TikTok enters its efficiency era
Belt-tightening is underway at TikTok.
After spending big over the last two years to get its e-commerce business off the ground, TikTok is taking new steps to squeeze out a return.
Since February, TikTok Shop has pushed out staffers based on performance, added stricter return-to-office rules, and had two rounds of layoffs, all while tacking on new measures to keep costs at bay, seven staffers told Business Insider. TikTok has also introduced cost-cutting measures to the broader company, including new budget caps for travel.
On Wednesday, the company began its latest layoffs, targeting e-commerce operations staff and some employees who work with global brands. In emails this week to laid-off workers, the company said it was reducing complexity "to create a more efficient operating model for the team's long-term growth."
TikTok's CEO Shou Chew hinted at a spending crackdown in the pursuit of efficiency in February. He told staff he wanted to review each of the company's teams and remove unnecessary layers, The Information reported.
Chew's directive mirrors similar efforts by executives at Meta, Microsoft, and Google, which have recently stripped away employee perks, trimmed head count, and shifted performance standards in pursuit of cost savings.
TikTok's cost cuts come at a tenuous moment for the company, which could face a US ban if it fails to reach an agreement with the Trump administration over a 2024 divestment law. The company has made broad changes to its US team in recent months, including consolidating control under Chinese leadership, employees previously told BI. And while TikTok videos are as popular as ever, the Shop business has failed to meet expectations. TikTok did not respond to a request for comment.
The workplace changes and broader uncertainty have weighed on some.
"For the past six months, it's been very up and down as far as morale and people's sense of security at work," a laid off staffer said.
How TikTok is cutting costs
In addition to cutting costs through layoffs, some teams have refocused performance goals this quarter around costs, profit, and revenue metrics like gross merchandise value, two staffers said.
The company also plans to stop subsidizing free shipping for TikTok Shop sellers later this month after previous reductions.
The move would bring TikTok's free shipping subsidies more in line with competitors like Amazon, but could irk some seller partners, one staffer said.
There have been signs of broader cost cutting, too. Last week, TikTok told staffers across the company it was instituting a stricter approval process for work travel. The company is asking for more information about travel arrangements to better understand the impact on the budget, and setting spend limits for hotels and airfare.
TikTok spent big on e-commerce in the US
TikTok's e-commerce division was an easy target for cost cutting. The company spent hundreds of millions of dollars getting the business off the ground.
The shopping platform is a big focus for owner ByteDance, which is trying to replicate the e-commerce success of its Chinese sister app, Douyin.
ByteDance's leadership has been disappointed with the progress of its US business, which failed to hit many of its goals in 2024. US sales on the platform have taken a hit this year, due partly to global tariffs. Weekly US order volume on TikTok Shop dropped by around 20% in mid-May compared to mid-April after tariffs went into effect, for example, according to internal data viewed by BI.
In an effort to turn things around, the company has shaken up its e-commerce leadership. The changes gave greater power to executives who have experience working on Douyin.
After several layoff rounds, a string of performance-related cuts and team reorgs, and other unrelated worker attrition, the US TikTok Shop is looking trimmer. BI was unable to determine the extent of the recent cuts, but the impacted teams were consolidated, per a memo sent on Wednesday evening and viewed by BI.
In the wake of organizational changes, the teams would "move faster, operate leaner, and be more efficient," e-commerce leader Mu Qing wrote.
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