Amazon hopes that selling its goods through TikTok, Facebook, Instagram and Snapchat will help reignite sluggish e-commerce growth as American consumers cut back on spending in a hyperinflationary environment.
The Seattle-based online retailer reportedly engaged in tough negotiations with CEOs of other tech giants over the course of two years, reaching the deal despite opposition from within Amazon itself.
Amazon CEO Andy Jassy met separately with Meta CEO Mark Zuckerberg, Snap CEO Evan Spiegel and TikTok CEO Shaw Zi Chu to discuss the 24-month partnership. According to The Information.
But ahead of the meeting, there had been discussions within Amazon about whether it was wise to work with other sites, amid concerns that online shoppers would move elsewhere and stop buying products from the company's homepage, The Information reported.
Amazon shares have been trading down more than 3% over the past month after the company reported that online sales growth slowed in the second quarter as consumers seek cheaper options amid stubborn inflation.
But supporters of the move argued that allowing shoppers to buy products on Amazon through social media apps would help grow the company's e-commerce division.
According to the Information, Amazon launched an initiative called “Project Handshake” in November to run ads on Meta-owned Facebook, Instagram and Snapchat and give users a way to buy Amazon products within those apps.
An Amazon spokesperson denied concerns about a drop in traffic, telling The Washington Post that the ads in social media apps aren't meant to take customers away from Amazon's app, but rather make it easier for customers to buy products where they are already.
“Amazon is expanding in-app shopping to make it easier for customers to shop on social media,” an Amazon spokesperson told The Post.
Amazon staff working on “Project Handshake” reportedly plan to expand the effort to allow shoppers to discover and purchase products through video and artificial intelligence-powered chatbots.
The Post reached out to Meta, Snap and TikTok for help.
The move to sell Amazon products through rival sites marks a radical shift for the online retail giant, which has long promoted the idea of its homepage as a one-stop shop for e-commerce.
Skeptics worry that allowing other apps to act as middlemen for Amazon shoppers could erode Amazon's dominance in e-commerce.
In the US alone, Amazon accounts for approximately 40% of all online purchases. According to eMarker.
It's ironic that Amazon would partner with Meta and TikTok, as these companies are also moving into e-commerce.
TikTok has launched the TikTok Shop, which allows users to purchase products directly within the app.
Meta allows Facebook and Instagram users to set up a store on their page.
Another potential downside for Amazon is that the new partnership poses risk to its $40 billion-a-year advertising business.
Amazon charges sellers hefty fees to increase the visibility of their products so that they are viewable when shoppers type into its search prompts.
However, these ads will not be shown to users of other apps who buy Amazon products without logging into the site, according to The Information.
