Live streaming, the new sales engine for e-commerce in China — part 2/2
Part 1 can be found here:
There are several factors why live streaming is such a strong sales engine for e-commerce companies.
- It creates better content . With more e-commerce companies offering similar products, how products are presented is key to acquire customers and realize conversion. When browsing replaces searching on e-commerce websites, a better presentation of the product is easier to get the customer’s attention. Take apparel as an example, the same dress can be shown on Neiman Marcus, Shopbop, Net-A-Porter, MatchesFashion. Some just show the pictures of the dress, front and back; some show a model in the dress; some put a video of the model in the dress. The more dimensions the product is shown, the more likely the customer will make the purchase. Live streaming takes the product presentation to the extreme. The customers not only can see vividly how the dress looks like on a real person, they can ask the host to turn around, walk back and forth, show the details close-up, etc. In another words, live streaming brings the product from a 2D picture to the 3D real life.
- Real-time interactions stimulate purchase. When tens of thousands people watch the video at the same time and have direct conversations with the host, they feel like they are in a community. Purchasing is no longer an individual and private activity, but more of a group activity. Viewers are more likely to feel FOMO when alerts keep telling you someone has already added the dress in their cart, which creates a sense of urgency to buy. Unlike regular e-commerce websites that either have a customer service by phone/email or on-line chat, live streaming e-commerce brings real-time customer service with no wait time nor automated messages. The hosts answer questions and requests as if they are your personal assistants. The satisfaction derived from receiving individual attention more often will lead to impulse purchase. That’s why Taobao has achieved conversion rate as high as 50% through its live broadcasting platform.
- It builds a more smooth path to sell and buy. The user interface of Taobao’s live streaming is extremely user friendly. There are only three clicks from entering the show room to adding the item to the cart, and all three can be done without pausing the video. All the items on sale are numbered, convenient for customers and hosts to refer to in their conversations. On the other hand, based on item’s popularity, sellers can adjust their inventory in real time. This is especially helpful for sellers who live broadcast in the retail stores and place orders for the customers who cannot visit the store in person. After customers express interests in certain items, sellers then make them available for sale, bearing no inventory pressure.
- It increases user viscosity and engagement at low cost. Customers receive points for activities such as watching, sending messages, liking, following and purchasing. The longer they watch, the more they interact with the hosts, the more points they receive and ultimately, these points represent customer ranks. Higher ranking customers will receive coupons to shop with their favorite hosts. This program quantifies customers’ loyalty which directly converts to sales. More importantly, the more time and money customers spent with hosts, the more data the hosts collects, with which they can provide more customized content for these loyal customers, results in more customer engagement, a positive feedback loop. Traditional e-commerce companies have been struggling to retain customers. They mostly rely on email marketing and promotions which would increase their customer acquisition costs.
- It’s the most effective influencer marketing. Influencers who have thousands of followers on Instagram and Youtube are chased after by marketers. They are paid by advertisers to mention their products in contents such as pictures, Intagram stories or Youtube videos. This types of marketing generates impressions but returns are hard to quantify since the content is not directly linked with sales. Live streaming, on the other hand, carves out a specific period of time for the influencers to reach their followers and tests their influence by how much sales they generate during the period. Mabelline invited Chinese celebrity Angelababy during a product release conference to live stream and sold over 10,000 lipsticks (~RMB1.4m GMV) in just two hours. Eve Zhang, a fashion influencer, sold nearly RMB 40 million of clothes during two hours of live streaming on Taobao.
In China, all the major e-commerce are adding live streaming to their platform. In US, there’s yet an e-commerce companies doing the same. Instagram Live is the closest, but people still mainly use it for social purpose and brands’ marketing is buried along with all the other live stories. In order for live streaming to fully realize its potential to boost sales, it needs to be built on an e-commerce platform that already has traffic and has the whole supply chain ready. It’s hard for a live streaming company to start e-commerce as the latter is capital intensive, which beats the whole purpose. A few weeks ago, Shopshops, a live streaming app that sells US based brands to Chinese consumers, raised $6.1 million seed funding from Forerunner Ventures, Union Square Ventures, etc. This is interesting as Shopshops initially started as a seller on Taobao which already provided all the technology. The hosts would do live streaming in US retail stores for their Chinese customers and place orders for them. All they need is a phone, Wifi, and a tripod. There are tons of such cross-border sellers on Taobao operating at very low cost. There are also several well capitalized cross-border e-commerce companies offering live streaming services. Now without Taobao’s technology support and customer traffic, Shopshops wants to build a stand-alone company competing with these competitors. I hope they use their $6 million wisely.
