November 2020 saw the 11th edition of Singles Day, the world’s biggest e-commerce festival and bellwether of the Chinese economy. Coming in the midst of a pandemic the discount bonanza this year bore particular significance, not only for what it said about the consumer mood, but also the performance of shoppable livestreaming, the red-hot trend that has boomed in China and around the world since the beginning of lockdown in January 2020. By John Millichap.
More than 250,000 brands took part in Singles Day 2020, yielding a record-smashing sales total of CNY498 billion (US$74 billion), according to Alibaba, which trademarked the name '双十一' (shuang shiyi), or 'Double-11', in 2012.
Competing platforms such as JD.com also offered heavy discounts, reporting sales of around CNY271.5 billion (US$41 billion), up from 2019's total of 204.4 billion (US$30.9 billion).¹
Data for shoppable livestreaming were similarly eye-popping. As many as 400 company executives and 300 celebrities hosted live events, netting a 400% increase in sales on the previous year. As the festival reached its climax some 583,000 live orders were being placed each second, with hundreds of millions of shoppers logging on from midnight to grab bargains.²
In 2020, for the first time the festival was split into two discount shopping windows, from 1-3 November and 11 November, thereby transforming a 24-hour bargain sprint into an 11-day promotional marathon. The change was intended to ease pressure on mail and courier services and give consumers more chance to browse bargains from the vastly increased number of brands and products on offer. These ranged from sacks of sweet potatoes to a Cartier necklace priced at CNY190 million (US$28.3 million). Alibaba’s logistics arm, Cainiao, chartered some 700 flights to meet demand.³
These figures back up a picture that has emerged over the past 10 months. Government data in May showed shoppable livestreaming in China attracted more than 560 million people during the first quarter of 2020, or roughly 62% of the country’s total number of internet users (more than 914 million people).⁴ This represents a rise of 163 million livestream users since the end of 2018, many of whom tuned to the format during lockdown in search of distraction and entertainment.⁵
Despite its relatively young audience, the industry’s Gross Merchandise Value topped US$63 billion last year. In the wake of lockdown that number is expected to more than double to US$138 billion.
Of these, the number of people who watched livestreaming e-commerce events reached 265 million in March – 260 million streamed live games, 213 million users watched live sports, 150 million connected to livestreamed music concerts and 207 million watched live entertainment.
All About the Eyeballs
Such spectacular numbers fall like fairy dust from a format that barely existed just five years ago. China’s PC-gamer crowd first adopted livestreaming as early as 2006, but it wasn’t until the launch of the mobile app Yizhibo in 2016 that technology, infrastructure and logistics converged to produce a light, integrated platform capable of handling payment, tracking, customer service and reviewing – all from a smart phone. Moreover, because Yizhibo works inside Weibo – China’s second-largest social media platform – it allowed users and KOLs to stream directly to their existing audience.
Shoppable livestreaming in China caught on quickest amongst the nation's chatty Gen-Zs, who tend to be the nation's biggest social media users. In 2019 almost half of livestream shoppers were aged under 25 with the majority spending CNY200-500 (US$30-75) per session.
Despite this relatively young audience the industry’s Gross Merchandise Value (GMV) topped CNY416 billion (US$63 billion) in 2019, prompting the nation’s media to declare ‘The Year of the Livestreamer’.⁶ In the wake of lockdown that number is expected to more than double to CNY911 billion (US$138 billion), according to data from iResearch, a market research firm based in Shanghai.
The key to shoppable livestreaming’s appeal is its interactivity and convenience, with users placed in the middle of the action direct from their phones. Part social media and part ecommerce, it allows users to quiz hosts, chat with other viewers, submit reviews, discover the hottest new products, and do a little shopping.
Older users tend to have a higher purchase intent and prefer the privacy of platforms such as WeChat. Younger audiences, by contrast, spend more time chatting and browsing.
Lockdown helped to widened shoppable livestreaming in China to 30- and 40-somethings and accelerate uptake among audiences in lower tier cities outside the nation’s ecommerce heartlands of Shanghai, Beijing and Guangzhou. What ensued was an intensification of the battle for eyeballs – or liuliang jingji (‘the traffic economy’)⁷ – with social media platforms such as Tencent’s WeChat, Douyin, and social commerce app Xiaohongshu, also known as Red, all launching livestreaming capabilities in 2020.
