Winning at e-commerce, TikTok enters the delivery market

Ms. Ngoc Phuong placed an electronic order from TikTok Shop in Ho Chi Minh City, expecting a delivery time of 4 days. However, she switched to another e-commerce platform and received the product two days later.

Mandatory delivery is always a problem for e-commerce platforms with a large number of orders, especially TikTok Shop (part of the short video social network TikTok), which has surpassed Lazada to become the e-commerce platform with the largest market share in Vietnam in the second quarter of 2023, according to Metric.

Looking at the region, according to Momentum Works, TikTok Shop could account for 13.2% of the Southeast Asia market share by the end of this year, closely following Tokopedia (forecast to account for 13.9% market share), not too far away from Lazada (estimated to be 13.9% market share). accounting for 17.7%), even though it has only been in the market for 1 year.

It can be seen that most of TikTok Shop's competitors have invested in affiliated delivery companies such as Shopee with Shopee Express and Lazada with Lazada Logistics. Even the competitor ranked at the bottom of Vietnam's e-commerce rankings in terms of market share, Tiki, has its delivery team, TikiNOW. Meanwhile, TikTok Shop currently only uses J&T Express as its sole delivery partner, handling up to 90% of TikTok Shop's orders in Southeast Asia.

There are many reasons why e-commerce platforms are forced to own delivery companies because, in addition to optimizing costs, they also reduce order cancellation rates by improving service quality.

Statista reported on the reasons affecting the ability to "close orders" in Vietnam in 2021: delivery service price and delivery service quality, accounting for 40% and 30% of survey respondents' reasons, respectively. The report also shows that the return rate as a percentage of online orders in Vietnam in 2023 will be 6.4%, down nearly 2 percentage points compared to 2021 and more than 3 percentage points compared to the peak of this year.

Note that this survey was taken from units that account for the majority of Vietnam's e-commerce market share, and most of them have delivery units. The refund rate of the livestream group, the branch where TikTok Shop is leading the market, does not yet have specific statistics because it is too new and the number may not be accurate due to the influence of price subsidy policies that change buying habits. customer shopping.

But in the end, the ability to close an order still depends on delivery time and service. Therefore, investing in delivery units to improve is a predictable step for TikTok, especially when rapid growth in China and Southeast Asia is putting pressure on the company's shipping process. Responding to Tech In Asia, Mr. Roshan Raj, partner at Redseer Strategy Consultants, said: “Any serious e-commerce effort needs in-house logistics capabilities.”

Douyin, the Chinese version of TikTok, has invested in Jisuda since 2020 to offer delivery within and outside the city in two days. This move is due to the company's logistics services being far behind those of JD.com and Alibaba. The rapid growth rate in a short period is a strength but also a weakness for TikTok Shop, as the time to invest in large delivery units is limited. Strategic investments could provide an advantage.

TikTok's parent company, ByteDance, has invested $40 million in iMile Delivery in 2021 to serve the Middle East delivery market. Rumors suggest TikTok may invest in a struggling food delivery unit in the Vietnamese market. The Chinese market is concentrated with clear potential and pressure, with Douyin's food delivery revenue reaching 13.8 billion USD in the first six months of 2023. However, this is less than half that of Meituan, which owns 6.4 million food delivery people and 9.3 million sellers on its platform as of April 2023.

Meituan is expanding into livestream sales to compete with Douyin and protect its market share in the Chinese market. To compete with Southeast Asian competitors like Lazada and Shopee, TikTok needs a regional-scale commercial delivery unit to compete with companies serving the fragmented food delivery market, which is less attractive than China.

Looking back over the past 3 years, the Southeast Asian market has witnessed delivery companies that always aim to expand into the region, such as Best, Ninja Van, and J&T Express. 

In 2021, J&T Express acquired Best's operations in China to expand its influence in this market. In addition, among them, only J&T Express has expanded its services to the US market since the end of last year. 

Citing Reuters, TikTok also started a sales program for Chinese merchants in the US market a few months ago. Therefore, it is not surprising if one day TikTok announces its entry into the delivery market. But a representative from TikTok Vietnam refused to say anything about this.