What Does Shopify’s New TikTok Deal Mean For The E-Commerce Stock?

In light of the recent COVID-related boom in e-commerce business, Amazon-rival Shopify has just announced a valuable partnership with TikTok.

Oct. 28, 2020

Ahead of its Q3 earnings report on Thursday morning — the busiest earnings day of the quarterShopify (NYSE: SHOP) made an unexpected announcement on Tuesday which sent its shares soaring 4.3%. Shopify will be partnering with TikTok, the short-form video phenomenon that has gripped millenials and governments alike for all the wrong — and sometimes right — reasons. 

In an official statement that can be found here, Shopify had this to say:

“Today, we’re announcing a first-of-its-kind commerce partnership with TikTok that brings the world’s leading destination for short form video to Shopify’s more than one million merchants. With the TikTok channel for Shopify, merchants can take advantage of TikTok’s global scale to reach new and highly engaged audiences.”

How will the partnership work?

For now, you won’t be selling those ‘totally original’ animal-patterned face masks on TikTok, so stick to Etsy. However, as of yesterday’s launch, the agreement allows Shopify merchants to create, run, and optimize their TikTok marketing campaigns directly from Shopify’s dashboard, and will eventually expand to include other in-app shopping features as well, the two companies confirmed. 

According to Shopify’s official statement, there’s plenty more to come too: 

“Shopify and TikTok will also collaborate to test new commerce features over the coming months that will further empower merchants to expand their paid and organic reach in video and on profiles.”

And if that isn’t enough for Shopify’s one million+ merchants, they can also install or connect their “TikTok Pixel” — a tool that will make tracking conversion of sales in ad campaigns far easier. 

Watch out Facebook, this might be the ad strategy of the future. 

What is #ShopBlack

Another initiative taken by Shopify in this new partnership is the ‘#ShopBlack Hashtag Challenge Plus’. 

In a bid to encourage more black entrepreneurs in commerce, Shopify and TikTok will collaborate to showcase Black-owned businesses. Running from November 10 to 15, TikTok users can spotlight their favorite Black-owned businesses using the hashtag #ShopBlack.

But isn’t TikTok getting banned in the U.S?

As of Tuesday, the feature has been made fully available to U.S. merchants and represents a fresh new medium for small to medium-sized businesses to reach younger audiences, with TikTok boasting more than 100 million U.S. users alone. It seems a risky move, given TikTok’s less-than-stellar relationship with the Trump administration of late, however, the upcoming presidential election has naturally pushed this issue to the sidelines temporarily. 

With Oracle and Walmart taking a 20% stake in TikTok last month, Shopify seems confident enough that the app will not be banned in the U.S., and so was happy tol broker its own partnership agreement. Worst case scenario, should TikTok’s ban be enforced — a ruling denied by the U.S. court system last month — Shopify has a global partnership with TikTok, so it will not completely lose out on the partnership. 

So, what does this mean for Shopify stock?

It means quite a lot. Satish Kanwar, Vice President of Product at Shopify, had this to say about the new partnership:

“TikTok is one of the world’s fastest-growing entertainment platforms with over 100 million highly engaged users in the U.S. alone. The TikTok channel means Shopify merchants–even those without a strong TikTok following of their own yet–can connect with these new audiences using content that feels authentic and genuine to the TikTok experience.” 

With TikTok and its hundreds of millions of users getting premium access to Shopify sites, it will mean a massive number of eyes on Shopify-backed products. It’s an amazing opportunity to do something that Amazon has not managed to get underway. As Shopify expands its fulfillment network across the U.S. and continues to grow, this partnership could be the catalyst that sees it become the primary rival to Amazon amid a wave of newly emerging competitors such as MercadoLibre and Sea Limited.

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