Additional contributions by Eliam Huang.
2019 was the year livestream e-commerce took off, with 250% year over year growth from 2018’s RMB 126.6 billion (around $18.0 billion), according to Chinese financial services firm Everbright Securities (in Chinese) and an estimate by Coresight.
The livestreaming e-commerce market is worth an estimated RMB 440 billion (around $63 billion) in 2019, according to Everbright. This equates to almost 9% of China’s total estimated e-commerce sales this year ($723 billion), or roughly 1% of the 2019 official estimate for total consumer good sales. According to the company, Everbright’s estimated sales revenues generated by livestreaming is based on industry forecasts, and surveys with major industry players, such as Taobao Live.
Livestreaming is becoming a go-to option for Chinese consumers seeking new products, promotions, or an impulse buy on a deal, especially for categories such as beauty and fashion, food, and home products. For instance, Taobao Live, Alibaba’s dedicated livestreaming channel, generated sales of RMB 20 billion during Alibaba’s Singles’ Day 2019 shopping holiday on November 11. This accounted for around 7.5% of the company’s total Singles’ Day sales of RMB 268.4 billion.
Livestreaming is like television shopping—think QVC—upgraded for the 21st century. It hosts real-time broadcasting of video content by presenters that model or try products. Viewers are able to immediately purchase the item from an embedded link online. Just like presenters on QVC, livestreaming hosts sell a wide range of products, from apparel and cosmetics to electronics and cars.
The big platforms
Taobao Live currently holds the largest share of the livestreaming e-commerce market in China. The next largest players are short-video platforms Kuaishou and Douyin, according to Everbright.
Taobao Live was launched in 2016 and was the first service to use livestreaming to facilitate e-commerce. Following suite, Douyin linked up with Taobao and Tmall in March 2018, allowing viewers to buy products from these platforms without leaving the TikTok app. In June that year, Kuaishou introduced a similar feature that enables livestreamers to sell goods through an on-platform store.
Taobao Live features a wider range of products than its major rivals, including apparel, beauty, and parent-and-baby products, whereas Douyin is focused on the beauty and fashion sector. L’Oréal’s official Douyin account has over 121,000 followers, as of November 23, 2019. Livestreaming hosts on Kuaishou often help brands to clear inventories (in Chinese), as well as selling rural fresh produce and local handcrafts. The orange retailer “Home of Tangerines 471” (ganju zhi xiang 471), which sells local fresh tangerines, has 71,300 followers on Kuaishou as of December 5, 2019.
Even group-buying giant Pinduoduo is reportedly exploring adding livestreaming function to their platform, according to 36kr (in Chinese). Pinduoduo has posted job ads hiring a “live streaming celebrity manager” and a “creative video manager” on on Lagou.com (in Chinese).
How to use it
To some extent, livestreaming is a 21st-century iteration of television shopping. While lucrative for companies who sell products there, the latter has always been a niche retail channel: We estimate that television shopping channels accounted for less than 1% of total retail sales in the US in 2018, for example. By contrast, livestreaming may already contribute 1% of total retail sales in China, according to our analysis of estimates by Everbright Securities.
Brands and retailers should consider the most appropriate livestreaming platform depending on their product category. For instance, Douyin is the best channel for targeting beauty consumers, whereas Taobao Live offers greater category range, including apparel, beauty, and parent-and-baby products.
Even while livestreaming is helping to power e-commerce growth, history may suggest a natural cap on the impact of this channel. Livestreaming is still quite a small portion of retail, accounting for 1% at most of total retail sales in 2018. But we believe livestreaming is a good channel where shoppers look for deals and impulse buys, especially for categories such as fashion and beauty, food and home products.
But when livestreaming works, it does things traditional e-commerce doesn’t. Livestreaming works well with for certain kinds of e-commerce because it serves not only as a tool to showcase and deliver information about products, but also as a customer engagement channel in which shoppers can interact with the host. It gives customers feelings of a personal relationship.
This feeling of a relationship can help consumers overcome the confusion known as the “paradox of choice”: if shoppers have too many options, they might feel difficult to choose and end up not buying anything. A trusted host who gives shopping recommendations can help consumers to focus on one product and make purchasing decisions more easily.
Correction: An earlier version of this article wrote that the livestreaming e-commerce market saw estimated 71.2% growth from 2018 to 2019. The correct figure is 250%.
An earlier version of the chart “Taobao Live dominates livestream e-commerce by transactions” omitted the “other” category. It has been revised to include it.