Can the US Replicate China’s $63B Livestream Shopping Industry?
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US Brands, Creators, and Platforms Can’t Afford to Ignore the Chinese Trend of Livestream Shopping
Projected to generate $129B in 2020 revenue, livestream commerce is a growing phenomenon in China that’s redefining the shopping experience for digitally-native consumers. What is livestream commerce? Think: Twitch meets QVC…
In a recent survey we conducted with our friends at The Social Standard, an influencer marketing agency, 48% of US brand marketer respondents said they don’t use international influencer marketing trends to inform their domestic priorities. However, the rise of Chinese livestreaming commerce should not be ignored. There are many relevant learnings for US brands, creators, and platforms. In this article we’ll explore:
The size of the livestream shopping market in China and why it’s so popular
Which American consumer trends across media and commerce give us confidence that livestream shopping will succeed in the US
The inherent differences between the Chinese and American consumer landscapes that will limit the growth of livestream shopping in America, or set it on a divergent path
How the livestream commerce market will develop in the US, and what American creators, brands, and platforms must do to take advantage of this emerging opportunity
1. What is Livestream Shopping? How Big is it in China?
Taobao Live (owned by Alibaba) is China’s premier livestream shopping destination. It’s projected to sell to 500M+ livestream shoppers in 2020 and generate 500B+ transactions over the next three years. Let those numbers sink in…
The shopping platform hosts countless influencers, who market and sell products from 100,000+ brands, including American brands like Levi’s and Ralph Lauren. Influencers generate buzz around products, as well as consumer trust, via engaging and interactive personality-driven broadcasts. These can last several hours and are similar to how US gamers host Twitch streams (Bloomberg described these broadcasts as “part variety show, part infomercial, part group chat”). Trusted hosts demonstrate a product and describe why they love it, answer real-time questions from viewers about issues like fit and feel, and then countdown to the sale, at which point a limited inventory is made available at a steep discount. Once the sale is live, graphic overlays provide real-time updates on the limited supply available, until it’s all sold out…and the host moves on to the next product.
Consumer tension and fear of missing out (aka FOMO) is built up and monetized through each of these sales cycles, and is a unique byproduct of the live experience. These dynamics can’t be replicated by a static Instagram post. As a result, livestream content shrinks the sales funnel and accelerates the customer journey, and converts viewers to buyers at a significantly higher rate than traditional marketing (30% vs. 3%). A spokesperson for the Greater China division of Procter & Gamble (which operates its own live shopping channel in China) commented,
“Customers used to move slowly down the path from awareness to interest to purchase to – ideally – loyalty. Working with the top livestreamers, the process gets much shorter”.
So, how big is the livestream commerce market in China?
The size and growth of the Chinese livestream commerce market is staggering
In 2020, the livestream commerce industry in China is expected to complete a 453% three-year growth rate (from $29B in 2018 to a projected $129B by the end of 2020)
“Singles’ Day” is China’s biggest shopping day of the year. It’s like our “Black Friday” meets “Prime Day”. On this day alone in 2019, over 1,000 brands participated in livestream shopping events, generating $2.9B on Taobao Live. Alibaba’s rival, JD.com, has its own shopping holiday called 618 Day, which happened in June. This day alone generated $38B in sales revenues, with an estimated $3B coming from livestreams
In 2019, livestream shopping accounted for 9% of China’s total ecommerce revenues
25% of live-shopping consumers are daily users, while 71% watch a live commerce event at least once a week
China’s top influencers drive purchasing at unprecedented scales and speeds
On this year’s Singles Day, Viya, China’s top livestream commerce influencer, reached 37M live viewers on a single stream. These viewers represent a larger audience than the “Game of Thrones” finale, The Oscars, or Sunday Night Football, and generated $425M+ in sales
In 2019, Kim Kardashian made a guest appearance on Viya’s stream to promote her signature perfume line. Within 15 minutes, Kardashian attracted 13M+ live viewers and sold out of her entire 15,000 bottle inventory
Livestream ecommerce is starting to be applied further up the value chain. Not only is it an effective tool to sell enormous volumes of everyday products like cosmetics, but another top Chinese creator, Geng Shuai, recently sold 1,623 cars on a 2.5 hour stream
COVID is Accelerating the Adoption of Livestream Shopping
205% YoY revenue growth for the Chinese live-shopping market
Viya’s average nightly viewership has nearly doubled during the COVID crisis
The number of merchants selling on Taobao Live for the first time increased by 719% between Jan-Feb 2020
2. The Case For Livestream Shopping in the US
Although China’s ecosystem of content / commerce / payment platforms is dissimilar to America’s (which we’ll explore in the following section), the scale of this emerging industry should not be ignored. Especially because it builds on the convergence of several consumer trends that we’re also seeing in the US. Benedict Evans, a prominent global technology analyst, suggests Western markets and China are more similar than different when it comes to viability of livestream shopping,
“Influencers, livestreaming, smart phones, social—those things are universal…It’s hard to predict in advance, but I struggle to say that influencers selling stuff [live] online wouldn’t work outside of China.”