Each is aimed at a slightly different demographic and each offers a slightly differently mix of products, from high-end luxury fashion and cosmetics to everyday groceries.
Older users tend to have a higher purchase intent and prefer the privacy of platforms such as WeChat, where they can ask live hosts one-on-one questions about specific product features. Younger audiences, by contrast, enjoy the more rowdy social media element and spend more time browsing and chatting on open platforms such as Weibo. All shoppable livestreaming in China operates in broadly the same manner, however, with livestreams either hosted at a brand’s official online store or at a third-party channel, whether that is a studio, a real world pop-up event or even on the beach.
Δ Austin Li, the so-called 'Lipstick King,' who famously sold 15,000 lipsticks in five minutes on Singles Day 2018.
Invasion of the Influencers
Despite the demographic changes, the habits of livestreaming’s original user base remain deeply imprinted in the format’s DNA. Practices such as group buying, for example, began as a way for pop-idol fans in their teens and 20s to get hold of discounted merchandise and concert tickets. Today that model has been expanded to include almost any product you can name and propelled the success of group-buying discount platforms like Pinduoduo – ‘a mixture of Costco and Disneyland’⁸ – which in the past five years has emerged as one of China’s top-five most valuable listed tech companies.
Another vestige of livestreaming’s early days is the dominance of the influencer host – a synergy of online fans’ obsessive loyalty and tendency to organize en masse in big gossipy groups.
Today, one of the biggest of these is Li Jiaqi, the so-called ‘Lipstick King’, who commands an army of 40 million followers on Douyin and neatly fits China's fan girl preference for a chaste, feminized aesthetic. Also known as Austin Li, the live-host star, now 28, famously sold 15,000 lipsticks in five minutes on Single’s Day 2018. Alibaba reckons that Li's shows netted more than CNY1 billion (US$142 million) on its platforms in the month leading up to the ecommerce festival in 2019.⁹
Δ Viya: "My ambition is to offer everything my fans might need: Doorbells, carpets, toothbrushes, furniture, mattresses, everything.”
Alternately, the big-sisterly role is fulfilled by Huang Wei, known online as 'Viya', who hit an all-time record in May 2020 when 37 million viewers tuned in to her broadcast on Taobao Live where she was selling everything from cosmetics and home appliances, to prepared foods and cars. The previous month she even sold a rocket launch live on air (yours for CNY40 million or US$5.6 million). On Singles Day 2019 she achieved sales of more than CNY3 billion and in 2018 earned more than CNY30 million, according to figures from Alibaba. The spread of coronavirus has more than doubled her viewership.¹⁰
How To Give What Everyone Wants
Why hasn’t this kind of shoppable livestreaming caught on elsewhere? Online influencers exist in the West, too. The key difference is structural. The internet in China is organised and used differently than elsewhere. Moreover, things like cost per click and cost per impression (CPC/CPM) advertising remain relatively underdeveloped in China compared to Facebook and Google. For brands aiming to connect with big audiences, the influencer offers a more direct and reliable route. The consequence of this is a highly sophisticated, albeit opaque system in which influencers act as the gatekeepers to China’s vast online audiences.
Further tensions have surfaced as brands attempt to tackle a format whose basic appeal is bound up in its spontaneity and unpredictability.
Problems arise in the awkward ground between what a brand expects and what audiences want. Hosts such as Li and Viya are savvy enough to realize their star power rests on credibility with their audience, many of who are jaded by the hyper-commercialization of China’s internet. Li’s willingness to diss big names has won praise as a signal of his authenticity and trustworthiness.
Yet at CNY131,000 (US$20,000) upfront fees, plus 30% sales commission for a five-minute slot – notwithstanding product discounts of up to 75% – brands have begun to wonder what kind of a collaboration they’re paying for. How sticky will this new audience prove to be? And how far will steep discounts dissuade buyers from making repeat purchases at the regular price?
Further tensions have surfaced as brands attempt to tackle a format whose basic appeal is bound up in its spontaneity and unpredictability.
Shoppable Livestreaming's Luxury Dilemma
Louis Vuitton was the first luxury brand to try shoppable livestreaming in China with an hour-long show-and-tell session in March on Xaiohongshu, a platform best known for fashion-forward shopping chat, tips, price comparisons and styling advice.¹¹
Fashion blogger Yvonne Ching, who has a following of two million on Weibo led the event decked out in LV’s 2020 summer collection, offering scrupulous commentary on each part of her outfit and reminding viewers to buy items via a link to the LV TMall store.
