Chinese merchants saw revenues double in 2020 through live-streaming. From WeChat to Tiktok, the big boys are jockeying for position. Does the trend have a future beyond the Far East?
It took all of five minutes to sell 15,000 lipsticks. Over 50 million tuned in to watch the Steve Jobs of China hawk smartphones. Revenues north of EUR 128m from just two shows a day. Those are the kinds of figures live-shopping in China produce regularly. To call it a boom would be putting it mildly. It has seen a sales assistant crowned King of Lipstick, it compels CEOs, like Xiamoi-Chef Lei Jun to sell their goods on camera and catapulted famous faces from the sectors to millionaire status. But can business keep booming? And what are the chances it makes it way to Europe in 2021? OMR takes a closer look at the craze sweeping China.
They say reality is stranger than fiction. Hard to argue against that pearl of wisdom when Chinese state media outlet Xinhua reported on a new education facility in a small town (a relative term) named Quzhou (over 2.5m inhabitants, making it bigger than Hamburg and Houston), which produced 1000 graduates four months after its inception. The name of this esteemed institution of higher learning? The “Village Livestreaming College.”
Despite initial appearances, the community college for teleshopping is not a joke. “In China, everything is bought online,” says Damian Maib. “So why not carrots, honey and potatoes?” Maib is the founder and CEO at Genuine German, an eCommerce and social media agency aimed at assisting German brands gain traction in China.
Given the propensity of the Chinese to embrace eCommerce for everything, he views the “Village Livestreaming College,” oh by the way financed by Alibaba, as no gimmick, but rather a plausible step in the company’s strategy to roll out live-shopping from Chinese metroplises to the country’s littany of Tier-2 to Tier-4 cities and beyond. Getting the country’s villagers to whip out their phones and plug their homemade noodles or self-cultivated produce on camera.
“Alibaba is forcing providers to enable access to their platforms even in the most rural of regions,” says Maib. In contrast to KOLs (key opinion leaders, the Chinese version of “influencers”), farmers of course have no reach of their own “until Alibaba puts on ‘Farmer Week’ and diverts traffic to them.” And if the company responsible for more than half of all eCommerce revenues in China is making such a heavy push into livestreaming, it figures to be a profitable undertaking for the alums of “Village Livestreaming College.”
Teleshopping meets a Tupperware party
Livestreaming is nothing new in China; we reported on it last April at OMR. We touched on how teleshopping and eCommerce has become an integral part of the nighttime routine for many Chinese, a way to unwind after a long 75-hour work week. KOLs present all manner of products to their followers in streaming sessions that typically last several hours, where each KOL assures their followers that they “will not find a better deal anywhere.” COVID has propelled the sector to even higher heights. Currently, revenues from livestreaming shows are projected to eclipse 1.05t renminbi by years’ end, roughly EUR 134b, more than doubling performance from a year before. The Chinese Ministry of Commerce estimates that there are 50,000 daily livestreams generating a total of 260 million views.
The format especially features during the annual shopping holidays, the most recent example being Singles’ Day on November 11 (a day invented by Alibaba founder Jack Ma to celebrate the single people out there; in China it’s known as double 11). Despite the challenging year that was (and still is), Alibaba managed to maintain its streak of setting a new record revenuewise. A catalyst for which being Singles’ Day morphed into a week-long celebration replete with discounts and sales—something we in the West are familiar with as Black Friday became Black Week became Black November or Cyber Monday became Cyber Week became Cyber Month.
Alibaba, which is credited with being a livestreaming pioneer, reported over EUR 63.77b in revenue from Singles’ Day. The report says that every one of the 28 livestream channels that was live on Taobao during the event generated over EUR 12.8m in revenue—no less than 360 million. For its part, competitor JD.com announced EUR 34.6m in Singles’ Day revenue for its 11-day event. While JD did not disclose any specifics on the revenue share attributed to livestreams, it provided another incredible nugget: over 7700 livestreams were broadcast through its IT infrastructure—3100 simultaneously.
Billion-dollar one man enterprise
As the number of livestreamers continues to grow and grow, it has become impossible to tell just how many there are. A couple of months ago, people were talking about 40K. While the small fish are plentiful, the market is dominated by the big fish, a handful of KOLs who have reached bonafide star status.
