AmpliSell
A weekly breakdown for ecommerce leaders scaling TikTok Shop. The creator systems, benchmarks, and data driving GMV for top brands and client accounts - ready for you to replicate and use. Every Tuesday.
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Hey Reader, Josh here - your TikTok/Amazon expert from AmpliSell. If you're at Accelerate today - remember to hydrate and chew gum! Every day I'm on calls about TikTok Shop, and I hear a version of this a lot: "That's all the margin I'm getting from TikTok?" For the typical brand doing over $1M a year on the channel, the answer is 11%. After product, delivery, GMV Max, creator commissions, and samples, 11 cents on the dollar is what's left. That 11% comes from Rafi Gans at Finaloop, an accounting firm that keeps the books for thousands of US consumer brands. At last week's TikTok Shop Operators Summit he pulled the median P&L for every Finaloop client doing $1M+ a year on TikTok Shop and compared it against the rest of their seven and eight figure brands. When I saw the 11% on his slide, my first thought was: yeah, that pencils with what we're seeing. If you went into TikTok Shop expecting it to be a profit center on its own, 11% is going to feel like a letdown. If you went in expecting a demand gen channel that drives growth across the whole company, 11% is fine. Rafi's data and ours backs up the second view and when you see what those brands did to the rest of their P&L, 11% starts to look like a bargain. Take a look: TikTok-Scaled Brands vs. Everyone ElseThe brands selling on TikTok grew the whole business faster than everyone else. Revenue up 61.5% vs 19.6% for peers (3.1x faster) Contribution profit up 90% vs 23.3% (3.9x faster) EBITDA up 116.6% vs 34.7% (3.4x faster) Top line, middle, bottom line. All of it! One thing to clarify: the chart above shows growth in dollars. Margins, meaning profit as a percentage of revenue, came in about the same as everyone else's. Same margin structure. A lot more revenue running through it. So if margins didn't move, where did the growth come from? The growth was hiding in 1 number you're probably not tracking yet. I'll get there. First, here's what margins look like on TikTok Shop on average. Median P&L for $1M+ TikTok Shop Brandsindexed to net sales Discounts at 51%. TikTok is an social, entertainment channel. People aren't here to buy, BUT they will if you create urgency through time-limited discounts. GMV Max at 34%. This is the line that surprises people most. 33% is a big number for ads, but it makes sense when you look at this cohort. If somebody's scaled up on TikTok, they're trying to grow aggressively. Nobody has gotten to $1M on TikTok in the last year by spending 5%. These are brands going hard at this channel. If you want to do the same, you've got to budget the same. But that doesn't mean you shouldn't be on there. Take the GMV Max number with a grain of salt. You don't have to run it that hard. You could run it at 12% to 18%, which is where we see our clients land, and still drive consistent growth. If you've got the margin to grow and your CAC is low enough, then it may make sense to run it aggressively. Creator commissions at 10%. Exactly what I expect. You're giving a slightly higher percentage than that to creators, but not every sale is going to be a commissioned sale, so that pulls the blended number down. Refunds at 6.9%. Refunds on TikTok run a little higher than average. It's a demand channel. Buys are more impulse-focused, so you tend to see slightly higher return rates. For reference, we see about 4.8% on Amazon. Samples at 1.9%. Sampling was relatively low in his data and I think that's because these brands are more mature on TikTok. They developed their creator communities well and they're getting more dollars out of the samples they send. As a percentage of total spend, sampling decreases over time. That's a good thing and it's something you want to see in your own account. TikTok Shop ROAS is a Bad MetricI think we all, at this point, understand that channel-level ROAS can lead you to bad decisions. The customer purchase journey is more and more omnichannel. Your shopper saw it on Facebook first, then on TikTok the next day, and then they bought it the next time they were in Target. The advertising investments across all your channels play a role in driving a future purchase that could occur on any channel. What I think we need to look at instead:
Rafi's numbers come from Finaloop's accounting ledger, which pulls spend and revenue from every channel. As I read it, that's total marketing spend over new customers, measured inside each brand over eighteen months, against peers of the same size. Where the Growth was HidingYou might expect the TikTok halo to show up as better marketing efficiency across the whole business, but it didn't. The brands selling on TikTok were not seeing significantly higher margins. Contribution margin for the TikTok cohort came in roughly level with everyone else, slightly lower if anything. The difference between the two groups came down to one thing: how fast CAC rises as spend rises. Every ecommerce leader knows the shape of that curve. The deeper you push into a market, the more resistance you hit, and the more expensive the next customer becomes. At some point the payback period stops making sense and you hit a wall. For TikTok-scaled brands:
That where the growth was hiding! These brands were able to spend more to drive more revenue, and grow the business faster, while keeping CAC from exploding. The TikTok cohort could keep raising the budget while the other group hit the wall. But Why Tho?Rafi's argument is that it comes down to creative. What looks like market saturation is usually a creative problem: the creative can't keep pace with the spend. TikTok Shop fixes that with an army of incentivized creators producing content at volume. You find the winners and scale them, then leverage those creatives across Meta, where they drive CPMs down and CTR up. That's the flywheel every operator at the summit talked about, and here it is in the P&L. I argue there is a 2nd reason. TikTok holds the attention of an audience that might not otherwise find you. Your TikTok user usually isn't your Facebook user. Meta skews older, millennial and above. TikTok skews Gen Z and younger. Pew puts TikTok use at 63% of US adults aged 18 to 29, while Facebook usage peaks among 30 to 49 year olds. You're getting in front of a whole new audience on TikTok and that helps keep your CAC low. Lastly, the halo doesn't show up in margins because good operators spend it. They see the advantage, scale into it, and the margin edge gets traded for volume. That's the right call because you end up with more profit dollars. Your caveats: This is correlation. Brands that reach $1M on TikTok Shop may simply be stronger operators across the board and even inside the cohort, results varied widely. Getting to $1M is no guarantee of anything! Your Takeaway"That's all the margin I'm getting from TikTok?" If you're judging TikTok Shop by its own contribution margin, 11% is where I would set expectations. But I wouldn't stop there. The TikTok-scaled brands grew revenue 3.1x faster and EBITDA 3.4x faster than their peers, and they did it because their cost to win the next customer climbed at less than half the rate. Build out your TikTok Shop P&L (if you haven't already), so you have your unit economics. Then track your CAC and MER across the whole business, and watch overall revenue and contribution margin. That's where TikTok Shop earns its keep. Thanks to Rafi and the Finaloop team for putting numbers behind what a lot of us have been seeing inside accounts! We help ecommerce leaders launch and scale TikTok Shop.
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AmpliSell
A weekly breakdown for ecommerce leaders scaling TikTok Shop. The creator systems, benchmarks, and data driving GMV for top brands and client accounts - ready for you to replicate and use. Every Tuesday.