Amazon FBA
Amazon FBA requires a significant upfront investment in inventory and fees.
It has a high barrier to entry due to upfront costs and competition.
Amazon FBA faces intense competition from established sellers.
Amazon FBA relies on pay-per-click (PPC) advertising to reach customers.
The platform offers fulfillment services through Amazon FBA, reducing seller workload.
TikTok Shop
Opening a TikTok Shop account is free.
TikTok shop offers a lower barrier to entry with less upfront investment.
The platform encounters less intense competition because of its recent launch.
The platform uses viral video content to generate organic sales and brand awareness.
TikTok Shop requires sellers to handle fulfillment themselves, demanding more involvement.
TikTok is better for new sellers with limited budget due to its lower barrier to entry and minimal upfront costs. Amazon FBA is better for established sellers with a larger product catalog and a budget to handle upfront costs and fees. However, doing well on TikTok Shop demands high-quality content. It also needs possible influencer collaboration. And order fulfillment requires more direct seller involvement.
TikTok Shop sellers can earn between $1,000 and $5,000 weekly, with significant potential for driving sales. Enchanted Scrunch attributed 90% of their sales to the platform. They got 500 orders a week after a video of theirs went viral. The video got 3 million views and over 170,000 followers.
However, Reddit users warn that new sellers on the platform should be ready for abrupt shop closures and arbitrary product violations that may lead to removed listings. This operational risks could disrupt sellers' sales. New sellers should understand and adhere to the platform's policies and prepare contingency plans to mitigate these risks.
In this article, we'll compare TikTok Shop vs Amazon FBA, their earning potential, major features and challenges. We'll also compare the initial investment, and costs needed for both models. This will help you see choose which platform offers the best growth for new sellers or or if there’s another lucrative and sustainable business model.
TikTok Shop vs Amazon FBA
FEATURES
AMAZON FBA
TIKTOK SHOP
FINAL VERDICT
Customer Acquisition
Customers on Amazon are actively searching for products, making it easier to get your product in front of potential buyers who already have purchase intent.
Customer acquisition on TikTok Shop relies on creating engaging video content that captures attention and sparks interest in your product, leading to discovery rather than direct search.
Tie (This depends on product and budget. If you have a well-established product with high demand, Amazon FBA might be easier. But for new or trendy products, TikTok Shop allows for more discovery.)
Cost
New sellers on Amazon typically invest between $2,500 and $5,000 to start their Amazon FBA business. Selling on Amazon FBA incurs various fees and these fees can add up and eat into your profit margin.
Setting up a TikTok Shop seller account is free, but sellers incur a commission fee per transaction. In both the UK and US, the initial commission rate is 1.8% for the first 90 days, then it increases to 5%.
TikTok Shop
Target Audience
Due to its vast product selection, Amazon attracts a broad range of customers across all demographics.
TikTok's user base skews younger and is more likely to be swayed by trends and social influence.
Tie (It depends on your product. If it appeals to a general audience, Amazon FBA might be better. But if your product caters to younger generations, TikTok Shop could be a good fit.)
Scalability
Amazon offers the potential to reach a massive audience and scale your sales significantly.
TikTok Shop can be highly scalable if your content goes viral and reaches a large audience organically. Paid advertising can further increase your reach.
Tie
Profit Margin
Amazon FBA is profitable because sellers can earn $1,000 to $25,000/month but the high competition on Amazon can lead to lower profit margins. This is due to price wars and the various fees involved.
TikTok Shop sellers can earn $1000-$5000 per week. TikTok Shop is a newer platform with less competition, you might have more flexibility with pricing and potentially achieve higher profit margins.
TikTok Shop
Ease of Entry
Setting up an Amazon seller account and optimizing your product listings for search requires some effort and knowledge of SEO (Search Engine Optimization).
Getting started on TikTok Shop is generally easier. The listing process is simpler, and you can leverage existing video content to showcase your products.
TikTok Shop
Market Saturation
The product selection on Amazon is vast and highly saturated, making it more challenging for new sellers to stand out.
