Full Guide to Livestream Sales in China 2022
While livestream sales have failed to fully catch on in the West, it’s a booming multi-billion-dollar market in China. According to a 2022 Qianzhan Industrial Research Institute market report, China’s livestream market grew to just under 2.4 trillion yuan in 2021 (330 billion USD), having almost doubled from 2020. These figures put the livestream market on track to meet the 423 billion USD market size projected by McKinsey for 2022 and 11.7% share of retail e-commerce sales in the country as projected by eMarketer.
As a trend that mainly started with Gen Z and millennials in China, livestream sales have steadily grown to become a popular shopping channel for all age demographics in China. In a 2020 survey from Alix Partners, two thirds of surveyed Chinese consumers say they have bought something from a livestream sale.
How Do Livestream Sales Work?
Livestream sales is a marketing tactic for selling products online that has exploded in popularity only in the last five years, growing out from the phenomenon of social shopping, the retail trend of mixing Ecommerce and social media.
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Livestream sales usually consists of an influencer presenting various products on livestreams and interacting with viewers in real time by answering their questions about the products. Often, products featured are heavily discounted and sold via flash sales. After influencers make the sales on the products they present, oftentimes they will also serve as customer service representatives for their audiences, building audience loyalty and serving as a liaison between buyers and brands.
The main platforms streamlined for this model of marketing include Douyin, RED, Taobao Live, and Kuaishou. These platforms offer a variety of in-stream components that seamlessly meld ecommerce into livestreams: one-click purchase buttons, dynamic shopping tags, live updates when audiences buy items, physical location geotags to promote brick and mortar stores, as well as audience chat and reaction functions,
By combining the entertaining and interactive aspects of influencer livestreams with the instantly gratifying model of ecommerce, livestream sales have transformed the Chinese retail ecosystem in recent years.
What Products are Most Suitable for Livestream Sales?
Livestream sales are an interactive method of retail, similar to a sales representatives talking to and responding to questions from potential customers in a brick-and-mortar store. Therefore, products whose utility or value that can be effectively demonstrated in a video format are prime candidates for selling via livestream sales.
According to the previously cited eMarketer report, the most popular products sold on Taobao Live are “women’s fashion, cosmetics, food, home goods, jewelry, and accessories”. When looking at gross merchandise value, more expensive items such as computers and home appliances top the charts.
Livestream Sale Case Studies
With livestreaming sales, influencers who may be popular through their short form video content or celebrity status might not be suited for the fast-paced interactive nature of selling products. On the other hand, influencers who may not have a large initial fanbase can come to dominate the arena, especially those with a background in retail sales. Because of this, there are a variety of approaches to livestream sales campaigns.
KOL/Celebrity Livestream Sales:
Top level KOLs and celebrities with over one million followers on their social media accounts are the top tier for livestream sales. For livestream sales with this tier of influencer, brand exposure and audience volume are guaranteed. However, due to their status, these influencers have considerably more bargaining power and less brand loyalty than smaller influencers. This means brands can expect to sell their products at much lower profit margins with these KOLs.
An often-cited case study would be of KOLs who rose to stardom via livestream sales such as Li Jiaqi, the “lipstick brother”, also known as Austin Li. In the runup to 2021’s Singles Day, the November 11th shopping holiday that can be considered China’s version of Black Friday, Austin Li’s livestream sale on Taobao Live sold 1.9 billion USD worth of goods. With products ranging from L’Oréal cosmetics to snack foods, Austin Li was able to sell 1% of China’s entire 2021 livestream sales market in a single session.
A more recent case study would be that of Liu Genghong, the Taiwanese singer who saw enormous livestream sales success earlier this year from his home fitness livestreams with his wife. Having initially signed to an MCN in December, his livestream sales were middling for a celebrity KOL, with just under $800,000 USD sold in products over nine livestreams. But after beginning home exercise livestreams with his wife, his follower count and livestream view count has exploded, amassing over 10 million followers over the span of a week.
An interesting case study that blurs the lines between KOL and platform is private education giant New Oriental’s livestream channel Oriental Select. Oriental Select was launched as a new business strategy from New Oriental in response to the government crackdown on private tutoring. Centering on hosts who double as educators, Oriental Select conducts educational livestreams teaching English via presenting products in both English and Chinese. While the channel struggled to surpass $150,000 USD in sales per day in the months after launching, in June of this year, daily sales increased almost two orders of magnitude over a ten-day span from $110,000 USD to 9.4 million USD. In terms of business model, Oriental Select charges a flat 10% commission and sells mostly everyday items like agricultural, health, and wellness products.
KOC Livestream Sales:
KOCs and smaller KOLs usually cater to specific niche audiences for their products. These influencers have followers ranging from ten thousand to a few hundred thousand. As they have less bargaining power than top level KOLs and celebrities, these influencers have stronger brand loyalty and provide more favourable profit margins for brands. In addition, they have a more defined community than larger KOLs, allowing for more precision marketing tactics.
