4 min read.
Live commerce, also known as the combination of live video streaming and ecommerce to sell actual products, truly began in China in 2016 with the launch of Taobao Live. With Taobao Live alone having over 400 million users generating a Gross Merchandise Volume (GMV) exceeding RMB 200 billion in 2019 and other platforms following in its footsteps, it is undeniable that live commerce is currently the next big thing in China. The dawn of COVID-19 accelerated live commerce’s pace of growth with Taobao reporting a surge in first-time livestreaming merchants of 719 percent in February 2020.
Why Live commerce is a Model Built for Success
There are several reasons why live commerce has an advantage as compared to ecommerce itself:
1) Human interaction
One of the biggest differentiators of live commerce is the ability for the host to interact in real-time with buyers. Buyers are able to see the person selling items to them live, see the products being used, ask questions, put down comments and even the opportunity to be named by the host, giving them a sense of belonging.
2) Word of mouth on steroids
Word of mouth is the most trusted source of advertising for consumers. According to Nielsen, 83 percent of consumers trust recommendations from people they know, and 66 percent trust consumer opinions posted online. Live commerce makes use of this trust. Livestreaming hosts make a living from building quick rapport with their audience using a variety of different methods including humor and body language to create engagement as fast as possible. Just like we have favorite actors in a movie, we soon develop a “relationship” with certain hosts, and if we watch them enough, view them as friends and trusted advisors in our purchasing journey. This in turn leads to conversion and even impulse buying from the fear of missing out.
3) Reduces the amount of work consumers have to do
Referring to the development of retail, each stage of its evolution has made life easier for consumers. The movement of stores into malls allows shoppers the access to multiple brands within one visit s; likewise, the aggregation of online retailers into a single platform saves consumers the efforts and time spent to find the right items from various sites. Live commerce offers consumers a wide array of brands, products and live streamers to choose from. At the same time, consumers are only required to sit back and listen to the live streams, with the streamers doing most of their homework for them.
4) Reduces the amount of work companies have to do
Live commerce condenses the classic marketing funnel into a single step, with everything happening within a few minutes on the consumer’s mobile device. This allows many smaller companies to bank in on this new method of sales and marketing, especially since the industry is still not as mature.
Why Live Commerce is Working Better in China than the West
One of the main reasons why ecommerce, mobile payment, and even technological infrastructure growth has been much faster in China is due to technological leapfrogging. The personal computer (desktop), telephone landlines and credit cards are just a few of the pieces of technology that China skipped. Unionpay, China’s only card payment organization was founded in 2002 and rior to Unionpay being established, China bank cards only worked for intra province usage and foreign operators were not allowed. Comparing this with the US, interstate bank cards were made available much earlier in the 1960s with Visa being established in 1958. This has allowed China to pick up newer technologies at a much faster pace, along with the concerted push from the government to build new infrastructure. Here is why I believe live commerce will grow faster and more explosively in China than in the West:
1) Early adoption
Taobao started live streaming in 2016 whereas Amazon started only in 2019. China’s Internet Network Information Center reported that as of March 2020, there were 560 million people using livestreaming apps, representing 62 percent of the total internet population. This is almost twice the size of the population of the US.
2) Ease of payments
With the advent of mobile payment platforms such as Alipay and Wechat Pay, making payments online has become much easier for users in China. Today, in live commerce, all it takes is a few clicks to make a purchase. With China’s mobile payment adoption being the highest by far, ease of payment online for the Chinese is the easiest.
3) Speed of logistics
The China’s State Post Bureau states that in 2019, the average delivery time was about 56 hours for a parcel in China. If the distance was under 1000km, the time was under 45 hours. Specific delivery companies in China even offer 12 hour deliveries, and the timings for deliveries in major cities are also shorter. As for intercity purchases, there are buyers who are willing to pay additional fees so that they can get their goods within a few hours.
With a smartphone ownership of 96 percent in China compared to 90 percent globally according to Deloitte, the growth of smartphone usage in China is one of the highest. With the per capita 4G base station ownership in China far exceeding that of the US, and with 5G already rolling out, the infrastructure is in place to support high data usage on mobile phones for things like livestreaming.
Alibaba, the giant of the Chinese ecosystem is vertically integrated with content distribution, ecommerce, e-payment, logistics and media companies. It even backs a Chinese influencer incubator Ruhan. This allows for consumers to enjoy a seamless shopping experience, all without leaving its platform. You do not get the same integration even with the biggest ecommerce companies of the West such as Amazon, Facebook or YouTube. As a user, I would go to Taobao not knowing what I want to buy, but I would not do the same for Amazon without already knowing exactly what I wanted. This fragmentation influences the customer’s end-to-end experience and thus is a case against the explosive growth of livestreaming in the West.
It is safe to say from the data aggregated over the past five years that livestreaming is indeed a trend that is growing at an explosive rate. Whilst Alibaba does not control social media channels similar to Facebook or YouTube in China, it has redefined the way consumers interact with ecommerce shopping platforms, converting it into a social platform as well, where people come to be entertained and to find out exactly what they want to buy. With improvement in adoption and ecosystems in the West, livestreaming and live commerce will catch up. However, if the next technology like VR or AR comes first, perhaps the West will do some leapfrogging of their own.
This article is written by Zhe Loy, Senior Editor at 86insider.