TikTok is taking a page from the playbook bargains app Temu employed to jumpstart its business in America: it’s promising merchants a fast-track to its burgeoning online marketplace — for free.

ByteDance Ltd.’s signature video service has begun pitching itself as a cost-free marketplace in a series of seminars and meetings with Chinese manufacturers and exporters. It’s dangling free listings, shipping, zero commissions and even warehousing to all comers: a tactic likely to disrupt a market now dominated by fellow Chinese-owned rivals Temu and Shein, and potentially undercut even Amazon.com Inc.

The stepped-up aggression move stems from TikTok’s effort to recast its image and grow its ecommerce platform, as the US weighs a ban on its core social video platform ahead of the elections. Its entry into online shopping promises to further shake up a market for cheap Chinese-made goods now led by fast-fashion upstart Shein and PDD Holdings Inc.’s Temu — which themselves carved out that niche with surprising speed in just the past two years.

TikTok will help Chinese merchants access its one-billion plus users by handling everything from marketing to logistics and invoicing, ByteDance sales managers said in live-streams. As envisioned, merchants submit product info and ship their goods to a Guangzhou warehouse and the company will take care of the rest, the employees said. TikTok’s advantage is that it’s already installed on 150 million devices in the US. It occupies an increasingly dominant share of mobile users’ time, to the detriment of services like YouTube and Instagram.

TikTok marketplaces already running outside US

TikTok has already rolled out full-fledged marketplaces inside its main app in the UK and Saudi Arabia, leveraging that “full-custody” model, and it’s planning a similar service in North America in coming months, they said. Representatives for the company declined to comment.

TikTok’s ecommerce business is already quadrupling annually and expected to hit $20 billion in gross merchandise value by the end of this year. Much of that growth is powered by Southeast Asia, where TikTok had its first major success in twinning online entertainment with in-app shopping. But for months, TikTok has also been preparing a full launch of ecommerce in the US, where it faces intensified scrutiny over its Chinese ownership.

Taking on Shein, Temu and — in the long run, Amazon — on US turf could present TikTok a lucrative avenue but also a big challenge.

Like elsewhere, TikTok Shop is a constellation of mini-stores linked to the profiles of influencers and creators, and users typically discover these stores through their content feeds. There’s also a “Shop” tab on TikTok’s main page that takes users to something more akin to a traditional shopping site — — a third-party marketplace or online bazaar that it now hopes to populate with Chinese vendors as well as big global brands.

Push into the US

The company hopes to push TikTok Shop to its US users, but more recently it has increased efforts on running that centralized marketplace, two people familiar with the matter said. That’s both because smartphone users in Western markets aren’t used to the idea of shoppable content, and because TikTok learned and applied lessons from Temu, they said. They asked to remain unidentified discussing internal deliberations.

Temu launched in 2022 in the US and quickly topped download charts before expanding to more places like Australia and Europe. It’s recruited Chinese sellers of everything from kitchen mops to hair clips using the full-custody model. It then generates revenue by taking a cut of sales.

Gaining merchants

While TikTok is poaching merchants in a similar spirit, it’s pledging zero fees — at least for now. To set TikTok’s offering apart, ByteDance salespeople also claimed they won’t push merchants to sell at a loss.

“Some rival platform only wants low prices, is that a good thing?” one of them said during a June 27 livestream on Douyin. “We don’t lack traffic, what we lack are good products and suppliers.”

It’s not uncommon for ecommerce platforms to waive fees to build an initial base: Alibaba Group Holding Ltd. employed that approach in China to great effect in its early years. Shein, which is building its own third-party marketplace, is also waiving commissions on a selective basis.

But TikTok stands out with its reach and engagement. Its tactic is already winning over some merchants. Frank Yan, who runs apparel factories in Guangzhou, is now producing dresses and T-shirts for the short-video app after months of trials on Temu. Both platforms survey merchants on pricing, then pick the most competitive offers, Yan said. But Temu has at times pushed the envelope too far, he added.

“It’s a vicious cycle where everyone has to join the price war,” he said.

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