The Big Sell | After L’Oreal’s livestreamer spat, is a new e-commerce era dawning in China?

Discussion around a high-profile spat between French cosmetics giant L’Oréal and China’s top livestreamers Li Jiaqi and Viya filled Chinese social media last week. 

In a rare public dispute for the retail industry, the duo accused the cosmetics brand of failing to deliver on its promises in giving them the lowest price for a face mask product as part of pre-sale promotions for this year’s Singles Day shopping festival, the Chinese equivalent of Black Friday in the US.

Furious users, who made purchases through the pair’s livestreams only to discover the product was available for cheaper days later on a separate L’Oréal’s livestream, voiced their discontent with the cosmetics company after it was publicly called out by the star livestreamers, and demanded the brand refund the difference.

With the popularity of live commerce, brands have become increasingly reliant on popular livestreamers as a sales channel to drive their revenue. The incident shed light on the hidden machinations between livestreamer KOLs and brands, who were once inanimate partners looking to capitalize on the live sales trend but have seen such relationships grow increasingly complex.

In recent years, China’s e-commerce environment has shifted to favor sustainable growth and profitability, not a win-at-all-costs pursuit of gross merchandise value (GMV). But that doesn’t mean that brands have abandoned steep discounts as a sales tactic – far from it, many are using such promotions to lure in customers who they then hope to build long-term relationships with. The dispute shows how much power – and sometimes how little agency – KOL livestreamers have as part of such collaborations.

A brief timeline

• Oct. 20: Several top livestreamers, including Li Jiaqi and Viya, promote L’Oréal’s Revitalift Filler mask in their livestream sessions on the first day of Alibaba’s pre-sales for Singles Day 2021. Fifty masks are sold for RMB 429 ($67), a deal that’s promoted as the lowest price all year. Li Jiaqi and Viya sell more than 800,000 units of the product, raking in around RMB 350 million.
• Nov. 1: Consumers find that the same product package is being sold more than a third cheaper at only RMB 257 on a livestream held by L’Oréal’s Tmall store. Angry buyers who placed orders via the pair’s livestreams ask the brand to refund the difference. The livestreamers redirect users to complete purchases on the brand’s Tmall stores.
• Nov. 17: Li Jiaqi and Viya explain in seperate statements that L’Oréal’s RMB 200 discount to users who spent more than RMB 999 is the cause of the price difference. “This is unfair for consumers who watched their clock to tune in to our show on October 20,” both streamers declare. The livestreamers suspended their collaboration with L’Oréal, giving the company 24 hours to come up with a solution. In a recognition of how damaging this could be to their personal brands, both stars pledge to compensate users out of their own pockets if the cosmetics company fails to make amends.
• Nov. 18: L’Oréal apologizes for the confusing promotion mechanism and explains that some consumers were able to purchase its products at a lower price in its online store because they used multiple discounts offered by the store and e-commerce platforms. After this fails to quell the backlash, the skincare giant says in a second statement that it will offer shopping vouchers to affected customers to settle the dispute.

Even this announcement fails to satisfy some users, however. “Why do I need the voucher? You expect me to buy your products again?” asked Weibo user “Wuyuemeirendemengda”.The sentiment is shared by many. A hashtag on the microblogging platform, “Why do I need the vouchers”, attracted 110 million views.

The condemnation was joined by state-backed media outlet People’s Daily, which criticized the company in a post from its Weibo account, saying the cosmetics brand’s blaming of complicated promotion mechanisms fails to address the more serious accusations of false advertising.

Others argued there was no “significant wrongdoing” on the part of the company because the promotion on its own store covered various products, while the promotion by the livestream KOLs only covered a single product. Regardless, the incident demonstrated the pitfalls of livestream strategies and resulted in several days of heated debate – not to mention some awkward headlines for the French brand.

