👜Why the Future of E-Commerce is Livestream 👜
What you need to know about Chinese Live-Streaming and next E-Commerce Revolution
The attention economy is fundamentally changing, and the game of content has been shifting alongside it.
Arguably, our true indicators of what the future of content production looks like is already happening — in China. There is no disputing that China is far ahead the rest of the world in terms of mobile payment adoption, but increasingly Chinese entertainment forms have spread globally. Let’s look at TikTok as an example. By doubling down on its unique, mobile-centric design, as well as focused on key ‘virality’ tenets that appeal to Gen Z, TikTok (originally Douyin) has now over 800 Million users, putting its growth well above Pinterest, LinkedIn and Snapchat in only two years (it launched in China in 2016, and the US in 2018). Usage became largely catalyzed by the coronavirus epidemic which left people in their homes looking for new avenues to display creativity, comedy, and most of all: connection.
The realm of social media, e-commerce, and online marketplaces are only getting deeper and more nuanced as mobile usage becomes more widespread. In a forward-looking 2004 essay, Chris Anderson conceptualized the idea of the ‘long tail’ that argued that products in low demand or with low sales volume can collectively make up market share that rivals or exceeds the relatively few current bestsellers and blockbusters but only if the store or distribution channel is large enough (TLDR: there are riches in niches).
With online distribution and retail, we are entering a world of abundance. And the differences are profound. (Chris Anderson)
As a result of this ‘long tail’, people create more content for niche audiences that search for new ways to cut through the noise of information. This perfectly fits the growing trend of live-streaming — that influencers can capture attention and monetize it in a more meaningful way.
Chinese Live-streaming
The combination of influence and real-time video is a powerful one, and one that is speedily becoming apparent. China’s live-streaming industry has $3Bn in revenues (2020). More than 70% of Chinese Gen Z consumers prefer buying products directly via social media as compared to the global average of 44% (SCMP). iResearch predicts that by the end of 2020, China will have 524 million online live-streaming users (40% of the population!) The reason there are so many users is that Chinese live-streaming is incredibly lucrative and coveted. KOL (Key Opinion Leaders) in China get on apps and stream recommendations, day-in-the-life, product reviews, and the like. One KOL named Viya sold roughly $50 Million USD worth of items in ONE DAY.
As Mark Yuan, CEO Of Luxe China, a luxury independent live-streaming media channel, put it:
“Live-streaming is a combination of QVC, Facebook Live, and E-commerce platform all rolled into one app”
In a video documenting how the live-streaming works, Mr. Yuan says “customers are saying to start streaming immediately, but Zoe (the influencer) is holding back… so she can build demand. When the time is RIGHT, then we start selling.” Zoe says “I know everything about my customers: their work, their life. I call them out by name.” She confides that 50–60 pairs of shoes can be sold in a mere second.
Live-streaming is richly rewarded due to the transparency it brings to influencer marketing and a better ROI to companies. It is clear how many items are being sold due to the influencer because items are purchased in real-time compared to influencer ads on Instagram or Youtube where the purchase is marked by affiliate links or codes. Sometimes purchases are made later than the video, if at all.
Influencers are selling machines: In rough numbers, one product placement could be $20,000 for a low-level KOL, and Super KOLs charge, per slot (product) $200,000 (USD). They often also receive a cut of whatever is sold of the product.
In fact, live-streaming in China saved rural farmer’s livelihoods during the pandemic. Connie Chan, General Partner at a16z, wrote this analysis of video-first commerce for farm-to-table:
“By selling directly to consumers instead of through grocers, farms can reach far more customers and earn more money. Meanwhile, viewers can support independent growers — meeting the face behind their fruit — and receive fresher produce than what’s available in local markets.”
In an insightful podcast with Morning Brew, Connie Chan also explains how video is the “backbone platform for new feature development,” leading to a true multi-media experience where entertainment and shopping are intertwined. Not only does video help users discover things they would have never bought, it gives them the confidence through data points to carry through with purchases. This creates the ultimate online shopping and “social commerce” experience.
Digital Crowds and Psychology
In an Alibaba live-stream ad, it is touted that “live-stream is the BEST way to sell.” This brings up the theoretical question of what is “good selling?” Who has authority? What psychological factors lead to buying?
I’ve done some thinking to narrow it down to a few factors.
For Live-stream Persona
- Relevance — age, demographic, location, interests. These are pretty obvious, the live-streamers usually know their specialized audience well and what surrounds them.
- Interaction — how do the streamers build rapport with consumers? Many show themselves living their life, behind the scenes, introduce them to friends and family, and make watchers feel included. They reply to comments in real-time and call out watchers by name. They are active on most media channels and engage directly with the consumers.
- Honesty — live-streamers have to be honest, brutally so at times in order to demonstrate authenticity and a discerning eye. They have to answer questions promptly and with visual demonstrations, without trying to hide anything.
- Charisma — this is an interesting one because Chinese live-streamers usually come from an MCN (Multi-Channel Network: like a talent agency) to build these skills.
- Beauty/Idiosyncrasy — like an actor or actress, what draws people to live-streamers are the characteristics that make them seem credible (eg good skin to recommend skincare products). Otherwise, they have to be extremely idiosyncratic or funny to garner attention.
Live-stream Buying
- Time constraint — deals on live-streams are only accessible during that stream. Products are also only offered (or in stock) during the stream, so it creates a fear of missing out or fear of regret.
- Social Proof — you can see how many people are online the stream, and particularly you can see how many people are BUYING in real-time. When you buy, the profile shows up to the influencer/KOL, and the buyers feel ‘noticed’.
- Replicates an Online/Offline Experience — the aspect of live-streaming that is almost as good as seeing and feeling the items themselves. The multi-angle filming and up-close videos allow people to get a sense of the texture/fit/appearance of items on a real person.
- Curation — linked to the KOL’s honesty and idiosyncrasy, the idea that the influencer has already vetted the items for the buyers to purchase, making decisions easier.
- Gamification — ‘gifts’ in the form of monetary donation to the influencer appear as small icons or cute images of cars (if the gift is more substantial). There are leaderboards and ways that make donating or buying much more game-like, making it more fun and addictive to buy.
What does this mean for the rest of the world?
Early signs of live-streaming have already arrived and are slowly ramping up in the US. According to Femstreet, Google has launched Shoploop, a mobile-only shopping platform where Creators upload 90s clips of products and using it. Just 5 days ago, Amazon opened up streaming for influencers and creators on Amazon Live with different tiers of payments for influencers. Instagram has already been using live-streams for at-home workouts and other entertainment purposes, and TikTok US also allows influencers to run live sessions within the app.
With the integration of live-streaming on websites like Facebook and Instagram with their respective Shops, this is the next frontier of shopping + entertainment. Kids are growing up video-native and will be the next consumers to adopt live-streaming as an inherent part of online shopping. Though live-streaming efforts are not entirely new, the catalyst of coronavirus may bring the future of E-commerce into the spotlight.
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