TikTok Shop is second only to Amazon in a key measure of customer loyalty

Amazon was the only e-commerce platform that beat TikTok Shop in Earnest’s dataset, which looked at customer-retention data between January 2022 and February 2024. That company saw around 36% of shoppers return after five months of their first purchase.

About one in 10 US households have made a TikTok Shop purchase since September, when the platform rolled out in the US, per Earnest’s analysis.

Michael Maloof, head of marketing at Earnest, said that TikTok Shop has been able to build a customer base in a relatively short period of time because it already has the attention of millions of potential buyers. While Temu reportedly spent $2 billion on Facebook and Instagram advertising to acquire new customers in 2023, TikTok was able to tap into its existing large and dedicated user base.

“Ultimately, they didn’t have to really spend to market this product. It was already in everyone’s pocket,” Maloof told Business Insider.

The timing of the platform’s launch — in the fall of 2023 — also likely gave it an advantage, as it came when people were shopping for the holidays. TikTok ran several Black Friday and Cyber Monday promotions at the time, offering big discount coupons to users and credits to sellers who uploaded engaging shopping videos.

TikTok’s recommendation algorithm is its secret sauce

TikTok Shop’s sales are driven heavily by customers who stick around. More than 81% of its sales in February came from repeat customers, up from 64% in November, per Earnest’s dataset.

The app’s sophisticated recommendation algorithm may be driving repeat sales. It’s optimized to show users content tied to what they’ve already engaged with. When it comes to shopping, that means spinning up videos related to products a user has already bought, which may help drive additional purchases.

“When you are purchasing a product and you are engaging with that content, you’re going to start getting more of that kind of content,” Nicole Rechtszaid, cofounder at the social-commerce firm and TikTok Shop partner Ghost Agency, told BI. “The second I bought my first TikTok Shop product, which was probably a year and a half ago, from that moment on, I started to get more TikTok Shop content.”

TikTok Shop seems to have become a place for impulse purchases, as well. Earnest’s data shows that TikTok shoppers make an average of one or two purchases a month, with an average transaction size of $40. They typically buy one item at a time rather than building a cart of products like they might with other online retailers.

“These are pretty small transactions that aren’t generating too much cognitive dissonance,” Maloof said. “Not many people are going to think too critically about spending $40 or a little less on a transaction.”