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10 FACTS BRANDS NEED TO KNOW ABOUT LIVESTREAMING IN CHINA

August 24, 2020 BeautyMatter
August 24, 2020

Livestreaming has come a long way in China since it emerged as a niche tool used by the gaming and e-commerce industries in 2015, reaching a tipping point last year as e-tailers generated a whopping RMB 433 billion (US $61 billion) in sales. With COVID-19 lockdowns shuttering brick-and-mortar retail and forcing residents to stay home, livestreaming e-commerce sales in China are booming, with annual revenue expected to double in 2020 to RMB 961 billion (US$136 billion), according to Chinese research firm iiMedia Research.

What’s not to like about livestreaming? As Franklin Chu, Managing Director Azoya International, very aptly describes it, “You are entertained by it, you are informed by it and you simply with one click can buy it, pay for it and have it delivered to your door.”

It’s safe to say livestreaming e-commerce has gone mainstream and China has evolved into a relatively mature livestreaming market. With more and more players trying to capture the consumer’s attention using this marketing lever, the landscape has become increasingly competitive. While the opportunity is real, success is not guaranteed and many brands are losing money on livestreaming campaigns.

Below are ten facts brands should know about livestreaming e-commerce in China.

Fact #1: Livestreaming enables customers to get to know your brand and product better. They can see how a product looks and can chat with the hosts in real time, gaining valuable information for an item they can’t try on in person. This is particularly effective for the color cosmetics category, which is highly demonstrable with various application techniques and the ability to create different looks.

Fact #2: Livestreaming mixes entertainment with e-commerce. During a livestreaming session, hosts do giveaways and play social games while interacting with the audience in real time. For example, China’s “lipstick king” influencer Austin Li will often spin a wheel to determine the gift with purchase. In other cases, KOL hosts will invite celebrities or other influencers to make guest appearances. This surprise-and-delight element increases engagement and keeps the audience watching even after they’ve made a purchase.

Fact #3: Livestreaming is becoming a non-negotiable marketing lever for e-commerce in China. There are brands driving 30-40% of annual sales from livestreaming e-commerce campaigns. On Taobao/Tmall, many product pages integrate livestreaming video as the first product photo rather than a static image. It is also not uncommon for a brand to serve up archived livestreaming video when a customer first lands on the product page.

Fact #4: Alibaba’s Taobao Live is the main player in livestreaming and can be used to drive traffic and sales to its B2C e-commerce platform Tmall. Taobao Live generated 20 billion RMB (US$2.87 billion) in sales during Singles’ Day 2019, or 7.5% of total sales on Taobao/Tmall. Other players such as JD.com, Kaola, Pinduoduo, WeChat, Xiaohongshu, and Douyin are all launching livestreaming functionality to drive sales, but Taobao/Tmall is unique. They have integrated logistics/supply chain/payments infrastructure that social media platforms don’t have, and have a larger audience than other e-commerce platforms such as JD.com or Kaola.

Fact #5: Brands either run livestreaming sessions themselves or hire a KOL to do it for them. Hiring a top influencer can be expensive, but it provides immediate access to a curated, high-quality fan base predisposed to impulse purchases. These influencers are very experienced and know how to plan and execute effective livestreaming sessions that can last for hours. They know the preferences of their audience and what incentives convert to purchases. In short, influencers can make a brand’s life easier and livestreaming strategies more effective.

Fact #6: Top influencers such as Austin Li and Viya can generate immediate brand awareness and sales, but brands often lose money working with them. Kim Kardashian’s KKW Beauty partnered with Viya selling 15,000 bottles of perfume within minutes, attracting over 13 million views in the process. However, such influencers have immense bargaining power, often asking for steep commissions and discounts to offer their customers. Brands often lose money on each sale working with these influencers. These campaigns have to be seen as strategic investments to build brand awareness and gain valuable insight into a new customer base.

Fact #7: Brands often use livestreaming to launch new products and stores. In 2016, Maybelline New York worked with top celebrity Angelababy to launch a new product line on Taobao Live. On the way to the planned product launch ceremony, Angelababy got stuck in traffic and yet an employee was able to stream Angelababy in real time from the car, generating substantial buzz. To promote the launch, Maybelline hired 50 influencers to help spread the campaign hashtag #MakeItHappen on China’s Twitter-like micro-blogging platform Weibo. This tactic garnered nearly six million viewers over the course of the two-hour livestreaming session, and Maybelline sold over 10,600 pieces of its Lip Flush Oil lipstick.

Fact #8: Livestreaming may be getting too crowded. The costs of retaining the services of KOLs are higher than ever before, making it difficult for small brands with limited budgets to make an impact. Brands need to be prepared to make substantial investments in marketing to attract viewers leading up to the livestreaming session. The probability of a consumer browsing Taobao and popping into the session by chance has decreased significantly. There are also rumors that top influencers are seeing declines in both viewership and followers as a result of the massive number of new entrants into the market. Moving forward, brands will need to be creative and have a well-thought-out marketing plan that is seamlessly executed to see success with livestreaming sessions.

Fact #9: Livestreaming is expanding to new categories as a result of the COVID-19 pandemic. From February to April, everyone from auto shop dealers to farmers and CEOs began livestreaming to support their businesses. This continued even as China began to reopen. In June, Gree, China’s largest white-goods appliance company, had its chairwoman Dong Mingzhu livestream on JD.com for this year’s 618 (June 18) e-commerce festival; the 3.5-hour show generated over RMB 700 million (US$98 million). Baidu’s chairman and CEO Robin Li also took to livestreaming chatting about his favorite books with the founder of an online book club.

Fact #10: There are still many risks involved with livestreaming e-commerce. Many KOL agencies require a minimum fixed fee and commitment of 5-10 livestreaming sessions with their influencers without a revenue guarantee. Often new brands end up with little to no sales. There is also the risk of using livestreaming too frequently—since livestreaming typically involves a discount or gift, brands run the risk of conditioning customers to expect a reward for every purchase, making it difficult to sell anything at full price. Lastly, the return rates for livestreaming can be high because the purchases are typically impulse driven and customers often experience buyer’s remorse.

To learn more about livestreaming and how brands can use it to effectively drive sales on Alibaba’s Tmall platform, download the Azoya 53-page Tmall Global Guide.