We agree. The below US trends give us confidence that livestream shopping can and will work in America.
Socially-interactive livestreaming and gaming are among the most popular new content mediums for younger US audiences. And commerce integrations have proven to be effective in these environments. Between Twitch / eSports and “The Metaverse”, we’ve seen a strong consumer appetite for shared live experiences built on social interactivity, audience engagement, and gamification (we explored the potency of live content in a recent report on sports media). These platforms are monetizing live engagement by integrating transaction opportunities that feel organic to the viewing and playing experience. Consumers have responded favorably. Demonstrating not only a willingness to transact on these platforms, but an excitement for it.
Live eSports Consumption: 169M hours of live gaming streamed in Q1 2020. Twitch has 40M active users in the US. The style of this content – from the intimate relationship between and amongst the host and the viewers, to the engaging graphic overlays and social interactivity – is very similar to the programming that has made livestream shopping such a big hit with Chinese audiences.
Live eSports Commerce: In-stream transactions are projected to account for 52% of eSports revenue by the end of 2020.
Metaverse Consumption: Top “Metaverse” platforms like Fortnite, Roblox, and Minecraft each generate 1-1.5B hours of playtime per month across 70-120M active monthly players. The nature of this content is evolving as well. From live gaming to live entertainment, experienced communally and socially. For example, Fortnite will be airing 3 of Christopher Nolan’s most popular films on its no-guns-allowed “Party Royale” mode, where it recently held a “virtual concert” from Travis Scott, which reached 12.3M concurrent viewers.
Metaverse Commerce: Marshmello’s 2019 “virtual concert” on Fortnite generated $30M through in-app purchases. Fortnite generated $44M+ through in-app purchases in April 2020 alone, a 25% YoY increase.
Although the platforms evolve, the fundamentals remain unchanged. Trusted content creators in the US have always effectively driven commerce. Tentpole IP and personalities are leveraged to enhance product discovery and awareness, and generate revenue through commerce conversions. Like Viya in China, influential creators in the US leverage their fan trust and engagement to power the customer journey and generate sales. From awareness, to interest, to purchase, to loyalty.
QVC Rebooted: The model of leveraging trusted personalities and constraints on time and supply to sell products in a live environment isn’t new. And it’s not foreign to the US market. QVC has been doing it since 1986. Despite the audience erosion that has resulted from cord-cutting, QVC has a $4B market cap, and last year it purchased the Home Shopping Network for $2.1B. Similarly, the daily five-minute “Steals & Deals” segment on NBC’s “Today Show” generated $60M in direct commerce revenue in 2019. As viewership migrates from traditional platforms towards digital and mobile streamers, the question isn’t “will the QVC model continue to work in the US?”. Instead, it’s “what will the nextgen QVC look like, and who will own it?”
