What value does an influencer bring? The lockdown boom in online shopping and wider acceptance of formats such as live e-commerce have transformed the role of key opinion leaders (KOLs) in China. As similar trends play out around the world, what lessons can the West learn from China's influencer economy? By John Millichap.
The acquisition in November last year of Parklu, China’s biggest influencer management and analytics company, by Launchmetrics says much about the heft of China’s online economy and the critical role of influencers and KOLs in helping to make it work.
Paris-based Launchmetrics is one of a growing number of influential data analytics companies that help businesses measure the effectiveness of their digital marketing efforts. Its main focus is the luxury industry. In the past it has helped brands such as Fendi, Burberry and Gucci plan their online campaigns.
In its takeover of Parklu the company has acquired performance data on more than 100,000 Chinese KOLs, including some of the biggest stars in the nation's influencer economy, across a range of social media platforms. In so doing it aims to boost its offering by promising clarity in an industry that is notoriously opaque, while also catching a foothold in a key market for the luxury industry. In 2020 China accounted for around 20 percent of total global luxury sales. By 2025 that share is expected to increase to 50 percent.
Δ China accounted for around 20% of total global luxury sales in 2020, up from 13% the previous year. According to Chris Tung, chief marketing officer of Alibaba Group, 'Chinese luxury consumers are digitally native, highly sophisticated and expect an elevated shopping experience. Global luxury brands have embraced new digital tools such as livestreaming for consumer education or product presentation.'
The numbers at stake are staggering. During the most recent Singles Day ecommerce festival one of the nation’s biggest KOLs, Austin Li, received more than 67 million views of his livestream and activated more than 2,000 private groups on the social media platform, WeChat — each of them with 500 people — to deliver product previews and manage after-sales inquiries.
Other heavy hitters include Huang Wei, known online as "Viya", who reached an all-time sales 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. On Singles Day 2019 she did more than ¥3 billion in sales (around $463 million) and in 2018 earned more than ¥30 million ($4.6 million), according to figures from Alibaba. The spread of coronavirus has more than doubled her viewership.
This sort of super-heated activity can be disorientating for overseas onlookers. For, if the past year has seen the smooth, relentless rise of KOLs in China, it has seen a damaging round of spats and cat calling among their peers in the West.
The days might be coming to an end when an influencer’s daily workload comprised little more than posting a photo on Instagram from a beach in Dubai.
As a result, by 2020 it wasn’t a surprise when "the end of the influencer" was finally declared. And by 2021 even the influencers had joined the influencer-bashing bandwagon, as competing YouTubers and Instagramers called each other out for being inauthentic and breaking Covid travel rules.
Why this big difference?
Context has much to do with it. Certainly it’s true that the number of influencer-brand partnerships in the West has fallen over the past 12 months – in the UK by as much as 37 percent according to one YouGov study. Dragging lockdowns across Europe have caused brands to slash their marketing budgets and influencers have been first in the firing line. There is also the gathering sense of an industry groping to find better ways to make use of influencers.
Faster and Faster
In China, by contrast, the Covid outbreak was contained quickly. Most businesses have returned to something like normal and marketing budgets have not been as badly effected. But even if the pandemic in China had dragged on, social media is structured and used very differently there – online audiences are far bigger, digital penetration is deeper, social media and ecommerce more tightly integrated, and use of influencers more sophisticated.
Significantly, the pace of change in China's influencer economy is quicker, and it’s in this sort of hyper-accelerated, hyper-connected environment that its KOLs have thrived. The boom in livestreaming, moreover, has not only served to increase the tempo, but highlighted the importance of KOLs in producing real-time content that yields immediate engagement and quick results.
Frequency of watching livestreams among Chinese social media users
Survey conducted May 2020
China's influencer economy has been boosted by strong uptake of live-selling. Source: Statistica 2021
This is at odds with the traditional approach to advertising in the West, which has evolved over the past century or more in parallel with the development of advertising media such as billboards, print, radio, and TV. Here, tactical campaigns are developed across multiple media and planned months or even years in advance. It is a formula that has worked well and which audiences have been trained to accept, yet it is not well adapted to the relentless and increasing pace of social media, where change occurs in days and even hours.
Kimberley Whitler neatly characterizes the East-West divide in her article,
What Western Marketers Can Learn from China, in which she notes how firms in China’s fast-growing economy need quick footwork to capture market share and keep investors on board. "Western marketers do not aim to be slow, of course. But there is a central difference in approach, with large Western firms emphasizing scale and efficiency (a profit mindset) while Chinese marketers focus on speed and growth (a revenue mindset)."
