Revealing the truth! Why are customers unsatisfied with TikTok’s online shopping?

 

Have you ever purchased something through TikTok’s channel? Nowadays, TikTok has expanded into E-commerce through features like TikTok Shop and live stream shopping, transforming the online retail landscape. In the fourth quarter of 2024, TikTok Shop's market share value in total E-Commerce reached 4.7%. However, most customers are dissatisfied with the products purchased in TikTok and constantly complain about the items' price, quality, or functions. What is the reason behind this phenomenon? While it seems linked to psychological factors such as customers’ preferences and personality, it could also be analysed from a microeconomic perspective.                  

In reality, the market has imperfect information, where the sellers tend to possess more information than the buyers. It is called asymmetric information in economics. Imagine that you purchased a dress in TikTok’s shop, do you know the true quality of it until you receive and try it?

Asymmetric information-What promotes you to purchase and receive low-quality items?

Algorithm-driven asymmetric information

What tempts you to purchase items through TikTok? Asymmetric information plays a crucial role in two aspects. On one aspect, TikTok’s algorithm controls what consumers see and how much information they have when purchasing. Do you notice that when you browse short videos on TikTok, the content you see is exactly what you want to buy? Patteson (2024) explains that TikTok’s algorithm creates asymmetric information, as it personalises content based on users’ behaviour, meaning users are exposed to products based on browsing habits, watch time, and engagement rather than objective quality or price comparisons. Hence, consumers are more likely to purchase as TikTok meets their preferences and customises exclusive messages for them. However, this limits consumers’ ability to compare multiple options, creating information asymmetry where sellers know more about alternatives than buyers. Consequently, consumers find it challenging to purchase truly satisfactory products.

Seller-driven asymmetric information

Another aspect is that asymmetric information works and sellers often know more than the buyers about the actual quantity of their products. There is over-beautification among these products because most sellers aim to earn higher profits from transactions. Many small sellers on TikTok may present products in an overly positive light through edited videos, misleading descriptions, or fake reviews to appear more trustworthy. It distorts the information available to consumers, leading to poor purchasing decisions. According to Bailey (2020), online shoppers are frequently misled by overly idealised product presentations, leading to a mismatch between expectations and reality after purchase.

Market signal-the role of TikTok’s influencers

Another reason why customers are dissatisfied with TikTok's online shopping is the signalling theory. In microeconomics, market signals act as the solution to the issue of asymmetric information. One of the potent market signals in TikTok is influencer endorsements. The influencers act as trusted intermediaries between sellers and online buyers, sharing product experiences through videos, reviews, and demonstrations, which helps reduce the information asymmetry. Spence (1973) stated that endorsements from trusted influencers convey quality and desirability, influencing consumer purchase decisions. When a popular influencer promotes a product, it signals to their followers that it is worth purchasing. However, sometimes, influencers send wrong signals to followers and give misleading information about products for their private profit. Businesses give influencers endorsement fees for product promotion or offer the influencers extra commission based on the quantities sold by the advertising of the influencers. Therefore, the influencers tend to exaggerate a product's quality, functionality, or benefits for their private interests. These wrong signals stimulate the purchase desire of their followers, resulting in unmet expectations when consumers receive the item. Xiao et al. (2022) indicated that exaggerated claims, low product authenticity, and discrepancies between live demonstrations and received items contribute to dissatisfaction. Consequently, followers lose the trust of the influencers. They realise the actual quality of products is low, and they tend to pay less for the items in the future. The fact is that wrong market signals fail to solve information asymmetry and further spawn the problem of adverse selection.

Adverse Selection- the effects of market inefficiency

As mentioned above, on TikTok, sellers and influencers know exactly what they’re selling. But buyers? We mostly rely on fast-paced demos, camera angles, and sometimes exaggerated claims. That’s classic information asymmetry—where the seller knows more information than the buyer. In economics, this creates a well-known issue called the “lemon problem”- a specific kind of adverse selection in the market. It occurs when sellers have more information about product quality than buyers, leading to market inefficiencies. Here’s how it works: the market is flooded with both good-quality and bad-quality products, but buyers can’t tell the difference. So, they only want to pay a price between good- and bad-quality items. Since sellers of good-quality products will not sell at a low price, legitimate sellers of high-quality products may leave the platform because they cannot charge fair prices. Therefore, low-quality products flood TikTok's marketplace, which could drive high-quality goods out of the market, resulting in market inefficiency. Consequently, consumers’ expectations will decrease, and they will be less willing to pay for the goods. Wang et al. (2023) highlight that this adverse selection issue is particularly prevalent in online shopping platforms lacking stringent quality control measures, exacerbating consumer mistrust and discouraging repeat purchases. Over time, consumers stop trusting the platform and eventually stop buying altogether. It’s a vicious cycle: low-quality products push out the good ones, and everyone loses—especially you, the buyer.

In conclusion the main reasons why consumers are dissatisfied with TikTok’s online shopping involve asymmetric information, market signals and adverse selection. Sellers have more product information than buyers, and influencers tend to send wrong market signals for private interests, creating the illusion of high quality to mislead the consumers. Furthermore, lower-quality goods tend to stay in the market and drive good-quality goods out, which is the result of adverse selection. So, the next time when you browse TikTok’s exaggerated advertisements about products or watch the influencers sell items through live streaming, try to be calm first and make critical judgement against the possibly misleading information. Ask yourself if what you see is the actual value or the appearance after careful packaging.

References

Patteson, C. (2024) ‘I find myself buying a lot of unnecessary things: TikTok algorithm has changed "the shopping game"’, Salon, 8 September. Available at: https://www.salon.com/2024/09/08/i-find-myself-buying-a-lot-of-unnecessary-things-tiktok-algorithm-has-changed-the-shopping-game/ (Accessed: 1 April 2025)

Bailey, A. (2020) ‘Deceived by design: How online product presentation influences post-purchase perceptions’, Journal of Retailing and Consumer Services, 54, 102028. https://doi.org/10.1016/j.jretconser.2019.102028

Spence, M. (1973). Job Market Signalling. The Quarterly Journal of Economics, 87(3), 355–374.

Zhang, X., and Zhao, L. (2022) ‘The Impact of Influencer Marketing on Consumer Trust and Product Satisfaction in Livestream Shopping’. Journal of Digital Commerce, 10(2), 45-63.

Wang, Y., Xu, Z., & Li, H. (2023). ‘The Dark Side of Live Commerce: Adverse Selection and Consumer Trust in Online Shopping’. Journal of Retailing and Consumer Services, 71, 103-186.