TikTok ramps-up efforts to develop global eCommerce fulfillment

Technology giant TikTok continues to look at international fulfilment as next major revenue stream. Ken Lyon, Ti Insights advisor, reports.

Another day, another technology giant decides it wants to become a global logistics titan. This week’s entry into that exclusive club is TikTok. They have published an advert which says it’s seeking a:

“Logistics Solutions Manager, Global Fulfillment Centre… We are looking for passionate and talented people to join our global logistics team, together we can build an e-commerce ecosystem that is innovative, secure and intuitive for our users.”

This was one of several job openings being advertised over the past few weeks as they ramp up efforts to develop logistics operations in the US. But the ambition is clearly global. Illustrated by the statement that “TikTok is looking to build an international e-commerce fulfilment system that will include international warehousing, customs clearance and other domestic and cross border efforts.”

All this seems to be inline with its desire to develop e-commerce as its next major revenue stream. Due to the size and scale of the user base, which is in excess of a billion users and growing, the company understands this provides a fantastic platform to attract merchants. Unlike Amazon though, the implications from the job vacancies listed so far, indicate that TikTok are more interested in managing transportation vendors rather than seeking to build a transportation asset base.

The company has stated that initial plans will focus on areas where they are already developing e-commerce services, such as the US, UK and parts of Asia. Also, rather than just opening the platform to anyone, initial moves indicate that they are looking to curate a group of merchants and product offerings. If successful, this could no doubt inform how they can scale logistics services in a measured and controlled way and manage demand appropriately.

They have also given strong indications that they plan to support ‘free’ returns. Given that nothing in the returns space is actually ‘free’, they are obviously looking to provide the service free to customers and either absorbing the cost themselves, or looking for partners to share that overhead off the back of large volumes and long term relationships – although this last point is speculation.

So what does all this mean to logistics operators?

I would suggest that eCommerce sales channels are increasingly dominated by the online platforms. i.e. Google for search, Facebook for recommendation and Amazon for choice and fulfilment. This does not include the giant Chinese online services such as Taobao (AliBaba), Pinduoduo, JD.com, Small, etc. who each have their own strategies for international growth (or not).

As these platforms evolve and develop their services, it is reasonable to assume they will attract a huge community of connected logistics services providers. These providers will connect directly through API’s or indirectly through other gateways. This should not be an issue for most companies if the volumes involved are modest, but as we have mentioned in the past (e.g. livestreams), there are some circumstances where demand may explode within hours and overwhelm the capabilities of any partner to service it.

This is further evidence that logistics service providers of any size need to ensure that their internal operating platforms are flexible and have the capacity to grow in a controlled manner, on demand. This last point is a direct reference to the necessity of running some or all of the operating applications on a scaleable Cloud service. This enables well designed application services to expand capacity at short notice and then reduce it if the demand subsides.

Recognising the role that the giant technology platforms play in developing ecommerce services probably makes sense if you are providing logistics services into the sector. Established manufacturers are discovering that almost all advertising and customer engagement necessitates working with these platforms. Unfortunately for manufacturers and sellers, every interaction helps to inform their machine learning algorithms, so they can either make the manufacturer more dependent on them for customers, or promote alternatives. The best protection any company will have to avoid getting ‘locked in’ will be to establish a strong brand and a great reputation for customer service and support.

Will this initiative by TikTok be a success, who knows? At this stage of development it is too early to say, but the company already has a recognised global brand with a very loyal user base. What is clear is that thanks to the technology revolution, once plans are agreed, it is possible to begin operations very quickly at scale. I suspect that TikTok are smart operators and have been watching how Amazon and others have developed operations and markets and will learn from their success and missteps. They understand how to create and nurture influences and trends into enormous global products. I doubt they will do so unless they have already established the fulfilment mechanisms to reliably deliver at massive scale. Otherwise, why bother?

Author: Ken Lyon

Source: Ti Insights

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