Influencer Marketing: The total revenue generated by influencer marketing is projected to grow from $8B in 2019 to $15B in 2022. Jessica Phillips, founder of The Social Standard, explains the power of influencer marketing and why it gives her confidence that livestream commerce will succeed in the US:
“Influencers consistently sell out products, crash websites with large volumes of traffic and outperform paid social. The livestream component – coupled with its flash sale mentality – only adds to the power of influencer marketing. It couples a hot tip from your “friend” with a limited time window – there is no stronger case for an online purchase.”
Social Selling: Consumers often discover products or brands on social media and purchase them elsewhere. Similar to what we’re seeing in China, this gap is shrinking as creators and platforms seek to retain more of the value they create. Facebook recently announced the launch of “Facebook Shops”, which it estimates will generate $30B in transactional fees directly through its platforms.
Content Brands Becoming Commerce Brands. Commerce Brands Becoming Content Brands: Content and commerce brands are seeking to unify the purchase funnel, and own 100% of the customer journey. Both Complex Networks and Barstool Sports generate a meaningful portion of their total revenues through DTC / commerce sales (at least one third for Barstool). And each recently launched a DTC commerce app; Sole Collector from Complex, and the One Bite Pizza app from Barstool. Meanwhile, DTC commerce brands are now launching independently-branded content verticals, including Casper / “Woolly”, Dollar Shave Club / “MEL”, and Away / “Here Magazine”.
Cultural capital + constraints on time and supply = increased urgency to buy. Consumer psychologist and marketing professor Robert Cialdini explains
“a product becomes more attractive when their perceived availability is limited”.
This dynamic is fundamental to the success of live-shopping in China. The hosts emphasize the exclusive nature of the offering through deep discounts and limited supply. Once they count down from five and activate the sale, there is a frenzied rush from viewers to seize the opportunity before it’s too late. Andy Yap, a social psychologist at INSEAD business school in Singapore, explains this theory in the context of Chinese livestream shopping:
“The perception of scarcity is a powerful psychological tool to get people to act fast, which leads to impulse buying…In a livestream, it’s even more intense because the time is shorter and there are a lot of other viewers who may be potential buyers. People feel more urgency.”
This principle is not unique to China’s culture. It’s been proven in the American streetwear market, which perfected the art of inflating demand through exclusive “product drops”. Like Chinese livestream commerce, American streetwear empires are built on the convergence of product scarcity and an influencer-driven sense of “cool”. A joint study by PWC and streetwear publisher Hypebeast explains,
“[In streetwear culture,] Exclusivity and desirability are conferred by scarcity and insider knowledge rather than high prices. In short, streetwear has redefined how ‘cool’ is made profitable”.
Yeezy: Kanye West’s “Yeezy” brand, which is valued at $3B, has been built on the “scarcity principle”. In 2017, Yeezy “dropped” a limited supply of his signature sneaker in an exclusive new color. It sold out in just 15 seconds.
Kylie Cosmetics: Valued at $1.2B, Kylie Jenner’s cosmetics line builds on two dynamics that are central to China’s livestream shopping craze: the power of celebrity-driven influence on social media, and the power of exclusive, time-sensitive purchasing windows. In 2018, Kylie Cosmetics operated an LA pop-up shop that sold products exclusive to the store. In just 14 days, 25,000 customers made purchases.
Ecommerce and livestreaming are both beneficiaries of the COVID crisis. As a result of COVID-induced shifts in consumption habits, the adoption of livestream shopping in the US will accelerate.
