August 31, 2020

What is Livestreaming E-commerce and Will it Become Mainstream in the US?

In China, “livestreaming e-commerce” has become extremely popular and a key monetization strategy for brands and online merchants, particularly post COVID with pent up consumer demand and brick and mortar hobbled by lockdowns. As COVID sweeps the globe, it begs the question — will this trend become mainstream in the US as well?

Let’s set the stage

It is widely believed that SARS, a prior major infectious disease that broke out in 2003, helped popularize online retail in China. Here we are 17 years later and with a blink of an eye, COVID is changing consumer behavior and influencing how nearly every industry operates. With 20M+ cases worldwide and rising, COVID, like SARS, will likely bring permanent change to how consumers consume, and businesses sell. It certainly did in China, where a growing interest in livestream e-commerce exploded as consumers stuck at home over the Lunar New Year due to COVID ached for new entertainment and satisfying remote experiences.

In a nutshell: what exactly is livestreaming?

Think QVC in 2020 — infomercials you actually wantto watch with hosts or VJs, appealing to broader, younger, savvier customers, promoting and endorsing products you’re sincerely interested in purchasing. As Bloomberg puts it, livestreaming is “part variety show, part infomercial, part group chat.”

Turns out, livestreaming is a pretty lucrative business for both merchants and sellers. Viya, China’s most well known livestreamer, is responsible for over 4.3B USD in 2019 online sales and has pocketed millions in commission. Last fall, Viya sold 15K units of Kim Kardashian’s perfume in 1 minute!

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With physical retail disrupted due to COVID, a large number of businesses in China have turned to platforms that enable live selling to offset losses and partly resume business. By the end of March this year, total viewers of live selling streams reached 265 million, or over 37% of China’s total online shoppers, according to China’s Internet Network Information Center (CNNIC).

Transactions generated from livestreaming on platforms such as TikTok account for 5.5% of the overall online retail market in 2020. And this number is expected to continue to climb as users grow accustomed to “tuning in” to livestreaming video and making real time purchases throughout the program.

Livestreaming e-commcerce has significant headroom to grow — representing a single digit percent of online retail in late 2019. But with the pandemic, that’s changing…quickly. Per Technode: “iResearch predicts that by the end of 2020, China will have 524 million online livestreaming users. This means 40% of Chinese people and 62% of the country’s internet users will be livestreamers.”

Why this should matter to you?

Alan Cannistraro, the CEO and founder of Rheo (Cherubic portfolio), poses an explanation for why livestreaming is here to stay:

“text-based shopping requires your active attention and focus, but a video (or audio) stream can be left on and tuned in and out by the viewer, allowing new surfaces for shopping. Always-on screens, like TVs, Google Home, Echo Show, etc, can now run linear e-commerce experiences.”

Platforms like Alibaba have mastered this “linear e-commerce experience,” where consumers can watch, chat and purchase in one frictionless session. As of July, Amazon Live is trying to do the same. With the influencer ecosystem established and thriving on platforms like Instagram, livestreaming should have the infrastructure in place to succeed in the US.

We suspect livestreaming will play a role in reshaping how consumers remotely shop and socialize. If this trend makes its way to the US, there will be lots of new opportunities for the tech community to innovate and customize for the American consumer. Some are already developing products/platforms that help people sell via livestreaming. If you are already building tools for e-commerce merchants or influencers, it may be worth thinking about what additional features will become essential if livestreaming commerce hits home.

Time will tell if this is a fleeting trend or a fundamental paradigm shift abroad. But as SARS helped popularize online retail in China in the early 2000’s, and with COVID an order of magnitude greater in terms of societal impact, we expect live commerce will endure beyond this crisis.

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