A case study of smaller KOCs reveal that smaller influencers can be help reach more specific target demographics. Degyi, a KOC with just over 20,000 followers on Douyin, creates short video content consisting of dance routines and skits with her husband. On average, her livestream sales sell 30,000 USD worth of product per stream. As an ethnic Tibetan, her niche as a KOC is selling for brands aiming to expand their offerings into Tibet.
In-House Brand Representative Livestream Sales:
As livestream sales are similar in scope to a retail environment with sales representatives, many brands have opted to strike it out on their own by creating their own livestream channels. Brands that choose this option are usually well established with large pre-existing social media followings. Oftentimes, having an in-house brand channel and doing livestreams campaigns with KOLs and KOCs need not be mutually exclusive. Sometimes brands will invite top tier KOLs and celebrities to appear on their brand’s livestream channel and continue selling products via KOC livestreams.
Most major luxury fashion brands have opted for this route. Louis Vuitton was one of the first brands to try their hand at livestream sales, livestreaming on RED in 2020. However, poor production quality for their initial livestream sale drew criticism from consumers. Later, they shifted towards livestreaming their runway show as a livestream show, a move that better fit their brand image and garnered record-breaking views. Burberry tried a more innovative and interactive approach to livestream sales by livestreaming from the brand’s flagship store in Shanghai. They invited various fashion KOLs who acted as customers and had sales representatives provide information to the livestream viewers about the products KOLs were trying on, replicating the feel of an in-person store visit. The accessories on display were reportedly sold out an hour into the livestream.
Yanzhiwu (燕之屋), a brand of edible bird’s nest, provides a case study in innovative in-house livestream sales strategy for non-fashion products. Last year for Taobao’s “Spoil Fans Festival” in March, Yanzhiwu hosted a 16-hour livestream sale. The livestream garnered 150,000 viewers and grew GMV 990% compared to the year before. It achieved this massive growth by carefully drumming up interest for the livestream via a Weibo campaign and joining Taobao’s Livestream Ranking Competition. They also collaborated with a variety of other livestream sales channels to increase their brand exposure during the lead up to their livestream. They collaborated with KOL Cherie 雪梨, having her present Yanzhiwu products on her livestream sale the day before the Yanzhiwu brand account livestream sale. They also collaborated with other brands their target demographics would be interested in, placing their products in livestream sales from brands such as MARCHON, an eyewear brand, and Simpcare, a skincare brand. Finally, Yanzhiwu’s in-house livestream was held at their factory, allowing viewers to see their products’ manufacturing process.
Behind the Scenes
So, what goes on behind the scenes of a livestream sale? Production levels can range widely between livestreams.
For larger KOLs, celebrities, and brands, the behind the scenes of a livestream sale can be as professional as a TV production, streaming out of dedicated studio with makeup artists, professional sound, multiple camera angles, live visual effects, and teleprompters. Smaller KOLs and KOCs may sometimes only livestream from a single phone or tablet and present products in their own bedrooms. In between these two extremes, there are a wide variety of livestream influencers, from MCN affiliated influencers who are provided studios, teams, and equipment to brands livestreaming out of their warehouses or factories.
Experience for Consumers
Most livestream sales provide consumers a similar experience to TV infomercials, except that they can ask questions and interact with the hosts. They can ask to see various angles of a product, ask for information about their orders, and see questions and reviews from other people in the audience in real time. Why wade through pages of reviews when you can get your questioned answered live on video?
In addition, products are usually on discount during livestream sales, providing consumers a place to get good deals on products they want.
Experience For Brands
When brands work on a livestream sales campaign with KOLs and KOCs, brands do not usually need to pay upfront, unlike in traditional influencer marketing. However, the influencers get to sell the brand’s products at discounted prices, while taking a portion of the sales home as commission. The size of the discount and commission increase with KOL bargaining power. Often, brands can spend months negotiating with high level celebrity KOLs only to end up with razor thin profit margins from the livestream sale.
While similar to traditional KOL marketing campaigns in that they allow brands to attach a personality to their products, livestream sales with influencers provide more than just a human face to a brand. Oftentimes KOLs and KOCs also act as sales representatives for a brand and help with customer enquiries after the sale has been made. This is more often the case with smaller KOLs and KOCs.
The Future of Livestream Sales
Earlier in 2022, crackdowns hit the top tier influencers on Taobao Live, Viya and Austin Li. While reasons were different for the respective crackdowns, this created room for more grassroots KOLs and KOCs to attract audiences and move products. While Austin Li has since returned to livestreaming, there was already a shift in the entire livestream sales landscape.
Instead of a making razor thin margins on livestreams with top tier KOLs and celebrities, brands have started employing smaller KOLs, KOCs, and in-house livestream sales. The entire market’s balance of power has shifted away from the top few superstar KOLs and livestream celebrities to a more fractured landscape where brands have started developing alternative livestream sales methods that rely less on a single celebrity’s charisma.
As seen in the examples from luxury fashion brands like Burberry to food brands like Yanzhiwu, there is no one size fits all strategy livestream sales. Brands should see livestream sales as one of many channels to coordinate for a successful comprehensive retail marketing strategy.
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