The broadcast attracted some 150,000 views and received wide-eyed applause in the local fashion media for the brand’s bold new move and pally, down-to-earth tone. Yet user comments were mixed, with some sniping that the event’s low-end styling fell short of what might be expected from one of the world’s top luxury fashion houses.¹²
Δ
Fashion influencer, Yvonne Ching (wearing stripes) first appeared on the influencer radar after dating popular actor Zheng Kai. The pair later starred on a reality TV show together.
Industry observers echo these concerns and point out a fundamental tension between luxury brands’ desire for exclusivity, polish and premium prices and livestreaming’s free-form, all-comers, discount ethos. Other luxury brands such as YSL have bridled at offering discounts and instead focus on using livestreaming as a way to raise awareness and gain market insight. Other brands have started to train in-house sales staff in live-selling. Yet with footfall in boutiques and malls still below pandemic levels, few top-end brands can ignore the potential of a hot, new format in what is now the world's biggest luxury market.
The Role of the State
All this super-heated activity made it inevitable the state would step in at some point. The extra scrutiny has largely been welcome. With audience numbers climbing fast, so, too, have incidences of fraud. A report published in March 2020 by the China Consumers Association (CCA) showed 37.3 percent of customers reported problems with purchases made during livestreaming sessions.¹³
Δ The stars of shoppable livestreaming in China, such as Viya (above), depend on large teams of assistants to help plan and execute events.
Meanwhile, brands face a different set of problems. Big hosts such as Li and Viya are backed by large teams of stylists and assistants who help to select products, decide discounts and plan broadcasts. But even with support like this, it takes long hours and commitment to build and maintain a big audience. For small and mid-tier hosts the temptation is to pad viewer numbers and inflate sales figures.
A common scam is to use up-front fees to pay proxies to make purchases during livestreams. The maximum product allowed under contract is then returned to the brand and any remaining items are sold on third-party sites. Although not fake in a technical sense such sales numbers are not true in any meaningful way.¹⁴
In June new measures were rolled out to tighten real-name registration for shoppable livestreaming – already mandatory on all social media platforms – plus new checks on the truth of host claims. Greater oversight is also promised to stamp out ‘low values’ and ‘vulgar content’, although what this might mean in practice is less certain. In May 2020 the Cyberspace Administration of China (CAC) singled out 10 firms, including ByteDance’s Xigua and three livestreaming apps run by Tencent-backed firms — Bilibili, Huya and DouYu — as services that must rectify ‘vulgar’ and ‘problematic’ content.¹⁵
In a world where ecommerce was beginning to look stale and samey, the rise of livestreaming has brought variety, spontaneity and excitement back to online shopping.
That sharp practices are quickly dealt with gets high priority in a country where ecommerce is tightly bound up in the fabric of daily life, as well as being a source of huge national pride. Moreover, as corporate profits skyrocket and the influence of big tech is felt ever more widely in Chinese society, the government has perhaps seized on regulation as a chance to remind everyone who’s the boss.
Towards The New Normal
With the Covid pandemic in China now largely contained, and new vaccines in the process of being rolled out, analysts had expected enthusiasm for live-selling to wane. Data from the recent Singles Day, however, suggest the trend for shoppable livestreaming in China may only just be beginning.
A recent report showed livestreaming currently represents just five percent of the country’s ecommerce market and a tiny share of the overall retail sector. That still translates into big revenues, but shows how much room there is for growth.
Around two-thirds of Chinese consumers said they had purchased products via livestreaming in the past 12 months, according to a survey by AlixPartners. And in a sign that livestreaming has been accepted as a way to shop like any other, only 19 percent of those polled said they did not plan to shop via livestreaming during this year’s festival.
In a world where ecommerce was beginning to look stale and samey, the rise of livestreaming has brought variety, spontaneity and excitement back to online shopping. For many in China and beyond, the pandemic helped to normalize the format – stirring consumers, brands and entrepreneurs to the potential of a new kind of shopping experience that has shaken off its faddy origins and inserted itself at the cutting edge of ecommerce.