A new way to shop the sales

Whereas Singles Day was once about hopping from store to store in search of a deal, the emergence of livestream e-commerce has seen hundreds of millions of buyers swarm to these virtual sales rooms to trust in livestream stars to guide them to the best bargains.

Fans of the “lipstick king” and the “livestream queen”, nicknames for Li Jiaqi and Viya, have spent lavishly and fearlessly because they believe the livestream figureheads will bring them the best deals. Consumers expect the products they recommend to be of high quality and to be sold at a low price that can’t be beaten anywhere else on the internet – thus, trust is crucial. 

This idea is so important to the presenters’ personal brands and income, that Li Jiaqi even starred in a hit variety show ahead of this year’s Singles Day which showed him bargaining with some of the biggest cosmetics firms in the world. Entitled Offers to Every Girl, the eight-episode show saw Li argue with firms including LVMH and Perfect Diary, bringing sales heads to their knees to gain extra-low prices.

The marketing worked. Buyers spent a combined RMB 18.9 billion during Li and Ziya’s livestream sessions on Oct. 20, the first day of Taobao’s Singles Day 2021 pre-sales.. 

Such numbers are only possible because the top KOLs have mostly delivered on their promises, yet this year things are beginning to change as brands shift their focus to store streaming or corporate streaming, a channel that addresses their new strategic focus of long-term growth.

Rise of the store-specific livestream

While the livestream model that Li Jiaqi and Viya have made their names with still retains enormous popularity, store-specific livestreaming, where brands or merchants promote their products through their own flagship stores either on Tmall or other platforms, is on the rise.

In its early stages, the live e-commerce industry relied on KOLs and livestreamers to bring them the traffic, but now an increasing number of mature brands are launching their own livestream sessions rather than relying on KOLs to promote their products, according to Echo Gong, an analyst at research agency Coresight. The trend is especially clear among companies that have already built a strong brand awareness and therefore feel increasingly emboldened to attract their own audiences. 

In addition to saving on the hefty commission fees star livestreamers now command, merchants also believe that they can direct user attention to their own marketing channels for long-term operations, thus building user loyalty. This trend was on full display during this year’s Singles Day shopping festival, where numerous merchants focused on long-term benchmarks such as customer retention, operating profit, and customer lifetime value, rather than judging themselves purely on sales numbers, according to a report research institute Bain released before Singles Day.

READ MORE: Singles Day 2021: Slower growth, more sense

During last year’s Singles Day promotional period, more than 60% of Taobao Live’s revenue came from corporate livestreams. According to data from iResearch in 2020, the sales of store-specific livestream accounted for 32.1% of the total live e-commerce industry in 2020, and it is expected to reach nearly 50% by 2023.

Xin Youzhi, also known as Xinba, a top livestreamer KOL with 95.6 million followers on video app Kuaishou, says he’s optimistic about store-specific livestreaming in the future. “The core of live commerce is still e-commerce,” he told TechNode “That means e-commerce is always driven by products rather than by people. Customer traffic is not a panacea.”

Conclusion: There’s no getting away from the fact that discounts will still be the most effective means to attract users for the foreseeable future given Chinese buyers’ long-ingrained taste for deals.

But promotions come at a cost. Instead of spending a huge chunk of their budgets on celebrity livestreamers, brands are increasingly looking to spend more tactically with the goal of attracting users to their own stores.

Disputes like the one between L’Oréal and its star livestreamers appear to damage everyone without a clear winner emerging. This specific incident tarnished the French brand’s image, while Li Ziqi and Viya were suspected in some quarters of monopolistic behavior.

The price bargaining power of livestreamers is “scary”, Weibo user Zeicha declared in a post on the microblogging platform in the wake of the public spat. “Similar to e-commerce marketplaces like Taobao, top KOL personalities like Li and Viya are platforms themselves. Instead of distributing customer traffic among the merchants, they hold onto the traffic on their own.”

Brands seem to have woken up to this too, meaning we could now be set for a whole new phase of livestreaming e-commerce.