TikTok Shop Costs

TIKTOK SHOP

WHAT ARE THE COSTS?

Shark Tank Kevin GIF by ABC Network

TikTok Shop is not cheap….. but compared to Amazon:

Cost Component

Amazon

TikTok Shop

Referral Fees/Commissions

6% - 45% (varies by category)

5% - 8% (varies by region and category)

Subscription Fees

$39.99/month (Professional Plan)

No monthly subscription fee

Fulfillment Fees

Varies by size/weight (FBA Fees)

Typically 1.8% - 2.8% (depends on fulfilment)

Advertising Costs

PPC costs (varies widely by keywords)

Variable (depends on GMV Max ads)

Other Fees

Storage fees, refund fees, removal fees, long-term storage fees

Refund administration fee (20% of referral fee) for returns

Let’s assume you sell a kid’s toy that costs $5 to manufacture and sells for $20:

Cost Component

Amazon (USD)

TikTok Shop (USD)

Selling Price

$20.00

$20.00

COGS (Cost of Goods Sold)

$5.00

$5.00

Referral Fees/Commissions

$3.00 (15% of $20)

$1.20 (6% of $20)

Fulfillment Fees

$3.50 (Approximate FBA fee)

$0.36 (1.8% fulfilment fee)

Payment Processing Fees

Included in Referral Fees

Included in Referral Fees

Other Fees

$0.50 (e.g., storage, refund fees)

$0.24 (Refund admin fee, if applicable)

Profit Before Advertising

$12.00

$13.80

Affiliate Commission

N/A

Based on 20% of the sale price.

$4

Profit After Affiliate Commission

N/A

$9.80

But there are 2 important factors

Affiliate Commission:

  • 20% is the average rate…. anything less and you won’t get any interested affiliates

  • Affiliates are the ‘lifeblood’ of TikTok Shop, so this expense is needed

Advertising:

  • We all know Amazon Ads are very expensive and hence, profit dwindles.

  • I would estimate that Amazon advertising takes most of the budget 🤬 

  • When it comes to TikTok Shop Ads, right now TikTok is focussing on their ad platform and hence, we are seeing ROI’s at least 2x-3x. In that case, the more you spend, the better the results. Which make ads on TikTok Shop somewhat relative (most of my clients do not budget for TikTok Shop Ads due to the success rate)

Conclusion:

Generally, TikTok Shop is cheaper that Amazon, especially when Amazon Ads are involved.

You are essentially substituting the the Amazon Ad budget with TikTok Shop Affiliate commission.

Bear in mind, TikTok Shop requires sending out tons of samples to potential affiliates….. that is a necessary expense.

Both platforms have their own expenses….. which model suits you?

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