When Walmart announced its potential investment in TikTok, the first question on many people’s minds was ‘why?’ Now, just months later, TikTok has announced its own commerce partnership with Shopify, home to over one million merchants just itching to reach TikTok’s audience of active young buyers.
So, why the sudden interest in TikTok as a new digital commerce channel? The answer, as it turns out, is a new approach to automating digital commerce, something called programmatic commerce.
The dynamics of programmatic commerce
Powered by artificial intelligence (AI) and machine learning (ML), programmatic commerce uses data and algorithms to predict consumer behavior, identify potential supply chain disruptions, predict store and online traffic, track inventory and product performance and replenish both virtual and in-store shelves at speed and scale. Simply put, programmatic commerce helps organizations automate the process of matching consumer demand with supply so companies can serve up products at the right time, in the right channels, right when customers are ready to buy.
Similar to programmatic advertising, programmatic commerce is dynamic, helping organizations shift from reactive supply chain management to proactive management based on the continuous analysis of large volumes of customer, behavioral and systematic data. It enables organizations to stay a step ahead of changes in consumer demand and creates a resilient, agile supply chain to support ‘just right’ commerce.
Creating digital connection points
The most basic principle of successful commerce is to be where the customers are. In today’s day and age that means being in physical locations but also online.
Walmart has a huge customer base buying online already from the brand’s website, but they know that connecting with potential customers — especially young buyers prone to impulse purchases — on popular digital platforms gives them yet another channel for sales.
The same concept holds true for Shopify merchants, many of whom only exist as eCommerce retailers. Why try to lure shoppers to your eCommerce channel when you can go directly to them on TikTok?
Unlike traditional commerce, digital platforms also give back in the form of rich customer data. This data helps create detailed personas of shoppers, helping retailers serve up the most relevant purchase suggestions to capture more conversions. Digital connection points also cost less to build and maintain, and they can help retailers meet customer expectations in our ‘same-day-shipping’ culture.
By placing dynamic ‘buy now’ buttons on popular TikTok videos or serving up suggested products based on the content being viewed, the viewer, time, location and any number of other data points, Shopify and Walmart are betting on a programmatic approach to create new sales.
The vast amounts of new data coming from the TikTok platform are another huge benefit for both Shopify and Walmart. If the Walmart/TikTok deal goes through, having access to this vast amount of data could help them edge into first place in the digital commerce race.
As for Shopify, they can win by creating and leveraging algorithms that understand customers even better than they understand themselves, and by creating simplistic conversion points to drive massive digital sales for their merchants. Applying artificial intelligence and machine learning to the data and automatically serving up relevant products, frees up merchants to do what they do best: logistics.
‘Zero click’ ordering
Scott Galloway, a professor at NYU and a proponent of this type of algorithmic-driven commerce model, thinks that merchants have the potential to establish true ‘zero click’ ordering through the TikTok relationship. He uses this example of a commerce model that revolves around a subscription: a consumer gets three boxes delivered every week. An algorithm determines what is inside each box, based in part on data from TikTok. The consumer gets one empty box they can use to return what they don’t want, free of charge. The algorithm learns what is kept and what is returned to make progressively smarter decisions.
Amazon patented ‘1-Click’ ordering 25 years ago, but zero click may not be far off. One thing is certain, however; the stock markets love friction-free subscription-based services. Galloway predicts that Walmart could increase its market value significantly by following this type of algorithmic commerce model.
Global commerce is on the verge of undergoing changes similar to those the media industry experienced after dynamic programmatic advertising was introduced 15 years ago. At the core of this shift is data infrastructure, vast amounts of customer signals, automation, smart algorithms and a completely digitized value chain. In a traditional industry like commerce that is constantly looking for new ways to build revenue, it’s worth thinking a little bit outside the box – just as Walmart and Shopify are doing with TikTok.
Are Traasdahl is the co-founder and CEO of Crisp.
Crisp leverages the power of the cloud to connect and analyze disparate data sources to provide real-time insights and trends. Food suppliers, retailers, distributors and brokers use Crisp to manage supply more efficiently, reduce waste and skyrocket profitability. Learn more at: www.gocrisp.com