In 2020, livestreaming has shown unprecedented vitality. Various livestreaming platforms are maturing, becoming more mainstream and the epidemic has led to the growth of online work, entertainment, and consumption.
Livestreaming e-commerce is growing every day. There’s a current trend for sales livestreams by top brass at big companies. Luo Yonghao, one of China’s most famous tech entrepreneurs, has entered the fray with sales during his first livestream in April 2020 exceeding RMB 110 million (about $15 million). Dong Mingzhu, president of China’s largest household appliance maker, Gree Electric, sold more than RMB 300 million of products on Kuaishou and more than RMB 700 million products on JD.com doing livestreams.
Ashley Galina Dudarenok is the founder of Alarice and a renowned China marketing expert.
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Brick and mortar shopping malls, along with other sectors, are being rescued by livestreaming e-commerce and everyone is trying to be the next Li Jiaqi or Viya.
Huge market potential
During the epidemic, with 5G developing, livestreaming has shown even more possibilities. 5G capabilities have made a big difference, as signals are more stable and pictures are clearer. In addition to retail, livestreaming has really stood out in education, entertainment, and tourism.
1. Livestreaming e-commerce has taken the lead
iResearch predicts that by the end of 2020, China will have 524 million online livestreaming users. This means 40% of Chinese people and 62% of the country’s internet users will be livestreamers. The total scale of China’s live streaming e-commerce industry reached RMB 433.8 billion in 2019 and is expected to double by the end of 2020.
Given that in 2019, livestreaming e-commerce only accounted for 4.1% of the online retail market and it accounted for 1.1% of overall e-commerce, it still has plenty of room for growth.
During the epidemic, more and more industries turned to livestreaming e-commerce and it moved beyond the standard products. People were even selling houses. On April 24, Evergrande Group, one of China’s biggest real estate companies, had over 3.8 million viewers for its livestream and it racked up 7.12 million likes. During the broadcast, 38 discounted apartments sold out in one second.
2. The education sector has been using livestreaming much more during the epidemic
Social distancing and school closures have made effective teacher-student interactions difficult. Hasty programs set up for teachers, as well as limitations due to internet access and bandwidth, meant that traffic demands often outweighed the abilities of some programs to deliver.
This is where livestreaming and video apps filled in the gaps. On Douyin (TikTok), for example, users could search for “Take a class at home” to use livestreaming course services for free. In addition to courses from educational institutions, Douyin cooperated with well known model teachers from schools around the country to livestream courses.
3. Offline entertainment and tourism have been some of the most seriously disrupted industries
A lot of entertainment businesses in China have stated that their cash reserves can only last three months. The global film industry is facing US$ 5 billion in losses amid the Covid-19 outbreak. In response, not only have movies gone online, but also nightclubs and bars. TV shows have also explored new formats for livestreaming.
Museums have expanded their online and livestreaming offerings. In March, Potala Palace conducted a livestreaming tour. Taobao’s livestreaming data showed that there were more than 800,000 people watching. In addition to an interpreter, six cultural experts gave explanations and insights that aren’t usually available during daily visits.
Things are looking up for livestreaming, but there are challenges ahead
Livestreaming’s popularity isn’t necessarily good for brands entering the market. As the scale of livestreaming e-commerce grows, problems are also emerging. Here are two of the biggest:
1. A large number of multi-channel networks (MCNs), which are like incubators for new KOLs and online personalities, have appeared and the competition is fierce.
There were around 14,500 MCNs in China in 2019. It’s estimated that by the end of 2020, there will be more than 20,000 and might be as many as 28,000.
The MCN market is saturated and it’s becoming less and less cost-effective for the MCNs to create popular KOLs. Beauty ONE’s “BA Celebrity” plan selected 200 amateurs and spent two years developing only one top celebrity—Li Jiaqi. A report from online news site Xinkuaibao claimed that labor costs for training a celebrity are at least RMB 1 million a year.
When market competition is so fierce, a variety of problems occur.
The incentive is strong for KOLs to use fake followers (shuijun) and fake data to improve the appearance of their follower base and sales. Sometimes, after signing a deal, small scale live steamers end up with a 40% return rate on items that were purchased by their customers. This is the maximum return guaranteed in their contract. The rate is 50% for bigger livestreamers.
Many top KOLs have their own Taobao stores, so they focus on promoting their own products instead of promoting other brands. They’re effectively in competition with the brands they cooperate with.
Sadly, some KOLs, especially those still trying to make a name for themselves, have experienced such strong pressure to produce results, criticism from the public and punishing working hours that it has led to mental health issues and depression.
2. Customer retention is a big problem
In terms of the disadvantages of livestreaming, customer retention is a key issue. This is because too many brands are focussed on using livestreaming for sales. KOLs like Viya and Li Jiaqi excel in this area and gains can be large, but also short term. Brands forget that big live stream sales are usually one offs that involve big KOLs who take their followers with them when they go away
Livestreaming can also improve brand image and brand awareness. This can yield long-term results for brands, increase customer loyalty, improve brand image, lead to better WOM marketing and increase the number of repeat purchases. Brands are better off using livestreaming for brand building. They can control this more easily and improve customer retention.
What should brands do?
Should brands livestream? The answer is YES.
Although there are challenges and we can’t predict when the trend will eventually lose steam, brands need to get on board or they’ll be left out in the cold.
Leverage livestreaming to foster brand communication and PR. One brand that did this well recently was Xiaomi. It was the first to do a livestreamed press conference after the epidemic, when it released the Xiaomi 10. This is likely to become mainstream in the future. One that didn’t use livestreaming well was LV. Their e-commerce livestream’s low-fi, DIY style was widely criticized online as being incompatible with the brand’s high-end sensibilities and luxury positioning. This was a big setback and left a bad impression with consumers.
Livestreaming sales are common on Taobao for all kinds of brands. If you go to a well-known flagship store on Taobao, you’ll see “The shopkeeper is livestreaming” in the upper right corner. Clicking on it will take you to the shopkeeper’s stream as they show and talk about products. It’s more interactive and immediate, but the products aren’t cheaper.
This kind of livestreaming isn’t to promote products. It’s to do branding. The goal is to help consumers get to know the brand’s products, see them in action and become more familiar with the brand. If viewers like a product and buy it, that’s an added bonus. This isn’t promoting sales through one off events. It’s marketing to build consumer confidence and influence consumers’ consumption decisions in the long term and this is a strategy that belongs in every brand’s arsenal.
Livestreaming technology keeps advancing
Because of the epidemic, livestreaming ended up being used in all kinds of ways that it hadn’t been before. Expect that trend to continue as people keep experimenting with new uses and technologies for live broadcasts. In the future, it will be used for medical purposes, aviation, the blockchain, AI, and more. It will also evolve with 5G developments and as technologies like VR and AR change.
For example, Li Jiaqi managed to cooperate with a virtual KOL called Luo Tianyi during a livestream for L’Occitane. Tech magic allowed him to appear right alongside the virtual character during the livestream.
Five years ago, livestreaming emerged from the gaming world to become a huge e-commerce asset.
Where will livestreaming be five years from now?