Lockdown has given a glimpse of how online behaviour, and online shopping, might be like in the future – a world in which speed, reach, convenience and responsiveness are decisive. In this way western consumers, especially younger demographics, have been nudged to become more like those in China. Will agencies also be tempted to look East for inspiration on how to use influencers to engage this fast-moving market?
Δ Despite her fame in the United States, Kim Kardashian had to adapt to a set of different rules to win over consumers in China. For Singles Day 2019, she teamed up with China's best-known live host, Viya, and despite an awkward debut performance, managed to sell 15,000 units of her KKW fragrance in a few minutes, largely thanks to Viya’s loyal followers, most of who had no idea who Kardashian was.
Trust in China's influencer economy
Inevitably, big differences will always remain. Several of the conditions that give influencers such dominance in China are unique. The most important of these include the growth of livestream ecommerce platforms such as Taobao Live, the country’s biggest, the dominance of social media omnichannels, such as WeChat, on which users spend more of their time, and the ubiquity of mobile technology, which encourages greater participation in both.
A massive user base also means massive content churn – a kind of social media "white noise", with the capacity to drown out even the most carefully crafted advertising campaign. Against this background KOLs and key opinion consumers (KOCs) function as arbiters and disseminators, signposting useful information for their followers – often based on particular subject areas (beauty, fashion, sports, cookery) – and setting standards (what’s hot and what’s not).
The key component is "reliability". Public trust in the mainstream media is low and online scams, such as fake and shoddy goods, are endemic in a market that is awash with new and unknown brands. As a consequence, of all the world’s digital consumers, Chinese spend the most time researching product information. In practice, this means seeking recommendations from friends and family, or else online reviews and the word of KOLs and KOCs.
In 2018, a Frost & Sullivan survey of 1,000 cross-border e-commerce consumers found that 30 percent of Chinese consumers turned to social media and KOLs for product information. However, among Gen-Zs, who tend to spend more time online, this proportion is likely much higher.
For brands, this statistic is especially significant because Gen-Zs in China account for 13 percent of household spending – more than four times that of their peers in the United States. Recent studies also suggest China’s Gen-Z’s are more accepting of sponsored content (although this may only be true for content in which users already have an interest).
Δ In a sign of the growing importance of livestream hosts, at the end of 2019 T-Mall Global announced plans to launch an influencer/KOL incubator. The aim is to broaden livestreaming so it can be adopted directly by a greater range of industries, of different sizes, including overseas brands.
The Decisive Moment
Lockdown and livestreaming have changed the character of China's influencer economy even further; the former by spreading online shopping more widely among more people – a phenomenon seen both in East and West – and the latter by subtly altering the relationship between KOLs and audiences.
It is still very early to have a detailed picture of the impact of livestreaming during the pandemic. However, anecdotal studies suggest the fact of being ‘live’ engenders greater trust in audiences – images are more difficult to falsify or prettify, and users are better able to judge the authenticity of a host's performance. Moreover, the immediacy of a livestream heightens an audience’s sense of being present at the decisive moment.
This participatory element is recognized as an important quality underlying the rise of social-commerce and the popularity of the influencer economy in China. Here, audience members are not mere passive receivers of information, but active members of a real-time event, often meeting up with friends online during a livestream to discover new products, share comments and post questions to each other and the host. Moreover, by introducing time-limited discounts and limited edition products to a livestream, sales events are transformed into a kind of competitive ecommerce game show. As a result, many purchases are made spontaneously.
This change in behaviour and technology places different demands on a KOL host, not least the ability to carry an event that may last for several hours – be knowledgeable about an array of different products, and to remain likeable throughout.
For brands and marketers, meanwhile, the unpredictable nature of livestreaming presents its own challenges. (See our article here.) The advantages of the format are clear, however, in the way a KOL’s performance can be judged quicker and more accurately and audience response be monitored in real time.
Lockdown in China has seen this format decisively emerge from the periphery. Uptake has been seen across a range of industries, from luxury fashion and jewellery to FMCG, groceries, automobiles and even property. We believe it is not a question of "if", but "when" livestreaming enters the mainstream in the West, and in what forms. The days might be coming to an end when an influencer’s daily workload comprised little more than posting a photo on Instagram from a beach in Dubai.