TikTok Shop is able to offer very low prices primarily due to several factors:
- TikTok subsidizes the Shop platform to attract more users and sellers, sometimes taking short-term losses to build the marketplace's popularity and hopefully make profits later through increased volume and pricing optimization.
- Sellers on TikTok Shop often use competitive pricing strategies, setting prices at or below competitors' levels to appeal to TikTok's vast user base. This often includes bulk buying to reduce cost per unit, psychological pricing, and frequent promotional discounts or flash sales.
- The platform encourages sellers to use TikTok's promotional tools and pricing analytics to optimize prices dynamically based on demand and trends, enabling sellers to offer deals that keep the prices attractive.
- There is an emphasis on clear value communication and competitive promotion to drive sales, even if some products may be sourced more cheaply or produced with less ethical considerations.
- TikTok Shop has a fair pricing policy that regulates excessive price gouging or misleading pricing but allows competitive pricing and some flexibility in shipping fees.
Overall, TikTok Shop’s combination of subsidization, competitive seller strategies, dynamic pricing tools, and promotional incentives contribute to its generally lower prices compared to traditional retail channels.