is currently the only active market for TikTok Shop in Europe. Despite being one of the first markets where TikTok Shop launched globally in 2021, it has not gained significant traction so far.” Despite its remarkable growth trajectory in Southeast Asia, TikTok Shop still faces challenges. As the e-commerce landscape in Southeast Asia is fiercely competitive, TikTok Shop must constantly innovate and adapt its strategies to maintain its competitive edge.  “We saw in Indonesia last year and with the discussions in the US this year, TikTok Shop is vulnerable to associations with China and concerns about distorting local competition in the markets where they operate,” Torring added. “This will likely continue to be the case as long as Bytedance is its corporate parent company – whether justified or not.”