Although it hasn’t been around for long, TikTok Shop has gradually established its position in the market as an effective sales channel, competing with e-commerce platforms like Lazada and Shopee. However, if you want to conduct business successfully on this platform, you need not only a suitable plan but also an understanding of the sales fees on TikTok Shop. In today’s article, Optimal Agency will guide you on the types of sales fees on TikTok Shop.
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What are the sales fees on TikTok Shop?
These are the costs that sellers need to pay when they sell a product on TikTok Shop and have a successful order. This fee supports TikTok’s activities such as payment processing, shipping, customer support, advertising,… Similar to other e-commerce platforms like Lazada and Shopee, TikTok Shop also charges a fee based on a percentage of the total order value.
So, what is the fee that sellers need to pay when selling on TikTok Shop? When TikTok Shop was first launched, the selling fee on this platform was 1% of the total order value. This fee was very attractive to businesses and online sellers.
According to the latest update, TikTok Shop has now adjusted and increased the fee to 4% of the total order value, including shipping fees, as of March 26, 2024. This fee applies to all sellers, whether individuals or businesses.
This fee includes Value Added Tax (VAT). For business sellers with a registered and verified tax code by TikTok Shop, the service fee will not include tax. TikTok Shop may change this fee in the future.
The formula for calculating sales fees on TikTok Shop:
Sales fees = 4% x (Payment amount from the buyer – Refund amount to the buyer).
The latest types of sales fees on TikTok Shop
The types of sales fees on TikTok Shop that you have to know are:
Fees for building a TikTok channel for brands
Building a TikTok channel aims to promote your products and brand. When your brand becomes well-known, it helps increase sales. However, building a brand on TikTok is not simple and requires a careful plan and budget estimation. During the sales process on TikTok, businesses should pay attention to this cost, especially for new channels.
Shipping fees
Similar to other selling platforms, TikTok Shop charges shipping fees. This is the cost that sellers need to pay to the shipping company to deliver goods to customers. On TikTok Shop, the platform supports businesses with many attractive free shipping vouchers like Free Shipping 25k, Seller Vouchers,… This helps sellers optimize shipping costs while attracting potential customers.
Advertising costs
Advertising is one of the methods that helps businesses reach many target audiences, increase interaction, and conversion rates. Therefore, running ads on TikTok Shop is one of the costs that businesses should invest in. It is also among the types of sales fees on TikTok Shop.
To be able to Tiktok Ads ad optimization and be most effective, businesses need to plan and carefully consider the budget, learn about the needs and target audience that the products and services are aimed at. From there, select and promote advertising to be most appropriate and cost-effective.
Platform discount fees
This is a type of sales fee on TikTok Shop that you need to be aware of. It is known as the promotional fee that TikTok deducts to support sellers in attracting customers through discount codes, free shipping codes,… Each channel will be supported by TikTok with different discount codes, vouchers,…
Live streaming fees
Live streaming is an effective selling method on TikTok. If you are not capable of selling via live stream, you should hire someone to do it. In the event that your business has a solid financial foundation and wants to reach a variety of customers, you can collaborate with KOLs/KOCs, Influencers. If you can negotiate the price for each live stream session with them, you can optimize selling costs on TikTok Shop.
Affiliate marketing fees
Affiliate marketing fees are the commission percentages that sellers have to pay to KOLs, KOCs, and Influencers collaborating as affiliates with their products. KOCs/KOLs will attach the product link on their pages, and only when there is a successful order from this link will they receive a commission.
The affiliate marketing cost is usually negotiated between the seller or business and the KOC/KOL. Depending on the product, the seller’s brand value, and the KOC/KOL’s booking price, the affiliate fee will vary.
How to optimize profits when TikTok Shop increases sales fees?
Aside from understanding the types of sales fees on TikTok Shop, businesses can optimize their profits by following these strategies:
Adjusting new prices accordingly
Adjusting sales fees on TikTok Shop, product prices may increase. Sellers and businesses need to carefully consider factors such as product cost, current selling prices, and new fees to set new prices that align with TikTok Shop’s fee structure. Set a selling price that ensures profitability after deducting all costs, including the new sales fees.
Organizing promotional and discount programs
Another way to optimize profits is to enhance promotional and discount programs to attract customers. Promotions and discounts can help sellers attract new customers, increase sales, and offset costs. Businesses can implement promotions such as 15% discount vouchers for loyal customers, gifts for new customers,…
Increasing marketing and product promotion activities
Through advertising and marketing activities, businesses can reach many potential customers and increase brand awareness. Increased sales can offset the cost difference due to the new TikTok Shop selling fees.
Sellers can use online advertising channels like Facebook, TikTok, Google Ads,…, to promote their products or participate in TikTok Shop’s promotional programs to attract customers.
Building sales strategies for each product
Businesses should adjust their business strategies according to each product and customer segment to maintain customer trust despite price increases. This includes:
- For high-priced products: Slightly increase the selling price and combine it with giveaways, vouchers for future purchases, or discounts on high-value orders.
- For low-value products: Enhance promotional and discount programs to attract customers and increase product consumption.
- For new products: Increase marketing efforts to reach customers, especially using advertising and affiliate marketing tools.
- For high-demand products: Enhance marketing and promotion activities to reach more customers.
Understanding rights and responsibilities
Sellers and businesses should understand their responsibilities and benefits concerning TikTok Shop sales fees:
- Sellers only have to pay a percentage of the sales fee to TikTok Shop for successful deliveries.
- TikTok Shop offers various vouchers, but only those created by the seller incur fees.
- To avoid penalties for discrepancies, you need to provide accurate order weights.
With the information shared above, you now understand the types of sales fees on TikTok Shop. Hopefully, this article will help you successfully conduct business on TikTok Shop, boost sales, and maximize profits.
Please refer to:
- How to successfully unblock TikTok live permanently in 2024?
- Reasons why TikTok ads do not pay off and how to fix it
- How to go live on TikTok is super simple for beginners
FAQ
Currently, TikTok does not charge a fee to open a TikTok Shop. However, you need to meet certain requirements and comply with TikTok’s regulations to open a store on this platform.
To reduce platform fees on TikTok Shop, you can apply the following methods:
Increase the order value: If your order value is high, the platform fee will decrease. You can increase product prices or the value of the order by adding related products.
Utilize promotional programs: TikTok Shop often has promotional and discount programs to support sellers. You can explore and use these programs to reduce platform fees.
Understand TikTok Shop policies: TikTok Shop has various policies to support sellers, such as price support, shipping discounts, free shipping,… Learn and apply these programs to reduce platform fees.