Offline retail (non-grocery) is expected to drop 20% this year
Since Jan 2020, US ecommerce revenue grew by 80%
US livestreaming consumption increased 45% from March-April 2020, and 99% YoY
The Houseparty app, a co-viewing livestream app, gained 50M new users between March and April of 2020
Videogame consumption, mostly driven by live, socially-interactive, “Metaverse” games like Fortnite, Roblox, Minecraft, and Animal Crossing, is up 75% during COIVD
Building from these converging trends, American platforms – both content and commerce – have partnered with creators to test the waters of live-selling. The results have been encouraging, and indicate that this market can and will be effective in the US. For example, in 2019, Instagram partnered with Lebron James and Uninterrupted to unveil an exclusive “drop” for his signature “More Than an Athlete” sneaker via a live unboxing streamed on IG Live. The sneaker sold out within five minutes, and the rest of the apparel collection, including an Instagram-exclusive hat, sold out in 10 minutes. Dev Sethi, Head of Instagram Sports and friend of RockWater, told us why he’s optimistic about the future of live commerce on the platform:
“Fans, in moments of inspiration, have been able to transact with their favorite sports brands and athletes on Instagram across multiple surfaces. As Instagram Live has become increasingly meaningful to brands and fans alike, we envision many use cases where shopping would thrive in the Live experience. Whether it’s a club going Live on Instagram to celebrate a championship and sell championship shirts, or a brand debuting new limited edition merch, our goal is to enable our partners to use Live and enrich the fan experience by making this surface shoppable in the future.”
Additionally, in 2019 Amazon launched the Amazon Live platform (its version of Taobao Live) and the Amazon Live Creator app, where brands can live stream directly to Amazon.com and the Amazon mobile app.
3. The Case Against Livestream Shopping in the US
Despite the converging consumer trends profiled above, we shouldn’t assume that livestream shopping will become as potent a force in America as in China. The fundamental differences between Chinese and American consumer ecosystems will shape divergent applications of livestream shopping.
Although America’s content and commerce landscape continues to consolidate, it’s significantly more fragmented than China’s. Chinese users spend their time on “super apps”, Alibaba’s being the biggest. Alibaba’s infrastructure powers platforms for content distribution (Taobao Live), ecommerce (Taobao and Tmall), e-payments (Alipay), and shipping / returns logistics (Cainiao). It even runs an incubator for influencer talent (Ruhan) to ensure that Taobao Live is always broadcasting premium personalities.
This vertically integrated infrastructure enables a frictionless user experience that allows live-shopping to thrive in China. Albibaba’s technology allows the audience to watch, interact, discover and purchase – all without leaving the platform.
In the US, major content platforms, like Facebook / Instagram and YouTube, are great for product discovery, but insufficient when it comes to point-of-sale transactions and inventory / shipping logistics. You may find a product on YouTube, but to select it for purchase you’ll often have to click out to a third-party portal, and to complete the purchase you probably have to interact with a fourth-party payment processor. Neither of these experiences feel native to the YouTube environment. A new layer of friction is introduced with each step further away from YouTube’s ecosystem, making the would-be shopper less and less likely to follow through with the purchase.
On the other hand, Amazon has perfected ecommerce but struggles to generate the organic influence that powers discovery. Shoppers go to Amazon with intent to purchase. They know what they want before they even log in. Yes, it has successfully leveraged a premium video offering to boost subscriptions to its Prime service, but this experience is different than the type of content engagement on social platforms, which promote organic product discovery and leverages the cultural capital of trusted influencers to drive purchases.
Content platforms have taken strides to bolster commerce functionality. Specifically, Facebook’s partnership with Shopify, NBCU’s rollout of “NBCUniversal Checkout”, YouTube’s launch of shoppable ads, and Snap’s new UX, which takes strides towards the Chinese “super app” model by having its own verticalized OS, including a partnership with Atom Tickets that enables seamless in-app purchasing. Further, Amazon has invested billions in top-of-funnel programming, including Amazon Prime Video, Amazon Studios, Twitch, and Amazon Live (recently valued at $500B collectively). But, no US company can replicate the end-to-end live-shopping experience that has taken off in China.
In Part 2 of this 2-part series, we’ll discuss what livestream shopping will look like in the US, and what each party (creators, platforms, brands) must do to win.
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