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April 22, 2024
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TikTok Shop is Raising Referral Fees

TikTok Shop is Raising Referral Fees

After offering discounts that seemed too good to be true, the video app is reeling back its deals. Here’s what businesses should expect.

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Amid a U.S. Federal Trade Commission investigation and a possible U.S. ban, TikTok is prioritizing its finances–by increasing referral fees in TikTok Shop, its e-commerce marketplace.

Starting April 1, referral fees for products sold in the TikTok Shop will increase from 2 percent to 6 percent–before ultimately climbing to 8 percent on July 1, the platform shared in a blog post. There are a few exceptions: For products sold in the electronics and collectibles categories, fees officially increased to and will stay at 6 percent, and fees for pre-owned items increased to and will stay at 5 percent.

TikTok Shop officially launched in September after an April 2023 beta launch. According to a TikTok spokesperson, the platform, at that time, boasted 200,000 sellers and more than 100,000 registered creators who share products through TikTok Shop Affiliate.

But in the fall, sellers reported technical bugs and operational challenges. Paul Jauregui, co-founder of the Austin-based cosmetics brush brand BK Beauty co-founder told Inc.com in November that his company experienced issues like customer orders not syncing between TikTok and the brand’s own information systems. To make up for inconveniences, the platform offered brands incentives, like up to $1,500 worth of discount coupons that brands could distribute to customers, Jauregui said. TikTok also waived BK Beauty’s standard 2 percent seller fee for a time, he added. 

Jauregui noted that TikTok’s discounting and other incentives were likely intended to soften the learning curve for sellers and keep them on the platform. 

The platform’s fee hikes could cause businesses that sell on the platform to adjust their prices. However, in the world of e-commerce, they’re not exceptionally high.

While fees on Amazon vary by category, the majority of items sold on that platform have a referral rate of around 15 percent. Ana Milevskaja, CMO of the e-commerce company ProductsUp told Inc. in November that platforms like Etsy and Facebook typically charge sellers a double-digit percentage fee to sell on their marketplaces–which made TikTok Shop’s pricing “one of the lowest and simplest options available among all major marketplaces.” Even as TikTok Shop’s referral fee climbs to 8 percent in July, it’ll still be less than those competitors–which may be reason enough for businesses to keep selling on the platform.

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