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US entities registered by sellers must be 51% US-owned

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Chinese vendors worry about losing prominence with US

buyers

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US TikTok Shop viewed by vendors as Amazon ( AMZN ) alternative

By David Kirton

SHENZHEN, China, March 27 (Reuters) - Chinese e-commerce

vendors that want to sell products on TikTok Shop in the U.S. as

an alternative to Amazon ( AMZN ) are upset by moves they say the short

video app has made to tighten enforcement of its rules for

overseas sellers opening shops on the platform.

Chinese-owned TikTok, which faces the threat of having to

divest its U.S. operations or be banned, has in recent weeks

taken a harder stance toward enforcing its internal rules,

according to five Chinese vendors on the site and an industry

association that represents 3,000 Chinese stores selling

products online.

TikTok is requiring that U.S. entities registered by sellers

be 51% U.S. owned and chaired by an U.S. passport holder, said

the vendors and Winnie Wang, executive chairman of the Shenzhen

Cross Border E-Commerce Association, China's largest sellers

group based in the manufacturing hub.

Many Chinese sellers had used U.S. entities to be

recognised as U.S. merchants on the platform but the rules mean

they will need to be re-registered as overseas sellers, which

they say receive less prominence and support, putting them at a

disadvantage compared to U.S. TikTok sellers.

TikTok, used by about 170 million Americans, has been

seeking to strike the right balance between pursuing rapid

growth and managing regulatory risks.

It has been ramping up its rhetoric that a U.S. move to ban

the platform would take billions of dollars out of the pockets

of creators and small businesses, while simultaneously seeking

to catch up to bigger rivals such as Shein and PDD

Holdings ( PDD )-owned Temu by signing up more merchants.

A TikTok spokesperson said the company has clear policies

and requirements for all sellers on its shop, including for

international sellers, and these have not changed since TikTok

Shop was introduced in the U.S. in September 2023.

"TikTok maintains robust policies to protect customers

and promote a trustworthy shopping environment, and we

continually strengthen how we enforce our rules," the

spokesperson said, without commenting specifically on whether

international sellers get less prominence.

The Chinese vendors said they feel targeted by TikTok's

rules and some are thinking about reducing the resources they

put into pushing sales on the platform or finding U.S. partners.

"We're rethinking how much of our time and resources we put

into this," said Shenzhen-based e-commerce seller Jackie Bai.

He and another seller said that in comparison, Amazon ( AMZN )

does not differentiate between U.S. and other sellers

on its platform, with all having access to its "seller central"

and competing equally.

Amazon ( AMZN ) did not respond to a request for comment.

Bai and two other China-based sellers said they heard from

TikTok Shop representatives that the tightening of the rules was

in response to the political sensitivities TikTok faces in the

U.S. in an election year. TikTok declined to comment.

U.S. officials have criticised the app's security and

privacy, suggesting user data might be shared with Beijing, but

TikTok has said the firm has never shared, or received a request

to share, U.S. user data with the Chinese government.

AMAZON ALTERNATIVE

Chinese vendors selling products from beauty to clothing

to housewares have rapidly grown their presence on

ByteDance-owned TikTok's shopping platform in the months since

its U.S. launch.

"Almost every single consumer tech company I know based in

China, and every Chinese consumer tech client we serve, is

selling on TikTok, and those who are not selling are considering

how and when to begin selling on TikTok," said Chris Pereira,

CEO of business consulting group Impact.

TikTok's U.S. shop posted a gross merchandise value of $1.67

billion from its opening in September 2023 to the year's end,

according to an estimate from data provider YipitData.

TikTok said it does not disclose sales and did not reply to

queries about the accuracy of YipitData's estimates.

Sellers said they had sought an alternative channel to the

dominant e-commerce giant Amazon ( AMZN ) and were also drawn by

subsidies on delivery costs.

Some 50% of sellers on the Amazon ( AMZN ) marketplace are Chinese,

with most concentrated in Shenzhen, said Wang.

These vendors, typically small businesses, submit

applications to create "digital storefronts" and pay fees to the

platforms for servicing their accounts and for advertising and

delivering their products.

Bai opened a U.S. TikTok shop largely selling undergarments

in October and the platform was already generating 20% of his

revenues by the end of February, he said.

He did not want to name his business or products citing fear

of retaliation from the platform, but said his TikTok store had

thrived after he hired U.S. actors to promote his products.

Bai said that a TikTok sales representative told him this

month he would have to close his U.S.-based entity and

re-register as an overseas seller because he is a Chinese

citizen.

Bai is now reconsidering his strategy and is looking for

local partners as he believes this would disadvantage him

against rival sellers.

"TikTok's shop is so new, the internal rules are changing

every week, and these are particularly strict," he said.