Livestreaming in China: Only for sales or is there brand value?

Livestreaming in China: Only for sales or is there brand value?

In 2020, livestream has shown an unprecedented vitality. A series of livestream platforms are gradually improving and are considered the main selling channel of many businesses, along with the forms of work, entertainment and online consumption that flourished after the pandemic.

Livestream in electronic commerce (e-commerce) is getting bigger and developing day by day. Senior executives at big companies consider livestream sales to be obvious. Specifically, famous technology entrepreneur Luo Yonghao sold $15 million in sales through a livestream in April 2020. Meanwhile, Dong Mingzhu, chairman of China’s largest household electronics firm Gree Electronic, sold more than 300 million RMB on the Kuaishou platform and more than 700 million RMB on JD.com in the form of livestream only.

Traditional shopping malls and other familiar forms of sales are clinging to the livestream as a timely saving-grace. And everyone wants to successfully launch the livestream like Li Jiaqi and Viya.

Huge market potential

In the midst of the Covid-19 pandemic, livestream had shown its enormous potential, along with the strong development of 5G network with the ability to bring more stable and clear images. Not only in the retail yield, livestream also achieves a certain position in education, entertainment and tourism.

 

1. Livestreaming e-commerce has taken the lead

iResearch predicts that by the end of 2020, China would have 524 million online livestream accounts, equivalent to 40% of the population and 62% of the total number of internet users. The total scale of China’s e-commerce livestream industry in 2019 is RMB 433.8 billion and is expected to double by the end of 2020.

In 2019, meanwhile, e-commerce livestream was only at 4.1% in the online sales market, equivalent to 1.1% in the overall e-commerce market. 

During a pandemic, more and more companies in different sectors turned to e-commerce livestream with a rich product system that has never been sold through this form, such as real estate. On April 24, China’s largest property company Evergrande Group, while live-streaming, reached 3.8 million views, 7.12 million likes and sold out 38 discount apartments in just one second.

 

2. The education sector has been using livestreaming much more during the epidemic

Social disruption and school closures have made the interaction between teachers and students much more difficult. Although urgent assistance programs have been set up for teachers, there still are bandwidths and transmission limitations that have exceeded the capacity of several programs.

This is also the gap that can be filled by livestream and video applications. On the Douyin social network (Tiktok), users can search for the keyword phrase “Attend a home-based classroom” to use free online learning services. In addition to courses from traditional academic centers, Douyin also connects with renowned teachers across the country to invite them to the online curriculum for this social media’s users.

 

Screenshot from Douyin

Screenshot from Douyin

 

3. Offline entertainment and tourism have been some of the most seriously disrupted industries

A series of entertainment companies in China announced that the cash reserves were only enough to sustain operations for three months while the global film industry faced revenue losses of up to $5 billion during the pandemics. In return, not only were the movies shown online but nightclubs, entertainment centers, TV shows began to deploy livestream services on a large scale.

Museums also began offering online sightseeing and livestream services. Typically, in March, the Potala Palace Museum launched an online tour for visitors on the Taobao platform and attracted more than 800.000 viewers. In this online tour, in addition to a tour guide, six cultural experts were also invited to explain cultural values ​​to viewers – something that would never have happened on offline tours.

Things are looking up for livestreaming, but there are challenges ahead

The popularity of the livestream is not really necessary for new brands to enter the market. As the scale increases, so do the challenges. Here are 2 major challenges of livestream:

 

1. A large number of multi-channel networks (MCNs), which are like incubators for new KOLs and online personalities, have appeared and the competition is fierce.

According to 2019 figures, there are currently around 14.500 MCNs in China and are expected to increase to between 20.000 and 28.000 by 2020. MCNs may be a potential incubator for new KOLs but the explosion of MCNs also means fierce competition.

The MCN market is moving into a saturated phase and becoming less efficient at creating popular KOLs. Beauty ONE’s “BA Celebrity” project selected 200 potential internet users to train as KOL in two years and the result was KOL Li Jiaqi. A report from Xin Kuaibao reported that the cost of personnel for KOL training costs at least 1 million RMB a year.

The more intense the market becomes, the more problems arise. After signing a contract, small streamers receive 40% commission for sales, while larger streamers earn up to 50%. This is the reason why the KOL team uses fake followers (shuijun) and bogus data to improve their image on social networks.

Many top KOLs possess their own Taobao stores, so they often focus on their own products instead of promoting products of other brands. Sadly, some KOLs are having serious mental health issues when faced with enormous pressure to try to make a name for themselves. 

 

2. Customer retention is a big problem

One of the disadvantages of livestream is customer retention because too many brands are focusing on sales when using this form. KOLs like Viya and Li Jiaqi are excelling and achieving certain achievements but these successes are short-term. Many brands forget that the big sales of well-known KOL are tied to that KOL instead of the brand itself. In other words, product sales are not related to product quality and brand reputation, but to KOL’s popularity.

However, livestream can improve brand image and brand awareness. This approach can bring long-term benefits to brands such as increasing customer loyalty and brand image and bringing the value of word of mouth (WOM) marketing and bettering the customer coming back.

What should brands do?

Should brands continue to deploy the livestream platform? The answer is YES.

Although there are many challenges in this form and no one can accurately predict what will happen next, the best brands should join this form if they do not want to be left behind. 

Xiaomi is one of the successful brands in transforming the livestream into an effective tool for brand promotion and PR. This is also the first brand to hold an online press conference to introduce the post-pandemic product Xiaomi 10. Meanwhile, LV is not a successful brand with this form. The livestream content of LV was criticized for being incompatible with high-class features and luxury brand positioning, leading to a bad impression in the eyes of consumers.

livestream in China

(Photo – reference only – from Digitaling)

Selling through livestream is a popular form on Taobao of all brands. If you click on a flagship store on Taobao, you will immediately see the words “This store is streaming” in the right corner of the screen and when you click on it, you will be taken to a livestream window and see the owner introducing their products. Although this form is highly interactive and fashionable, the products introduced are not cheap.

This feature of livestream is not for promoting products but for branding. The main goal is to help customers aware the product brand and familiarize themselves with the brand’s presence. The role of marketing is to build customer trust and encourage long-term purchase and this is a vital strategy in the longer race of brands.

livestream in china (1)

(Photo – reference only – from Digitaling)

Livestreaming technology keeps advancing

“Thanks to” the pandemic, the form of livestream is being used in many different ways that have never been thought of before. In the future, the livestream will be used in medicine, aviation, blockchain, AI and expanded to various fields when combined with 5G telecommunications networks and advanced technologies such as VR/AR.

For example, Li Jiaqi teamed up with virtual reality KOL Luo Tiany to livestream for L’Occitane. Technological breakthroughs allow Li to appear right next to the virtual character Luo in the livestream.

livestream in china (2)

(Photo – reference only – from Digitaling)

Five years ago, the livestream evolved from the gaming world and became a powerful tool in the e-commerce market. So where will the livestream be in the next five years?
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