Stars include eccentric personalities like Xinba, who got his name from Zimba from “The Lion King” and who decided to get married in the humble confines of Beijing’s Olympic Stadium. He also made headlines and further endeared himself to his countrymen and women by pledging to donate USD 21m to Wuhan’s corona victims. Xinba who made the jump from farmers’ boy to streaming star without the help of the “Village Livestreaming College” is in fact a sales leader on Kuishou, an app comparable to Tiktok that is primarily beloved in the country’s rural areas. In this profile by the South China Morning Post his shows last year are said to generated revenues approaching EUR 2b. Recently, he set a new record with EUR 240m in revenue in a 12-hour show.
The biggest superstars, however, are the aforementioned lipstick king Aston Li and Viya, who between July and September 2020, i.e. pre Singles’ Day, generated sales of EUR 750m. Her name pops up repeatedly when the biggest eCommerce players talk performance from the shopping event and her sale’s touch is great enough to sell absurd items, like postcards of Alibaba founder Jack Ma.
“Bloomberg Businessweek” called Viya’s daily show part varieté, part infomercial and part group chat. Whatever the 34-year-old’s formula, it attracts more viewers than the series finale of “Game of Thrones.” Non-Chinese companies, like Tesla and Procter & Gamble, turn to her to gain footing among Chinese customers—and to profit from her magic touch. Another example of what she can sell: A rocket launch which she offered last April for a cool EUR 5m.
Magic Johnson lost in translation
A career as a livestreamer is now so attractive that established household names are now entering into the sector as a side hustle. Actress and singer Liu Tao hosted her first sales show in April and has since evolved in a general store with a changing assortment of featured items. In a total of 12 shows to date, she has leveraged her celebrity into a side gig worth—if you assume the typical 20%—an additional EUR 5m in commission.
Events like Singles’ Day also attract random, unexpected hosts. Foreign enterprises typically use the day to introduce brand new products. And to standout during the days-long extravaganza, Western stars like Victoria Beckham, Kim Kardashian and “Magic” Johnson make appearances. This year, NBA legend Johnson promoted the CBD brand Uncle Bud’s to Chinese Tmall viewers; Johnson is an investor.
Hyped up prices
The bulk of successful livestreamers tend to be KOLs with a moderate degree of celebrity. For Genuine German’s Damian Maib, that’s a problem that may not end the streaming boom outright, but could significantly slow it.
He says that the current hype surrounding the format led to massive costs. “The asking rate for KOLs is through the roof and I don’t see that as being sustainable,” says Maib. He went on to says that while he expects the rates to come back down to earth, they are currently too high for worthwhile partnerships of the majority of companies. “Mid-range KOLs are tricky regarding ROI,” says Maib. “On average, livestreamers can be expected to receive between EUR 2500 and 3000 for a 6-minute slot.
Platforms pony up for the latest tech
In addition, Maib says a guarantee that the products won’t be sold elsewhere for less is commonplace in such deals, further shrinking margins. Another potential complication is that “actual viewer figures do not always line up with those livestreamers provide, since bots may be involved,” says Maib. “You are usually better off to go straight to a ‘star streamer.’ They cost a great deal more, between 10 and 25K and also typically charge a 20% commission, but they guarantee significantly more reach.
For their part, the platforms are as yet unshaken in their belief that the livestreaming business will continue to grow. Baidu, for example, just shelled out USD 3.6b for YY live (including the current accusations that YY has falsified its viewer figures). There is one notable figure that figues to give the entire industry reason for optimism that the best is yet to come: livestream shopping in China for 2019 only accounted for seven percent of the country’s eCommerce revenue. Therefore, it’s well within the realm of possibility that the ubiquitous do-everything app WeChat, which is currently testing a shop infrastructure that could be seamlessly integrated into livestreams, could join the fray as another massive player.
Teleshopping beyond (linguistic) borders
The most active innovator at the moment, however, remains the sector’s OG, Alibaba. The eCommerce behemoth is not only training farmers to become livestreamers, but is also reaching deep into its pocketbook to invest in a myriad of technologies. In the run up to Singles’ Day 2020, they introduced a tool that translates livestreams on AliExpress from Chinese into English, Russian, Spanish and French in real-time, and also from English into Russian, Spanish and French. User comments in 18 languages can be translated into one of the aforementioned tongues as well. Alibaba said that 70 percent of merchants activated the function for Singles’ Day. Previous cases indicated that conversion rates increased fourfold when CAT tools were used.
