Live streaming, the new sales engine for e-commerce in China— part 1/2

It was 5am in the morning and I was lying awake on the bed, suffering from jet lag as I had just arrived at my parent’s house in China. Bored and tired, I decided to do some window shopping on the newly downloaded Alibaba’s Taobao app. The last time I used Taobao was 10 years ago when E-commerce had just started in China and there was no smart phone or mobile app yet. Now Taobao has become one of the world’s largest e-commerce websites with $768 billion GMV in fiscal 2018 and 617 million monthly active users on mobile devices as of Q1 2018.

On the landing page of the app, I saw there’s a function called “Taobao live broadcast”. Curious who would be live broadcasting so early, I opened it and thus entered this new world. At 5am, there were already tons of hosts live broadcasting, one eating noodles that she’s selling while talking with her audience, one showcasing different rings on her fingers.

This is a host selling noodles. There were 6144 watching.
This seller was live broadcasting harvesting cherries for sale.

There was one broadcast with the title “how to properly dress to show your long legs” and it had 6346 audience. I clicked into it, a girl in her early 20s was standing in what looks like a makeshift studio, grey wall, a blackboard with her height, weight and BWH, a rack full of clothes. The girl was standing on a bench, demonstrating a pair of black pants she was wearing. She was talking to the camera, explaining how the high-waisted pants would visually extend your legs, and the black color would make you look slimmer. To compare and contrast, she took off one side of the pants to demonstrate the difference. She sometimes would pause and look at her phones and answer questions from her audience. On the left bottom corner of the screen, messages kept popping up. “I’m 160cm, what size should I buy?” “Can you try on item number 3?” “This is pretty, I like it”. Clicking on the button in the shape of a shopping bag at the very bottom of the screen, the list of numbered items currently on sale showed up. One more click, the pants would be added to your cart. Every few seconds, alerts showed who had joined or who had made the purchase. The audience and the host were so actively interacting with each other that I almost forgot it’s just 5am in the morning.

This, I later learned is a new strategy Taobao started two years ago, combining e-commerce platform with live broadcasting for the shops on its platform. Unlike other pure play live broadcasting companies in China such as Inke, YY, Huajiao, where hosts live-broadcast their lives, playing video games and platform mainly makes money from advertisement and rewards paid by audience to their favorite hosts, Taobao’s live broadcasting aims to directly convert viewing to purchasing and charges commission from the sales. In 2006, when it just started, there were about 1000 sellers doing live broadcasting selling cosmetics, apparels, food, maternal and child products, reaching tens of millions of customers. Within less than two years, during the “Double 11 Festival” (November 11th) in 2017, there were over 330k live broadcasts reaching over 3 billion customers. In 2017, Taobao said their live broadcasting platform realized more than 50% conversion rate. The top seller has over two millions of followers, making 25 million RMB ($4 million)a year. She sold 70 million GMV during a 5 hour live broadcast, setting a record. Following Taobao, all the other e-commerce companies in China have added live broadcasting to their platform, making it their number one investment priority.

So why does combining live broadcast and e-commerce — the two seemingly irrelavant businesses together — create such a powerful sales engine? More to come.