US Brands, Creators, and Platforms Can’t Afford to Ignore The Chinese Trend of “Livestream Shopping”
Projected to generate $129B in 2020 revenue, livestream commerce is a growing phenomenon in China that’s redefining the shopping experience for digitally-native consumers. What is livestream commerce? Think: Twitch meets QVC… In a recent survey we conducted, 48% of US brand marketer respondents said they don’t use international influencer marketing trends to inform their domestic priorities. However, the rise of Chinese livestreaming commerce should not be ignored. There are many relevant learnings for US brands, creators, and platforms. In this article we’ll explore:
1. What is Livestream Shopping? How Big is it in China?
Taobao Live (owned by Alibaba) is China’s premier livestream shopping destination. It’s projected to sell to 500M+ livestream shoppers in 2020 and generate 500B+ transactions over the next three years. Let those numbers sink in…
The shopping platform hosts countless influencers, who market and sell products from 100,000+ brands, including American brands like Levi’s and Ralph Lauren. Influencers generate buzz around products, as well as consumer trust, via engaging and interactive personality-driven broadcasts. These can last several hours and are similar to how US gamers host Twitch streams (Bloomberg described these broadcasts as “part variety show, part infomercial, part group chat”). Trusted hosts demonstrate a product and describe why they love it, answer real-time questions from viewers about issues like fit and feel, and then countdown to the sale, at which point a limited inventory is made available at a steep discount. Once the sale is live, graphic overlays provide real-time updates on the limited supply available, until it’s all sold out…and the host moves on to the next product.
Consumer tension and fear of missing out (aka FOMO) is built up and monetized through each of these sales cycles, and is a unique byproduct of the live experience. These dynamics can’t be replicated by a static Instagram post. As a result, livestream content shrinks the sales funnel and accelerates the customer journey, and converts viewers to buyers at a significantly higher rate than traditional marketing (30% vs. 3%). A spokesperson for the Greater China division of Procter & Gamble (which operates its own live shopping channel in China) commented,
“Customers used to move slowly down the path from awareness to interest to purchase to – ideally – loyalty. Working with the top livestreamers, the process gets much shorter”.
So, how big is the livestream commerce market in China?
The size and growth of the Chinese livestream commerce market is staggering
China’s top influencers drive purchasing at unprecedented scales and speeds
COVID is Accelerating the Adoption of Livestream Shopping
2. The Case For Livestream Shopping in the US
Although China’s ecosystem of content / commerce / payment platforms is dissimilar to America’s (which we’ll explore in the following section), the scale of this emerging industry should not be ignored. Especially because it builds on the convergence of several consumer trends that we’re also seeing in the US. Benedict Evans, a prominent global technology analyst, suggests Western markets and China are more similar than different when it comes to viability of livestream shopping, “Influencers, livestreaming, smart phones, social—those things are universal…It’s hard to predict in advance, but I struggle to say that influencers selling stuff [live] online wouldn’t work outside of China.”
We agree. The below US trends give us confidence that livestream shopping can and will work in America.
Socially-interactive livestreaming and gaming are among the most popular new content mediums for younger US audiences. And commerce integrations have proven to be effective in these environments. Between Twitch / eSports and “The Metaverse”, we’ve seen a strong consumer appetite for shared live experiences built on social interactivity, audience engagement, and gamification (we explored the potency of live content in a recent report on sports media). These platforms are monetizing live engagement by integrating transaction opportunities that feel organic to the viewing and playing experience. Consumers have responded favorably. Demonstrating not only a willingness to transact on these platforms, but an excitement for it.
Although the platforms evolve, the fundamentals remain unchanged. Trusted content creators in the US have always effectively driven commerce. Tentpole IP and personalities are leveraged to enhance product discovery and awareness, and generate revenue through commerce conversions. Like Viya in China, influential creators in the US leverage their fan trust and engagement to power the customer journey and generate sales. From awareness, to interest, to purchase, to loyalty.
Cultural capital + constraints on time and supply = increased urgency to buy. Consumer psychologist and marketing professor Robert Cialdini explains
“a product becomes more attractive when their perceived availability is limited”.