The tool is in line with Alibaba’s overarching plan to expand its cross-border business. Since Alibaba acquired Amazon-clone Lazada, it has had access to a fulfillment network that reaches across vast swaths of Southeast Asia. Alibaba is also investing significant resources into shortening delivery times to Europe. CNBC reported that in the two weeks after Singles’s Day, Alibaba chartered 100 cargo planes to spare customers in France and Spain long lead times.
Alibaba’s translation tool was produced by the company’s DAMO Academy. Founded in 2017, the R&D body has seven different locations, five of which are beyond China; three in the US and one each in Israel and Singapore. The academy was also instrumental in developing another new feature that was rolled out on this year’s Singles’ Day: virtual liveshopping hosts. According to this product video , the comicbook avatars can not only dance and greet the audience, but can also comprehend and answer questions asked in the chat. On top of that, gestures and body language are adapted to the overall mood of the show.
The faux-hosts appeared primarily as sidekicks for livestreamers, sometimes taking over the show after the human host had left. As reported by “China Daily” international household brands like Philips, L’Oreal, Unilever and L’Occitane also employed virtual hosts, meaning they were not a novelty employed merely by Chinese brands.
Although on the surface virtual hosts seem like a charming gimmick, they are much more. At their core, they are designed to make liveshopping independent of fickle humans and their needs for sleep, food and other frivolities. Not exactly a reach to see hordes of virtual salesbeings assisting Aliexpress customers from Chinese servers all around the world and in every language the Damo tool knows.
Livestreaming for the elite?
Through such investments in new tech, Chinese providers are forcing their way into new markets. With livestreaming booming all across SE Asia, the question moving forward is how likely will the format translate to Western markets? There are some trailblazers in the States, like streetwear drop livestreaming app NTWRK (who we reported on recently), who have shown that there does in fact lie a great deal of potential in the format—at least as a niche. A shop with limited sneakers and exclusive items is hard to project at scale.
The pandemic and the ensuing push for eCommerce has led to the format slowly arriving in Europe, (as we reported on back in April). A decisive factor for whether or not the format breaks through to the mainstream figures to be dependent on how much technical infrastructure major platform operators make available to get liveshopping off the ground. Facebook, for example, is equipping Instagram with the necessary tech.
The recently announced partnership between Tiktok and Shopify could push the format among merchants willing to experiment with new formats. If it takes hold there, liveshopping is just a hop, skip and a jump away. In China, where TikTok goes by Douyin, it’s the segment’s largest newcomer. Figures provided by Ocean Insights, which is owned by Bytedance, just like Douyin/Tiktok, indicate the amount of livestreams with activated ‘Shopping Cart’ features grew by 876% between December 2019 and June 2020.
All roads lead to Amazon
Another vital role in the success or failure of the format in the West could be played by Amazon. That is primarily due to the livestreaming boom being dependent on the underlying logistics. If someone tuning in at home likes the price and decides to make a spur of the moment purchase, it’s best to get the product into their hands as fast as possible, before they have a change of heart and cancel.
Amazon, of course, is bar none the king of logistics and also already offers its “Live Creator” app. However, a quick look at the current shows being broadcast, shows that the format is not (yet) a priority.Luxury brand Louis Vuitton made its livestream debut in April 2020 on Little Red Book
Perhaps the biggest challenge to overcome is one of image. If livestream shopping is equated to teleshopping on your phone then the format figures to sound trashy to Western ears. Taking a luxury/exclusivity approach could be instrumental in changing the tone—another explanation for NTWRK’s strategy, where NBA stars unveil exclusive collabs and vacuum sealers are at least gilded.
“Hollywood Livestreaming College”
In China, the first wave of luxury brands are wading out into the livestreaming waters—despite the fact that initial reports suggest that breaking through is not easy. At present, the format is for deal hunters and entertainment, more WalMart than Tiffany’s. Exclusive brands live from their exclusion from the bargain bins. Therefore, it’s possible the luxury segment needs to adopt a top-down approach to succeed. In China, US stars are already making cameos in livestreaming shows—why couldn’t they do the same at home?
Maib also sees potential for such an approach: “It’s my belief that luxury brands do have a future in livestream shows—even in Europe.“ However, he always recommends to his clients that they properly vet a KOL or an influencer to ascertain if they only have reach or if they also possess some expertise for their products. It’s commonplace for serious questions about a product to quickly overwhelm uninformed livestreamers.