Chinese livestreamers can rake in billions of dollars in hours. How long will it last?

Online streamers are preparing for the annual Double 11 online shopping festival at Lingu E-Commerce Industry Park on October 27, 2021 in Linyi, Shandong Province of China.

Xu Chuanbao | China Visual Group | Getty Images

BEIJING – Even as China’s newly wealthy internet celebrities continue to break direct selling records, companies are finding other strategies that might work better for their brands.

Live streaming is here to stay, many analysts say, but relying on a system of Internet personalities and views will no longer be enough.

The phenomenon of real-time online selling – also known as “live commerce” or “live e-commerce” – took off in China after the coronavirus pandemic started last year and is expanding in other countries.

The difference from last year is that it is not as easy for streamers to achieve consumer sales volume, said Xin Youzhi, one of the top streamers with 95.6 million followers. on the Kuaishou video application. This is a challenge for the industry in the future, as he said that the market size has reached around 2,000 billion yuan ($ 312.5 billion) relying more on sales volume than on product quality.

Xin now also runs his own company, Xinxuan Group, which employs 1,400 people to filter products, develop products and train professional streamers. Xin said he hopes that one day the company can have 1,000 of its own product designers.

The trend of direct sales in China, even before the pandemic, was dominated by internet celebrities like Austin Li, 29. He rose to fame selling lipstick and set a record last month selling the equivalent of $ 1.8 billion in a single 12.5-hour live broadcast session on Taobao’s. Alibaba ahead of the Singles Day shopping event on November 11.

According to industry research firm Hongrendianji, compatriot Viya recorded a trading volume of about $ 1.3 billion in about 14.5 hours during the same promotional event. Skin care products and makeup were among the top-selling products, the company said.

Companies create their own live broadcast teams

Despite the massive sales volume that working with such internet personalities can bring, many companies decide to train their own staff to host live streaming sessions instead.

“Cooperating with the best live streamers isn’t the only way, and sometimes it can be a ‘bad’ way, especially if [the company] seeks profit because the major players are not brand loyal and often have bargaining power, ”said Jialu Shan, economist and academic in Asian and emerging markets at the International Institute for Management Development..

According to Oliver Wyman’s Dave Xie, using in-house staff to conduct live selling sessions also helps businesses save costs, as influencers charge a commission and around 20% to 30% of transaction volume ends. by being returned.

Especially for this year’s Singles Day, internet influencers have been arguing for prices that are at least as low as last year, said Pedro Yip, colleague of Xie, responsible for retail and sales. consumer goods at Oliver Wyman.

But that means less profit for companies, and some brands that worked with Li and Viya found themselves in lengthy negotiations over the final selling price of the products, Yip said.

Limited livestreaming returns

Initial figures on live sales also make it less clear what ROI brands are getting.

The number of views or the volume of transactions is “no longer sufficient to assess the success of the live streaming session,” said Xiaofeng Wang, senior analyst at Forrester, noting that audience data can be “diluted.” .

“A lot of brands have actually found it to be not profitable just in terms of the session,” Wang said. “They have to learn a lot of tactics. Basically we don’t have a guide[e] book for live commerce, but brands need to learn [from] previous sessions, and if they keep those metrics in mind, they can quickly test, learn, and adjust. “

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The market is still growing rapidly. For e-commerce giants like Alibaba, results releases show that Taobao’s Gross Merchandise Live Volume, or GMV – an industry metric that measures the total value of goods sold over a period of time – has reached 500 billion yuan in the 12 months ended March 31.

That means the quarterly average has grown by more than 40% in less than two years, according to CNBC’s calculations of figures released by Alibaba. During the 12 months ended September 2020, Taobao live GMV averaged 87.5 million yuan per quarter.

However, Taobao’s live GMV in the 12-month period ended March 31 was only 6.7% of Alibaba’s Chinese retail market GMV of 7.49 billion yuan during the year. same period, according to public records.

The emergence of other e-commerce platforms and Beijing’s crackdown on monopolistic behavior by internet technology companies gives companies other options.

Oliver Wyman’s Xie added that companies are now assembling teams for live streaming across all platforms, from Alibaba to ByteDance’s hugely popular video app, Douyin. A cosmetics customer who is one of the top sellers on Douyin generates around 10% of their sales through live streaming, up from 1% three years ago, Xie said.

Outside of Taobao, the top three sales streamers in October were all on Kuaishou – and Xinxuan, according to Hongrendianji.

The live streaming market may double or more, but it will take more companies and major changes, Xin said in Mandarin, translated by CNBC. “Whether this market can become 5,000 billion yuan, 10,000 billion yuan can only be seen after more [industry] standardization.”

Looking ahead, Xin said it is increasingly important for streamers to show customers where products come from or how they are made. This knowledge and connection to the manufacturing supply chain will help streamers become more professional and develop more focused brands, which Xin says will be essential in helping his business stay competitive.

He said he hoped that once pandemic travel restrictions were lifted, he and his team could travel to Europe to find brands that might do well in China, as well as share their live streaming experience. with the local market.

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