“TikTok Shop’s 300% Fee Hike: A Seller’s Dilemma”

TikTok Shop Merchants Face a 300% Fee Hike: A Blow to Profit Margins

TikTok Shop’s 300% Fee Increase Leaves Merchants Counting Profits

Merchants on the TikTok Shop e-commerce platform were taken aback by a recent announcement regarding a revision in commission fees effective July 18. The standard seller commission rates across various product categories have doubled or tripled, reaching up to 12%, a significant jump from the previous rate of 4%.

Fashion sellers, for instance, now face a commission rate of 10-12%, up from the previous 4%. Similar hikes have been observed in the home & lifestyle, grocery, health & beauty, and mother & baby categories, with many products now subject to rates ranging from 8.5% to 12%. The increase for authorized sellers (Mall) is relatively milder, ranging from 0.5% to 2%.

A notable change is the integration of the shipping support program (SPF) into the new commission rates, applied by default instead of being an optional add-on. Previously, SPF was a separate service that sellers could opt into, with a fee of 4.5% per order, capped at 30,000 VND per product. However, since July 18, SPF has been included in the commission, causing many sellers to overlook the substantial increase in their overall costs.

On top of this, the transaction fee remains at 5% of the order value. As a result, some sellers could be paying up to 15-17% in mandatory costs (commission and transaction fees) per order, excluding additional expenses for promotions, advertising, or extra shipping.

Commenting on this development, marketing expert Mr. Nguyen Quang Phap shared his insights. He explained that, in essence, TikTok hasn’t eliminated SPF but has instead incorporated it into the commission structure to avoid separate displays. However, with the cap now less transparent, fashion sellers, for instance, could be paying a 12% commission, a threefold increase.

In reality, e-commerce platforms’ fee adjustments are an inevitable trend as they have heavily invested in market expansion and attracting sellers and buyers over the years.

According to the expert, to maintain competitiveness, especially through deep discount programs to retain customers, platforms must balance their revenue and expenditure. Hence, fee increases are seen as a solution at this point. Consequently, when platforms raise their revenue-sharing ratios, sellers often have to adjust their product prices to compensate for the increased costs.

Mounting Fees Leave Sellers Struggling to Calculate Profits

Ms. Vu Quyen, a small fashion shop owner on TikTok Shop in Ba Dinh District, Hanoi, shared that she had to temporarily halt her livestream sales from July 19 due to soaring costs despite no significant increase in orders.

“Previously, for an order of 300,000 VND, I only paid around 12,000 VND in fees. Now, it’s almost 36,000 VND, excluding mandatory shipping and promotional costs. Each order barely makes a profit of 20,000 VND,” said Ms. Quyen.

Mr. Viet Dung from District 3, Ho Chi Minh City, who specializes in selling household appliances on TikTok, encountered a similar situation. According to him, since the new fee policy took effect, his profit margin has significantly decreased, as evident in the higher deductions in his sales statements, despite no changes in selling prices.

“For an order of 259,000 VND, the 5% transaction fee amounts to nearly 13,000 VND, and the commission is over 25,000 VND. Including the affiliate fee, almost 60,000 VND goes to the platform, leaving little profit,” Mr. Dung explained.

While most small businesses shared that they couldn’t leave TikTok Shop as it is their primary revenue source and has the advantage of attracting customers through short videos, the frequent policy changes have left them feeling uncertain and overwhelmed.

In various TikTok Shop seller groups, many members voiced their concerns about the sudden fee hike. Some shared that they were “caught off guard” as the changes were implemented swiftly, and they only realized the impact when they noticed higher deductions than usual. As a result, they turned to these forums for clarification.

“Selling on TikTok used to be a dream come true because there were no shop rental costs, but now it’s not much different from renting a physical space. Fees are piling up, and for every 10 orders, I barely make a profit of 3. I’m still contemplating whether to continue or quit,” shared Ms. Quyen, reflecting the dilemma faced by many sellers.

The steep fee increase has left many TikTok Shop merchants considering alternative platforms, but they are hesitant due to their reliance on TikTok Shop for their primary income and the platform’s ability to attract a large audience. Additionally, transitioning to a new platform would entail costs for channel development, branding, and more.