Live-streaming Commerce in Chinese Luxury Market
Is live-streaming commerce a new future of the luxury industry in China?
Live-streaming commerce is the combination of real-time video and e-commerce. This shopping format is considered an emerging trend across the globe, especially in China. Normally, the live video is broadcasted by one or several hosts on an online platform to demonstrate products and convert audiences into clients. Since Taobao, the biggest e-commerce platform in China, embodied the real-time video function in 2016, live-streaming commerce has been rapidly developing. Now, it has become one of the most popular shopping modes in the Chinese market with outstanding performances. According to Statista, in 2020, the Chinese live-streaming commerce market is expected to reach approximately 960 billion CNY which is about 10% of its e-commerce market. As China is one of the most important growing markets in the world, more and more player are starting to leverage the popularity of this commercial trend when expanding their business in this country.
Favorable environment for live-streaming commerce
The prosperous development of live-streaming commerce is not a coincidence for China. Actually, this country has several potentials enabling the growth of this trend. Firstly, China has a huge and increasing number of internet users. By January 2021, there are already around 930 million people using the internet which is equal to 65% of the country’s whole population. Additionally, the smart-phone penetration rate is high: 96.3% of Chinese internet users aged 16 to 64 own a smart-phone. The widespread use of the internet and smart-phone has built a big potential consumer base for e-commerce. Secondly, China offers a favorable environment for live-streaming commerce in terms of technical base for its well-developed digital payment services. The mobile payment penetration rate has reached 81% in 2019, which means Chinese consumers are familiar with the usage of this service to acquire a seamless online shopping experience. Finally, despite being a new shopping mode in the Chinese market, the commercial live stream can be easily accepted by consumers. This is because online shopping is already a common consumption behavior in this country as approximately 80% of its internet users have made purchases online in 2020 It is therefore expected that live-streaming commerce, also a type of online shopping, can be highly accepted by clients.
3 live-streaming giant platforms
The development of the live-streaming platform also accelerates this new trend of e-commerce. Taobao Live, Kuaishou, and Douyin (aka. TikTok in China) are the three major players that contributed more than 95% of commercial live-streaming revenue in 2020. All of those platforms provide users seamless online services which allows audiences to order items during the live-streaming show without switching to another website or application. Despite the similar function, the user profile of those three players differs from one to another.
Taobao Live
Alibaba Group is the pioneer of live-streaming commerce in China. After introducing live video function into Taobao in 2016, it launched Taobao Live as a new channel for live-streaming shopping services. Since then, Taobao has been the biggest player in the live commerce market with more than 750 million monthly active users and generated a revenue of 500 billion CNY in 2020, which accounted for approximately 50% of the total live-streaming commerce revenue in the same year. Most of its users are female aged 20–40 from the second and below tier cities and rural areas.
Kuaishou
Kuaishou was a GIF picture application founded in 2011 and later transformed into a video sharing platform. It started its commercial live-streaming services in 2017 and now is invested by Tencent, the tech giant in China. In 2020, it was the second-largest live commerce app which accumulated a revenue of 250 billion CNY with its 470 million monthly active users. Contrary to its counterparts, Kuaishou is a more male-oriented platform. And its users are mainly from the third and below tier cities and between 25 to 35 years old.
Douyin
Douyin, also known as Tiktok outside the Chinese market, is a short video sharing application launched in 2016 by ByteDance. It has quickly become one of the most used social media in the world with more than 680 million monthly active users across the globe by 2021. With its 460 million Chinese monthly active users, mostly from the first and second tier cities, Douyin’s live commerce revenue has reached 200 billion CNY in China in 2020. Different from its two major competitors, this platform has a gender-equal and younger user base — the average user age is under 24 years old.
Struggling situation of luxury industry
The luxury industry is one of the most affected sectors during the pandemic period as many countries, including China, have implemented lockdown, which forces physical stores to close. Additionally, people are reducing their budget for luxury goods as it is considered “unnecessary”. It is therefore estimated that there was a 9% decrease in the worldwide luxury revenue in 2020. Moreover, it is harder to maintain the client loyalty because brands have lost their physical touchpoints with consumers. This can bring potential damages in terms of financial performance in the future. It is the reason why more and more luxury houses start to seek new ways to digitally engage their clients. In China, it seems the emerging trend of live-streaming commerce can provide a new solution helping the luxury industry ride out the storm of Covid-19.