This dynamic is fundamental to the success of live-shopping in China. The hosts emphasize the exclusive nature of the offering through deep discounts and limited supply. Once they count down from five and activate the sale, there is a frenzied rush from viewers to seize the opportunity before it’s too late. Andy Yap, a social psychologist at INSEAD business school in Singapore, explains this theory in the context of Chinese livestream shopping:
“The perception of scarcity is a powerful psychological tool to get people to act fast, which leads to impulse buying…In a livestream, it’s even more intense because the time is shorter and there are a lot of other viewers who may be potential buyers. People feel more urgency.”
This principle is not unique to China’s culture. It’s been proven in the American streetwear market, which perfected the art of inflating demand through exclusive “product drops”. Like Chinese livestream commerce, American streetwear empires are built on the convergence of product scarcity and an influencer-driven sense of “cool”. A joint study by PWC and streetwear publisher Hypebeast explains,
“[In streetwear culture,] Exclusivity and desirability are conferred by scarcity and insider knowledge rather than high prices. In short, streetwear has redefined how ‘cool’ is made profitable”.
Ecommerce and livestreaming are both beneficiaries of the COVID crisis. As a result of COVID- induced shifts in consumption habits, the adoption of livestream shopping in the US will accelerate.
Building from these converging trends, American platforms – both content and commerce – have partnered with creators to test the waters of live-selling. The results have been encouraging, and indicate that this market can and will be effective in the US. For example, in 2019, Instagram partnered with Lebron James and Uninterrupted to unveil an exclusive “drop” for his signature “More Than an Athlete” sneaker via a live unboxing streamed on IG Live. The sneaker sold out within five minutes, and the rest of the apparel collection, including an Instagram-exclusive hat, sold out in 10 minutes. Additionally, in 2019 Amazon launched the Amazon Live platform (its version of Taobao Live) and the Amazon Live Creator app, where brands can live stream directly to Amazon.com and the Amazon mobile app.
3. The Case Against Livestream Shopping In The US
Despite the converging consumer trends profiled above, we shouldn’t assume that livestream shopping will become as potent a force in America as in China. The fundamental differences between Chinese and American consumer ecosystems will shape divergent applications of livestream shopping.
Although America’s content and commerce landscape continues to consolidate, it’s significantly more fragmented than China’s. Chinese users spend their time on “super apps”, Alibaba’s being the biggest. Alibaba’s infrastructure powers platforms for content distribution (Taobao Live), ecommerce (Taobao and Tmall), e-payments (Alipay), and shipping / returns logistics (Cainiao). It even runs an incubator for influencer talent (Ruhan) to ensure that Taobao Live is always broadcasting premium personalities.
This vertically integrated infrastructure enables a frictionless user experience that allows live-shopping to thrive in China. Albibaba’s technology allows the audience to watch, interact, discover and purchase – all without leaving the platform.
In the US, major content platforms, like Facebook / Instagram and Youtube, are great for product discovery, but insufficient when it comes to point-of-sale transactions and inventory / shipping logistics. You may find a product on Instagram, but to select it for purchase you’ll often have to click out to a third-party portal, and to complete the purchase you probably have to interact with a fourth-party payment processor. Neither of these experiences feel native to the Instagram environment. A new layer of friction is introduced with each step further away from Instagram’s ecosystem, making the would-be shopper less and less likely to follow through with the purchase.
On the other hand, Amazon has perfected ecommerce but struggles to generate the organic influence that powers discovery. Shoppers go to Amazon with intent to purchase. They know what they want before they even log in. Yes, it has successfully leveraged a premium video offering to boost subscriptions to its Prime service, but this experience is different than the type of content engagement on social platforms, which promote organic product discovery and leverages the cultural capital of trusted influencers to drive purchases.
Content platforms have taken strides to bolster commerce functionality. Specifically, Facebook’s partnership with Shopify, NBCU’s rollout of “NBCUniversal Checkout”, YouTube’s launch of shoppable ads, and Snap’s new UX, which takes strides towards the Chinese “super app” model by having its own verticalized OS, including a partnership with Atom Tickets that enables seamless in-app purchasing.
Further, Amazon has invested billions in top-of-funnel programming, including Amazon Prime Video, Amazon Studios, Twitch, and Amazon Live (recently valued at $500B collectively). But, no US company can replicate the end-to-end live-shopping experience that has taken off in China.
Over the next couple weeks, we’ll publish Part 2 of this 2-part series. We’ll discuss what livestream shopping will look like in the US, and what each party (creators, platforms, brands) must do to win.