As a newer platform, TikTok Shop offers a less saturated market, giving new sellers a better chance of getting noticed.
TikTok Shop
Fulfillment
By using Fulfillment by Amazon (FBA), Amazon handles all aspects of storage, picking, packing, and shipping your products, allowing you to focus on other areas of your business.
TikTok Shop currently doesn't offer a built-in fulfillment service in all regions. You'll either need to fulfill orders yourself or use a third-party logistics provider.
Tie (If you have limited resources, FBA can be helpful. But if you can handle fulfillment yourself, TikTok Shop allows for more control.
Inventory
Careful inventory management is crucial on Amazon FBA to avoid stockouts that can hurt your sales rank or overstocking that ties up capital.
TikTok Shop's focus on impulse buying gives you more flexibility with inventory levels. You might not need to hold as much stock compared to Amazon.
Amazon FBA
Initial Investment
Most Amazon sellers spend an average of $3,800 at the outset of their business.
No initial investment is required for sellers to start with TikTok Shop.
TikTok Shop
Marketing Focus
Success on Amazon FBA relies heavily on keyword research and pay-per-click (PPC) advertising to improve product ranking and visibility in search results.
Effective marketing on TikTok Shop hinges on creating engaging video content and potentially leveraging influencer marketing to reach your target audience.
Amazon FBA
Final Verdict: Which Platform Offers Better Growth for New Sellers?
TikTok Shop offers a better growth for new sellers with its lower barrier to entry, focus on organic reach, and potential for viral moments. 80% of weekly users engage in some form of e-commerce behavior on the platform, and users are 220% more likely to buy something they discover on TikTok compared to other platforms. This presents a significant opportunity for new sellers to capture customer interest organically.
Amazon FBA is better fit if you have a well-researched product with established demand and a larger budget. It provides a vast customer base, reliable fulfillment, and benefits from Amazon's brand trust.
What are the Differences Between TikTok Shop vs Amazon FBA?
The differences between TikTok Shop vs Amazon FBA are:
Amazon caters to a diverse age demographic ranging from 18 to 60, with 45% of its user base falling within the 35 to 49-year-old age group. The platform appeals to various customer segments, including singles, young married couples, families with children, and retirees. However, its strongest demographic focus lies on middle-aged families across all socioeconomic strata. These families have an average annual household income of $85,000.
TikTok states that individuals aged 25 to 34 constitute 34% of the platform's usage, representing its largest user demographic. Additionally, the platform observed that its audience in the UK has matured when comparing data from 2023 to 2024.
Individual sellers on Amazon are charged a $0.99 fee per item sold but don't incur a monthly subscription fee. Professional sellers opt for a monthly subscription fee of $39.99, which replaces the per-item charge. Amazon applies an administration fee for refunds. The fee is $5.00 or 20% of the refunded amount.
Starting April 1, 2024, fees for standard-size items will decrease from $0.87 to $0.78 per cubic foot from January to September. For October to December, the fees stay $2.40 per cubic foot for standard items. They are $1.40 for large bulky/extra-large items.
Users can sign up as sellers for free, but TikTok currently charges merchants a 2% commission plus a $0.30 transaction fee. However, starting in July, this commission rate will increase to 8%.
TikTok initially offered very low 1.8% fees for the first 90 days to attract sellers. But, the higher commission rates in 2024 will hurt how TikTok Shop sellers set prices and their profits. This will especially hurt smaller businesses.
When withdrawing earnings from TikTok Shop, sellers must pay a fee. The fee varies based on the chosen payment method. For instance, using PayPal incurs a 1% fee on the total sale. Advertising on TikTok requires an extra payment. Ad fees differ based on the ad type and targeting options.
TikTok Shop's restricted products are items that require prior approval from TikTok Shop before being listed. Sellers must provide documents for these products. These include testing reports, certifications, and product details. They must also submit any information that supports medicinal claims. Ensure that you upload all required documents in the Seller Center before the product goes live.