Gucci marathon live fashion show
Due to the pandemic crisis, the gathering was forbidden in many countries, so a number of physical fashion shows were canceled in 2020. The usage of live-streaming has therefore become a popular way to broadcast fashion shows. Gucci, one of the luxury companies having the best digital performance in China, has also joined this trend. In July 2020, this Italian brand launched an “unusual” live show: a 12-hour online fashion show on Weibo for its Epilogue collection.
The luxury maison and celebrities firstly posted relevant content on social media as an announcement one day before the live activity. By this, Gucci was able to reach as many audiences as possible and raise awareness towards the event. The real-time video was separated into two major parts. During the first six hours, information about the new collection and the preparation process of the fashion show were presented to create a documentary-like experience. The second part of the show was dedicated to the fashion show itself. During the broadcast, the celebrities involved in the campaign were asked to make Weibo posts comprising the official website link. Meanwhile, the brand uploaded several short celebrity interviews on Weibo story in which the official web link was also included. Finally, after the event, the Italian brand posted several captures of the live show to generate a second spread on social media. The real-time video show has received a positive feedback: it had more than 15 million views and successfully created a social buzz around Gucci in the Chinese online community. This live fashion video broadcast is therefore considered a great practice for brand awareness raising during the coronavirus crisis.
Louis Vuitton’s interactive product promotion
While Gucci used the live stream as a pure video broadcast channel, Louis Vuitton turned it into a means via which the French brand was capable of having authentic interactions with audiences. In March 2020, Louis Vuitton organized a live-streaming show on Little Red Book, a UGC social media with more than 300 million users, by collaborating with an influencer to promote its latest collection. The influencer was the host of the live-streaming show in which she introduced the products and interacted with audience by answering their questions. Even though there were some technical problems that viewers needed to switch to another channel to make purchases instead of buying goods directly on this platform, this online activity still received some positive feedbacks in terms of interaction and follower acquisition. More than 30% of the viewers had interacted with the host. And after the live-streaming show, the French luxury company acquired 20 thousand new followers on this platform.
Challenges for luxury industry
Louis Vuitton was the first luxury brand organizing a live stream on Little Red Book, but it was harshly criticized. Those criticisms are actually the challenges that the luxury companies will face when starting their live-streaming commerce in China.
Firstly, the visual experience plays an essential role in live-streaming shopping. According to the research made by Beijing Consumer Association, more than 40% of respondents said that they made purchases in online streaming for the good visual presentation. It is the reason why Louis Vuitton’s live stream was negatively criticized mainly for its poorly designed setting. Secondly, there is a difficulty of replicating the feeling of exclusivity which is deeply connected to luxury goods and personalized services. As the live-streaming show is normally hosted by only one or few people, it is nearly impossible to provide customized services to every viewer. It is, therefore, harder for clients to obtain a satisfying shopping experience which can probably pose potential threats to their loyalty towards the brand. The third challenge is the risk of technical problems which will damage the experience of viewers. As Gen Z is becoming the main target client in the luxury industry, many brands start to use some emerging social media to reach them. However, those new platforms are not necessarily equipped with stable and well-developed live-streaming facilities. Without technical supports, brands are not able to provide seamless shopping experiences to consumers, which will lower their purchase intention and even damage the image of the company. Finally, the intervention of the government can be a huge challenge in China. For example, platforms will be asked to record and keep the live-streaming video for 3 years from May 2021 because of the new Administrative Measures for Online Trading. This will probably lower both clients’ and influencers’ willingness of participating in the live-streaming shopping.
Promising future of live-streaming commerce
Despite some difficulties, the future of the commercial live-streaming in China remains promising. It is popular to buy foreign goods, especially, luxury goods, from the Chinese people living outside China. This way of purchasing is called “daigou”. And the live stream provides a more efficient cross-border communication means for it. It is therefore expected that there will be a trend of international live-streaming commerce. For brands, live-streaming commerce offers a channel to interact with clients remotely. This can digitally engage the consumers, which can even increase their willingness of visiting the physical stores in person. Last but not least, 5G technology will accelerate the development of live-streaming commerce. As China has been actively developing its 5G infrastructure, the difficulties of doing live video will be eliminated, which will even create more possibilities for this new format of e-commerce.
