Chinese live streamers can raise billions of dollars in hours. How long will it last?

BEIJING – Even as China’s recent rich internet celebrities continue to break sales records for live streaming, companies are finding other strategies that can work better for their brands.

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

The real-time phenomenon of online sales ̵[ads1]1; also called “live commerce” or “livestreaming e-commerce” – took off in China after the outbreak of the coronavirus pandemic last year, and is growing in other countries.

The difference from last year is that it is not as easy for livestreamers to get consumer sales volume, said Xin Youzhi, a top livestreamer with 95.6 million followers on the video app Kuaishou. This is a challenge for the industry going forward, as he said it has grown to about 2 trillion yuan ($ 312.5 billion) in market size by relying more on sales volume than focusing on product quality.

Xin now also runs its own company, Xinxuan Group, which has a staff of 1,400 people to screen goods, develop products and train professional livestreamers. Xin said he hopes the company can one day have 1,000 of its own product designers.

The sales trend for live streaming in China, even before the pandemic, has been dominated by internet celebrities like 29-year-old Austin Li. He became famous by selling lipstick, and set a record last month by selling the equivalent of $ 1.8 billion during a single 12.5-hour live streaming session on Alibaba’s Taobao in the run-up to the Singles Day shopping event on November 11.

Other livestreams Viya achieved a transaction volume of about $ 1.3 billion in about 14.5 hours during the same advertising event, according to industrial research firm Hongrendianji. Skin care products and makeup were among the most popular products sold, the company said.

Despite the huge sales volume that working with such internet personalities can provide, many companies decide to train their own employees to hold live streaming sessions instead.

“Working with the best live streamers is not the only way, and sometimes it can be a ‘bad’ way, especially if [the company] looking for profit, as the top players do not have brand loyalty and often have bargaining power, “said Jialu Shan, an economist and researcher in Asian and emerging markets at the International Institute for Management Development..

Using in-house staff to conduct direct sales sessions also helps companies save costs, since influencers take commissions and approximately 20% to 30% of the transaction volume ends up being returned, according to Oliver Wymans Dave Xie.

Especially for this year’s Singles Day, Internet influences have made a selling point to promote prices that are at least as low as last year, said Xie’s colleague Pedro Yip, head of retail and consumer goods practices at Oliver Wyman.

But that means a smaller profit for companies, and some brands that worked with Li and Viya have ended up in long negotiations about the final sales price for the products, Yip said.

Initial figures for sales of live streaming also make it less clear how much return on investment brands get.

The number of views or transaction volume is “no longer enough to evaluate the success of the live streaming session,” said Xiaofeng Wang, a lead analyst at Forrester, noting that viewer data could be “diluted”.

“Many brands actually found that it’s not profitable just in terms of the session alone,” Wang said. “There are many tactics they have to learn. Basically, we have no guidance[e] book for livestreaming trading yet, but notice, they need to learn [from] previous sessions, and if they have these calculations in mind, they can quickly test, learn and adjust. “

The market continues to grow rapidly. For e-commerce giants like Alibaba, revenue reports Taobao live gross goods volume, or GMV – an industry calculation that measures the total value of goods sold over a period of time – reached 500 billion yuan during the 12 months ended March 31.

This means that the quarterly average rose by more than 40% in less than two years, according to CNBC calculations of figures published by Alibaba. During the 12 months ended September 2020, Taobao live GMV averaged 87.5 million yuan in the quarter.

However, during the 12 months ended March 31, Taobao live GMV was only 6.7% of Alibaba’s Chinese retail marketplace GMV of 7.49 billion yuan at the same time, public records showed.

The emergence of other e-commerce platforms and Beijing’s breakdown of monopolistic behavior among Internet technology companies offer companies other opportunities.

Oliver Wymans Xie added that companies are now building teams for live streaming across platforms, from Alibaba to ByteDance’s very popular video app Douyin. A cosmetics client who is a top seller on Douyin generates about 10% of sales from live streaming, up from 1% three years ago, Xie said.

Outside Taobao, the top three live streams after sales in October were all on Kuaishou – and from Xinxuan, according to Hongrendianji.

The live streaming market may double or more, but it will require more companies coming in and big changes, Xin said in Mandarin, translated by CNBC. “If this market can be 5 trillion yuan, 10 trillion yuan in size can only be seen for more [industry] standardization. “

Looking ahead, Xin said it is increasingly important for live streamers to show customers where their products come from or how they are made. This knowledge and connection with the production chain will help livestreamers become more professional and develop more targeted brands – everything that Xin expects will be crucial to help his company stay competitive.

He said his hope is that when pandemic travel restrictions are lifted, he and his team can travel to Europe to find brands that can do well in China, as well as share the live streaming experience with the local market.