TikTok Shop's Restricted Categories are:
- Pet Food
- Jewelry, Watches, and Accessories
- Beauty, Cosmetics, and Personal Care Products
- Electricals and Electronics
TikTok Shop has a list of prohibited products that cannot be sold on the platform. Even if sellers have the needed permissions and qualifications, they can't sell these items on TikTok Shop.
TikTok Shop's Prohibited Categories are:
- Medicines and Medical Devices
- Alcohol, Tobacco, and E-Cigarettes
- Vehicles & Automotive Parts
- Media Products
- Virtual Products
- Services
- Sex or Adult Products and Services
- Weight Loss Products and Supplements
- Second-hand Products
Restricted (gated) Amazon products require sellers to get Amazon's approval before listing. They may be dangerous, illegal, or age-restricted. A gated category doesn't mean all products within it are restricted. Some products may be restricted for ingredients, content, or branding. This is true even if the category is ungated. Some brands are also gated in otherwise ungated categories.
Gated Amazon Product Categories are:
- Alcohol, & food & beverage
- Animals & animal-related products
- Art - fine art & home decor
- Automotive and powersports
- Composite wood products
- Cosmetics & skin/hair care
- CPAP cleaning and disinfecting devices
- Currency, coins, cash equivalents, and gift cards
- Dietary supplements, drugs & drug paraphernalia
- Electronics
- Explosives, weapons, and related items
- Export controls
- Gambling & lottery
- Hazardous and prohibited items
- Human parts & burial artifacts
- Jewelry & precious gems
- Laser products
- Lighting
- Lock picking & theft devices
- Medical devices and accessories
- Offensive & controversial materials
- Pesticides and pesticide devices
- Plant and seed products
- Postage meters and stamps
- Recalled products
- Recycling electronics
- Refrigerants
- Strike anywhere matches
- Subscriptions and periodicals
- Surveillance equipment
- Tobacco & tobacco-related products
- Warranties, service plans, contracts, and guarantees
- Upholstered furniture, bedding, & other quilted products
New sellers can join Amazon Brand Registry for branding, marketing tools, and IP protection. Registered sellers can use A+ Content to highlight their brand story and product features. They can also build multi-page stores to boost brand awareness, drive traffic, and improve customer loyalty.
New sellers using Amazon Advertising solutions like Sponsored Products and Sponsored Brands boost visibility and sales. A 2022 report found that sellers using Sponsored Products spent 13-79% less per click than alternatives.
TikTok Shop provides brand-building opportunities through its promotional activities for sellers. This allowing sellers and creators to participate and increase product visibility and sales. The platform's Creator Marketplace connects brands with TikTok creators. Sellers can find creators aligned with their target audience using its extensive influencer database. It also provides data-driven insights and tools to help develop effective marketing campaigns.
Amazon FBA offers a set-it-and-forget-it approach. Sellers can send products to Amazon's warehouses. Amazon handles everything from storage to picking, packing, shipping, and returns. This frees you up to focus on marketing and sales.
However, TikTok Shop gives you more control over fulfillment. You can choose to handle it yourself or use a third-party service like Fulfilled by TikTok (limited availability). This can be more work upfront, but it reduces costs. Managing your own logistics requires storage space. You also need packaging materials. And, you must figure out shipping options.
TikTok Shop vs Amazon FBA on Reddit
TikTok Shop on Reddit
Reddit user Garyjitui does not recommend doing business with TikTok unless sellers are ready to deal with a ton of issues. They shared how their shop got closed for ridiculous reasons and not being able to get it back. Their funds ability was also permanently deactivated and voiced out their frustration on the terrible management of the platform.
Another user, Covertchicken also shared their bleak experience in the platform. They expressed their frustration with the lousy dashboard and the arbitrary product violations they received. The reddit user also commented on the terrible customer support of TikTok Shop that were unhelpful at resolving their issues.
