"Just days after Facebook (NASDAQ:FB) doubled down on its social commerce ambitions by launching a shopping tab on its main app, Walmart (NYSE:WMT) surprised everyone by partnering with Microsoft (NASDAQ:MSFT) to bid for TikTok.
On the surface, Walmart’s interest in TikTok may seem insane. It is a highly strategic decision and not a random misplaced one, though. To keep growing its e-commerce business, the big-box retailer needs social media channels, and the short-form video app caters to that need.
Unlike with messaging and social networking, social commerce is in relative infancy, and Facebook hasn’t quite sewed up the niche yet. Facebook’s path to achieving its ambitions in this niche becomes more complicated if Walmart and Microsoft’s bid for TikTok is successful.
TikTok
Walmart could prove highly disruptive if it succeeds in acquiring TikTok in a partnership with Microsoft. | @chetanp/Twitter
Why Walmart Wants TikTok
The number of internet users who have bought a product directly via social media platforms has been growing double digits in the last few quarters. Between the fourth quarter of 2018 and the third quarter of 2019, this number rose from 13% to 21%, according to eMarketer.
It is estimated that this category of buyers spends, on average, $300 per year via social media channels.
Social commerce, though, is tiny relative to all online sales. Last year on Cyber Monday, just 2.6% of the $9.2 billion spent online came via social media channels. There’s lots of room for growth, and Walmart wants in on the opportunity early.
China Shows the Way
To get an idea of where social commerce is headed to in the U.S., China offers a good example.
In the world’s second-largest economy, social commerce was worth $186 billion in 2019. It is expected to grow by 30% in 2020 to hit $242 billion. ..."
