The Big Sell | Will short video apps rule livestream e-commerce?

Livestream e-commerce is proving to be a trend with staying power, rather than a flash-in-the-pan phenomenon driven by pandemic-crazed online consumption.

E-commerce sales achieved through livestreaming represented more than 10% of China’s total online retail sales in 2020, according to data from iResearch. The research agency forecasts that the proportion will reach 24.3% by 2023. 

E-commerce giants, such as Alibaba and JD.com, as well as short video sites, notably Douyin and Kuaishou, have tapped into the livestream boom to boost their online commerce businesses.

For now, e-commerce platforms still rule the livestreaming roost, but Douyin and Kuaishou are catching up quickly as Chinese users’ experience and shopping preferences evolve. Experts we talked to said short video apps pose a threat to Alibaba’s dominance in live e-commerce.

READ MORE: How e-commerce and livestreaming became frenemies

Same service, different operating rationales

From a user’s perspective, e-commerce and short video apps offer very similar livestream shopping experiences. However, the operational models of these two types of platforms mean they approach live e-commerce differently.

Users on e-commerce platforms like Taobao and JD open these apps with clear shopping intentions. Therefore, the livestream sales performance of stores on Alibaba’s Tmall depends on the traffic to the store or brand itself, an employee from a business process outsourcing company in the livestream industry told TechNode. 

“If the store (brand) is well-recognized and has its own user base, the sales will be high, and vice versa,” he explained, asking to stay anonymous because his employer did not give him the permission to speak.

Meanwhile, the primary goal of livestreaming on Douyin is always to drive sales—not platform branding or customer relations—said the same source. “Most Douyin users haven’t established the habit of shopping on the short video platform. It’s highly probable that they are diverted to the livestreaming session for potential impulse buys while browsing some funny video clips.” 

It’s thus not surprising that Taobao’s traffic is more stable while traffic from Douyin and Kuaishou tends to be sporadic and unpredictable. The difference in platforms leads to different demands on livestreamers and support teams. Tmall store livestreamers tend to adopt a lean approach. One livestreamer can run a session after becoming familiar with prices and basic product information.

In contrast, Douyin’s livestreamers, whose primary goal is to retain audience attention and convert that attention into sales, usually need about three support staff to run a session. The extra staff perform tasks such as uploading the product links and changing prices, he explained.

Douyin versus Kuaishou

As for the livestream battle within the short video arena, Douyin has the upper hand over Kuaishou so far. Douyin aims to reach RMB 1 trillion ($160 billion) in gross merchandise value (GMV) on its platform this year. Meanwhile, Kuaishou expects to achieve a GMV of RMB 650 billion this year. That’s a downsized adjustment from the beginning of the year, when it set a GMV target of between RMB 750 billion and RMB 800 billion. 

“Kuaishou’s commercialization started earlier by building e-commerce based on social trust and connecting directly to the starting point of the supply chain,” said Xin Youzhi, a top livestreamer widely known as Xin Ba. He has 95.6 million followers on Kuaishou. 

To compare Kuaishou and Douyin, the livestreamer sales star explained that Kuaishou has a strong bond with users, who have dubbed themselves lao tie, or “buddies” in English, a term of endearment for the fans of livestream hosts. First gaining popularity among users in China’s lower-tier cities, the Tencent-backed firm is often described as the less sophisticated rival of ByteDance-owned Douyin. 

Merchants on Kuaishou were among the first to adopt the C2M (consumer-to-manufacturer) model, under which they directly give user feedback to upstream supply chain manufacturers. They thus can significantly reduce the marginal and intermediate costs and enable customers to buy more affordable products.

Meanwhile, Douyin has more social media features than Kuaishou. But the two video platforms are learning from each other to strengthen their e-commerce ecosystems, said Xin.

Short video as e-commerce challengers

E-commerce platforms are still far ahead in livestream e-commerce revenues. Taobao Live achieved a GMV of more than RMB 500 billion in the 2021 fiscal year ended March 2021. Douyin’s livestream GMV was RMB 100 million in 2020, according to a comparable fiscal calculation standard adopted by Alibaba. Douyin boasted a livestream GMV of RMB 500 billion in 2020, of which RMB 100 million was achieved through Douyin stores, according to a report by Forward Research Institute.

Compared with e-commerce platforms, short video platforms have advantages in terms of customer traffic and livestreaming scenarios, according to Xin Youzhi.

“Livestream e-commerce” for now puts the emphasis on e-commerce, not livestream. “Users on e-commerce platforms like Taobao and JD will buy, with or without livestreams,” said Sandy Shen, VP analyst with the digital commerce team at research and advisory company Gartner.

“As people spend more time on short video platforms, the apps could become super apps like WeChat, which cover every aspect of our daily lives, including e-commerce,” said Shen. 

Young shoppers lead the way

The trend is already apparent among Chinese youth. “Millennials, the core user group of short video apps, could be easily converted to consumers on these platforms,” said Shen. 

She added that short video apps are becoming an important entertainment and information channel for people from lower-tier parts of the country, where e-commerce platforms like Alibaba and JD have lower penetration. For this group, it’s natural for them to buy through a platform they are familiar with, according to Shen.

User attention is only the first step on the way to winning the e-commerce market, however.

“In the early stage, the live commerce industry relied on customer traffic, KOLs and livestreamers, but the core of live commerce is still e-commerce. That means e-commerce is always driven by products rather than by people. Customer traffic is not a panacea,” said Xin, who also runs his own retailer and livestream company Xinxuan Group.

In the meantime, the industry is also getting to the point where it has to face and adapt to a new developmental stage. The industry needs to push its limits with respect to people, goods and business models, according to Xin.

The short video apps still need time to improve behind-the-scenes capabilities from supply chain and logistics to KOL talent training and regulation compliance, Xin added.