Amazon FBA on Reddit
Putrid_Sample_9961 states that Amazon FBA is still a viable opportunity. However, they also warn other users to consider the current market conditions and potential saturation. They advise new sellers to approach the platform with a clear understanding of the market dynamics and a solid business plan.
CupHead1101 adds that starting with Amazon FBA is expensive. New sellers can make a huge amount of money but it would require a lot of effort and hard work. They also observed that the only passive with Amazon is their shipping services.
Can You Use TikTok Shop and Amazon FBA Together?
Yes, you can use TikTok Shop and Amazon FBA together by integrating the two platforms to automate order fulfillment. This integration involves matching the SKU and UPC codes of your product listings on both TikTok Shop and Amazon FBA.
To help with the integration, you can use a third-party app like Webby. It links your TikTok Shop to Amazon FBA. This allows Amazon to fulfill TikTok orders . This streamlines the logistics and enhances operational management. This allows you to monitor and manage orders through Webby’s dashboard. You can't sell Amazon products on TikTok shop directly. This is because they are separate platforms with their own fulfillment and transaction systems. However, you can create engaging content to showcase your products and drive traffic to your Amazon store.
Reddit user EllieKuk states that TikTok does not provide a feature that allows users to directly connect their TikTok Shop to Amazon. However, they recommend using apps like 4Seller ERP. It supports syncing Amazon listings to TikTok Shop and supports TTS order fulfillment through FBA inventory.
Can TikTok and Amazon’s Algorithms Impact New Sellers?
Yes, TikTok and Amazon's algorithms can impact new sellers. The Amazon A9 algorithm ranks products based on conversion rate, keyword relevance, and sales history. John Tilly from Zonguru states Amazon's algorithm affects new sellers by prioritizing sales velocity, seller authority, and product listing optimization. He states new sellers may struggle without a sales history.
However, they can optimize their listings, use high-quality images, and drive external traffic to boost visibility and sales. Leveraging Amazon's advertising tools can also enhance their competitive edge.
YouTuber StartupWise says that TikTok's recent algorithm changes stress the value of longer videos. They are now preferred due to growing user demand. The YouTuber states statistics show that viewers spent 90% more time watching videos longer than one minute last year.
TikTok's algorithm changes emphasize a preference for longer videos, those longer than one minute. This shows a shift to deeper, more comprehensive content. They also say that TikTok encourages users to use effective storytelling. This means following a clear structure with a beginning, middle, and end.
What are the Disadvantages of Using TikTok Shop?
The disadvantages of using TikTok Shop are:
Which Types of Products Perform Better on TikTok Shop and Amazon FBA?
The types of products that perform better TikTok Shop are in Beauty & Personal Care. They dominate by generating the most money, accounting for 22.50% of the total. This is followed by Womenswear & Underwear and Menswear & Underwear, which contribute 12.56% and 8.06% to the TikTok Shop GMV. These categories show significant transaction volumes, reflecting their popularity among users.
The type of products that perform better on Amazon FBA include smaller, lighter items with higher profit margins due to lower fulfillment costs. This is especially true in the home and kitchen category (over 20% market share) and beauty (projected U.S. e-commerce sales to reach over $31 billion by 2025). These categories have steady demand. FBA’s quick fulfillment helps customers experiment with new beauty products. Sellers can increase profits by riding trends. For example, searches for outdoor gear go up in certain seasons. They can also do so by avoiding perishables with strict storage needs.
Reddit user Floraacmilan also shared the top 3 viral products on TikTok. They mentioned GuruNanda Cocomint Pulling oil that has 2.4 million units sold. Car Air Freshener Diffusers by Scent Szn that has become a must have for car enthusiasts and car owners. And the 15 Day Cleanse by Milamiamor with 1.1 million units sold. They also say that there's a big push towards health and wellness products, new tech gadgets and beauty items.
Quora user Jas Wu also shared TikTok Shop's top 10 categories in the U.S. that generated $290.63 million in GMV last March 2024. Beauty & personal care items recorded the highest GMV, generating $90.52 million. Womenswear & underwear followed, reaching $45.76 million.
