Could The TikTok Shop Craze Cause a Crash in the Trading Card Market?

The impact of TikTok's subsidization offerings on the trading card industry.

If you haven’t seen it yet, The TikTok shop has been offering some really amazing deals. If you’re able to snag a coupon for 20%, 30%, or even 50% off your order of $80 or more, then the search for a cheap alternative to trading cards is over. The continued trend for the hobby seems to be heading into a favorable position for buyers. But is it really?

What is The TikTok Shop?

So if you’re unfamiliar with The Tiktoks and the new shop experience that they have just released, then you’re probably like me. Informed enough to know that TikTok is sometimes annoying and you’d rather spend your time doing other things than sitting on your “throne” watching 20 somethings dance to EDM music, mouth lyrics, and show off their “assets” to a crowd of millions. The truth is, if you wanna survive the digital apocalypse as a business, you have to be engaged in and on Tiktok. Take Brian over at PokeNE. He started with 10 video uploads a day to TikTok and in a few months, raked up thousands of followers that turned into customers. So for me to say that TikTok isn’t effective, would be wrong.

The Birth of another eCommerce Marketplace

So enter the TikTok Shop. A marketplace like any other. Offers the humble or possibly the unhumble merchant access to these millions of users to sell their wares and grow their business. Here the shop is full of everything you can think of and oftentimes, they are at a decent price. But since Covid, the birth of Tiktok’s popularity and the trading card boom (more like scammers and scalpers dream), streamers and stores have been trying to use TikTok as another sales channel. So, the adage, “Location, Location, Location” does apply here in the digital neighborhood of eCommerce. Being online, through social media and engaged where the people are is generally the same idea about having a brick and mortar. With all the necessity in being where the people are, TikTok has taken this next step in a shop to another level.

The wholesale v.s. reseller relationship

Just about anyone can figure out how brands make, distribute and sell their product. Pokémon for example has several manufacturing facilities and companies that print their products, packages, cards, and whatnot for distribution. From there, they sell their products to a distributor or wholesaler. This is where the markups begin. A nobody, like yours truly can’t just walk up to a brand and request to be a distributor. We’d have to be a verified wholesale company. So companies like Peach State, Southern Hobby, or MadAl all have contract agreements to buy these brands’ products and then sell them for distribution. This is the 1st markup on price. Now, LGS/LCSs (Local Game Store/Local Card Shop) have accounts with these wholesalers and can now purchase the product for retail. So take a booster box of Pokémon as an example. Wholesale, they are typically $90-$100. Retail, they are marked up by 50% to about $140-$165. This markup is how LGS/LCSs stay in business and how wholesalers make their money.

The challenge is that since covid, wholesalers have closed their doors to A LOT of ecommerce only resellers, like yours truly. There are exceptions. Again, PokeNE showed that he had the “receipts” in sales for Southern Hobby to bring him on and he doesn’t have a brick & mortar. But for a normal Tom, Dick, and Gary, this isn’t the case. So we’re stuck buying product as low as we can get it, to flip it, and grow. Of course, you’ve got those people in 2023 that think we’re still in 2021 and try to flip retail items for 2 or 3x what they are really going for. But that’s a different article. So for the normal, small business, grinding, entrepreneur’s that are just starting or are trying to just pay their bills and enjoy their hobby, retail costs add up significantly. Buying what we can for as low as we can is key.

How does cheap product factor into LGS/LCS and eCommerce?

Buy low and sell high is the phrase any person with a little common sense would tell you, but in 2023, it’s buy high and sell for the same price, or maybe a few dollars profit. Margins on sealed products are so tight that, often it’s a squeak instead of a roar to make it through a month of selling. So by having cheap product, resellers can make the attempt to fulfill that phrase, buy low and sell high. But this comes with some major compromises.

Oftentimes, resellers have to come in under, and in many cases, WAY under MSRP. Take the Pokémon 151 Ultra Premium Collection. MSRP is $119.99. Wholesale, they are about $70-76. A nice markup on price for a reseller. But, if you wanna get sales and build a brand, AND create a customer base, you have to undercut everyone including the big box stores by sometimes 20%. So now that $40-ish profit, means cutting back to $20-ish and in many cases, even less.

Here’s where cheap product is beneficial. If you buy cheap, sealed product and are able to sell it at the same markup, but under MSRP, you’re golden. Cheap products are great for consumers. But in this new age of everybody and their mother are thinking they can profit HUGE from trading cards, because they opened a $5 pack from walmart that had a $15 card inside, cheap products means that legit resellers and LGS/LCSs are going to be hurting. I’ll explain below.

Is The TikTok Shop craze damaging to small businesses?

I’m not a financial guru or a business whiz. But there are easy ways to see how cheap product flooding the market is actually hurting the market. TikTok Shop has been fueled with this campaign to offer ridiculous coupons that lower the cost of a product. Essentially what this is a Comp. What is a comp? A comp is a kickback in sorts. It’s short for “compensation” and it’s the way many sellers are able to offer their products and services at a special rate. TikTok is essentially comping sellers with the difference the coupon a user applies to their checkout in order to gain popularity. They are buying users to the TikTok platform basically. How’s does this translate to damaging small business?

