Hong Kong (Business NEWS)Walmart is a 58-year-old American company known for big box stores that sell everyday goods, casual clothing, groceries and TVs.
TikTok is a Chinese-owned app that in just a few years has captivated hundreds of millions of teens with its entertaining dance videos, lip syncing performances and comedy routines.
At first glance, the two couldn't be more different. That's why Walmart's (WMT) announcement that it was joining Microsoft (MSFT) in its bid to buy TikTok's US operations came as a surprise to so many.
But analysts who have watched the meteoric rise of social commerce in China — a mash up of social media activity and frenzied online shopping — say Walmart's interest in TikTok makes perfect sense.
The Chinese version of TikTok, known as Douyin, is one of several apps in the country that have tapped into the rapidly growing number of Chinese shoppers who like to buy stuff on social media platforms.
Users of Douyin and Tencent-owned (TCEHY) rival Kuaishou, for example, can buy goods after watching short videos about products. They tune into live streams of influencers peddling everything from makeup to furniture. Users can ask influencers about products and get responses in real time, or they can click on steep discounts that are offered only in the apps.
Social commerce is growing fast
Social commerce in China was worth $186 billion last year, more than 10 times the value of sales made in the United States, according to market research firm eMarketer. The Chinese market is expected to grow 30% this year to $242 billion.
Walmart has already acknowledged the value of e-commerce when it comes to TikTok. The company said Thursday that its interest in the app stems from the way it has "integrated e-commerce and advertising capabilities in other markets," and added that TikTok could bolster Walmart's access to consumers.
China's success with social commerce hinges on the early and widespread adoption of advanced, mobile-friendly payment systems that the United States is at least three years behind in implementing, said Eric Schiffer, CEO of the Patriarch Organization, a technology-focused private equity firm. For Walmart to create a runaway success with TikTok, it would likely need to replicate that payment technology and encourage TikTok's largely young audience to use it.
"The battleground of this decade for Gen Z will be where they spend time," Schiffer said, "and being able to integrate payments is a critical piece to maximizing the return on investment on TikTok."
The American retailer likely thinks it can replicate at least some of that runaway Chinese growth in the US market, and get "millions of sellers and advertisers fueling commissions and online commerce," said Greg Paull, principal at marketing research firm R3.
"More importantly, Walmart needs to attract Gen Z shoppers as its profile continues to age with the population," he added.
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