For new sellers, this indicates a significant opportunity in these categories. This could help them gain traction, tap into established trends, and make big sales on TikTok Shop.
YouTuber Arie Scherson highlighted the top-performing Amazon products. The Wavy Talk Thermal Brush generated over $3 million in sales through simple, authentic creator videos. The Beach Waver B1, despite a seasonal dip, maintained strong sales, achieving eight figures in six months. The Easy Untangle Brush earned $2 million by solving a common issue, selling a million units. The cordless vacuum made $1.7 million. It had an $87 average order value. Shilajit supplements used paid ads to earn $613,000 on a $150,000 investment.
Arie Scherson states that these products did well because they are everyday relevant. They also had authentic creator videos and strategic ads. The ads drove engagement and sales.
Who are the Primary Buyers on TikTok Shop and Amazon FBA?
Amazon FBA's primary buyers are predominantly aged between 18 and 54, with 62% of them being male and 38% female. The average customer earns around $60,000 per year and is a white Gen X woman. 92% of U.S. Amazon users read reviews before making a purchase, highlighting their reliance on user feedback. The Amazon mobile app remains an essential tool, boasting 155 million monthly active users in the U.S. during Q2 2021. This data underscores the importance of reviews. It also shows the importance of mobile accessibility. These things help reach and appeal to Amazon FBA's main buyers.
In contrast, TikTok Shop's primary buyers are Generation Z (born 1997-2012). This demographic makes up 44.7% of all TikTok users, with 78% of Gen Z Americans using the platform as of 2023. 52.5% of Gen Z consumers use TikTok monthly for shopping or product discovery. And, 68% are likely to buy through the app. 43% of Gen Z consumers consider TikTok their starting point for product searches. The platform is also the top social shopping choice for 29.1% of this group. This shows how Gen Z uses TikTok Shop to find and buy products.
What is TikTok Shop?
TikTok Shop is an e-commerce platform within TikTok that allows sellers to promote and sell products through in-feed videos, live streams, and the Showcase tab. It supports product discovery, detailed information, checkout, and post-payment activities. Sellers can register for free, with TikTok currently charging a 2% commission and a 30-cent transaction fee, which will increase to 8% in July.
What is Amazon FBA?
Amazon FBA, or Fulfillment by Amazon, is a service that allows third-party sellers to outsource their order fulfillment and shipping processes to Amazon. Sellers send their products to Amazon's fulfillment centers and Amazon takes care of the rest. This includes storage, packing, shipping, and customer service. This service lets sellers offer customers fast and reliable shipping. Amazon's Supply Chain services include free two-day shipping through Amazon Prime.
Conclusion: Why Local Lead Generation Trumps TikTok Shop and Amazon FBA for New Businesses?
Local lead generation trumps TikTok Shop and Amazon FBA for new businesses because it fosters a more strategic and results-oriented approach. By focusing on a specific geographic area, you can tailor your marketing and messaging to resonate with the local community. This approach contrasts with Amazon FBA and TikTok Shop, where results may take longer due to high competition. Local lead generation requires a $500 to $1000 initial investment. This is lower than launching campaigns on broader platforms. But, most importantly, by being there and involved locally, you build trust and rapport with potential customers. This fosters loyalty and repeat business.
Local lead generation is more cost-effective because it allows you to leverage existing resources like online directories and local events to generate leads. By contrast, Amazon FBA requires sellers to pay storage and fulfillment fees. Effective TikTok Shop campaigns often need extra investments in influencer marketing or advertising. Amazon FBA and TikTok Shop offer scalability and brand awareness. But, local lead generation prioritizes building a strong local customer base. This is often the best path for many new businesses.
Local lead generation allows new businesses to control their sales process, target specific demographics, and build customer relationships. It also provides flexibility and scalability while reducing overhead costs. This makes local lead generation an ideal choice for new business owners who want to pursue efficient and sustainable growth strategies.