Ok, time for some math kids. 

• Take that booster box we mentioned earlier. It’s normal price, on a good day, with a good deal could be $125. 
• TikTok offers a 30% discount up to $20 off. Ok. Now you’re at $105 before shipping and taxes (oftentimes, shipping is free too!). 
• If you bought that box wholesale at $97 from a wholesale distributor. Your profit is now $7. Yes. You read that right. $7. 
• Free shipping is more than likely paid by the seller and to ship a booster box to California from Ohio, can be as low as $5.65. Now we’re down to less than $3 profit. 

But remember, TikTok is comping sellers on their shop. They are taking a MASSIVE hit financially to gain users on their platform and are severely diminishing the way businesses need to operate to grow and survive. So where the seller on TikTok is making that money back, anyone selling that isn’t on the platform can’t compete and still profit.

Now inflate this issue of cheap product with expectation. Buyers are finicky people. Once they see a lower price, they IMMEDIATELY expect that to be the price everywhere. AND they expect free shipping (the Amazon paradigm). So we’ve compounded the issues for LGS/LCSs, legit resellers, and normal hobbyist/collectors in making any kind of business growth, even more difficult. They say that selling trading cards is tough and the industry is crowded. This issue that TikTok has created for everyone else seems to be a “thinning of the herd” scenario. Population control is another word for it. So who is going to be impacted and for how long?

The Trading Card Apocalypse is NYE! Maybe?

Take popular streamers like RyansCardHouse or Poke-collect. They are always offering huge breaks, coupons, deals, and product giveaways because they are established enough to do so. No one just starting out is going to be able to do this initially. The question then becomes…

Is the time of being able to start a small business focused on a hobby over? Is the world moving in a direction that if you aren’t already established, you’re out of luck? 

Possibly. I know first hand that this is something I have dreamt about doing. Owning my own business centered around the nostalgia and love for nerd culture that I’ve been engulfed with since a boy. I’ve always wanted to work for myself, provide for my family, and do something I’d love so it didn’t feel like a job or a means to an end. But this kind of grinding is becoming almost unbearable. I’m no expert on any of these things, trends and red flags appear easily to me so in one way, this new concept that TikTok is providing could be extremely dangerous for small businesses, ecommerce startups, and hobbyists. If this continues, it’s possible it trickles down to singles, digital service/assets, and more. Some call this Capitalism, I call it overkill.

The real question is for how long does this keep up? I mean, eventually this has to be corrected. TikTok can’t keep funding millions and millions into this venture without taking huge losses year over year, right? At some point, the expectation has to be normalized and the market has to recover, right? What happens when TikTok stops pumping capital into this campaign? I can tell you that it’s really, really hard to change the perception of buyers. Once they are expecting free shipping, lower than wholesale prices, and massive coupons, that’s going to be the norm for a LONG TIME. Amazon changed the way we expect shipping to be handled. Apple with the all digital, no CD-ROM drive computer, and TikTok will help to craft the new e-commerce strategy for years to come. 

The problem is that the wave of steep discounts and over inflated expectations are quite possibly deal breakers for any and all resellers or brick & mortar stores that are just surviving as it is. There is no competing with billion dollar funding that cripples smaller stores to the point that inventory from wholesalers is swallowed up, buyers don’t attend events, and finding it “cheaper” elsewhere becomes the norm. Buyers aren’t going to settle for high prices without a return. Hence why Temu is extremely popular right now. We all know it’s cheaply made products at cheap prices. We aren’t expecting high quality. In the trading card world, quality means owning and collecting something that is valuable now and during the years it's in a collection. Not just a spur of the moment, pack opening, that leads to a dopamine hit. Turning buyers into junkies and sellers into street dealers.

Conclusion

In all fairness, I was taken back by this when Dr. Applesauce and PokeNE did videos on this topic and so I decided to investigate and do my own blog post about it. So I’ll conclude with a few uplifting notes.

If you are a new, small, e-commerce only business…

1. Keep grinding. It will take time and patience. I have to tell myself this everyday
2. Connect and network. Find others to help rely on for advice, inventory, and guidance. THEN RECIPROCATE THAT TO OTHERS (the whole, pay it forward idea).
3. Patience and smart planning. Have and do these both. PokeNE started with $500 and now is making more than $500,000 because of these 2 tactics.
4. Invest wisely through testing on small scales. Don’t go into debt over inventory. Buy small amounts and test the waters. Find the right solution for you.
5. Timing is everything. This includes your time and how long it takes to make a business happen.

Don’t get FOMO on any of this. Be wise in your approach and focus on little wins and gains that equal larger ones over time. And YES, I’m preaching to myself right now.

That’s my Ted talk. Thanks for reading. Best of luck and remember you can do all things through Christ who gives you strength.

SHAMELESS PLUG ALERT