“Live shopping”, a new generation of tele-shopping, has found spectacular success in China for almost a year. As Chinese consumers grow ever fonder of live streaming, brands and retailers have quickly understood the potential of this new communication channel. E-commerce is steadily invading these videos, regardless of whether it is via a fashion show or internet celebrities reviewing the latest cosmetic products via video; enabling Internet users to buy what they see on the screen in real time.

Live streaming is gaining popularity in the West too, thanks to Facebook Live. In China, the live-streaming craze has been around for more than a year with content ranging from amateur singers to celebrities sharing their daily life. However, a key difference in China is that Internet users can show their adoration by sending virtual gifts that can be exchanged for cash. Live streaming grew by 180% in 2016 in China.

From live streaming to live e-commerce

Investments in these live video platforms have multiplied in recent months. Tencent, the creator of WeChat, is planning to pour money and resources worth US$ 294 million into its own live-streaming platform Now Live. Competitors such as live streaming app Huya have also raised US$ 75 million in April 2017 whilst another competitor Huajiao raised US$ 45 million in September 2016.

Brands, e-commerce platforms and internet celebrities have made it their new favorite marketing channel to boost their sales. According to estimates by venture capital firm Kleiner Perkins in its 2017 internet trends report, live broadcasts have actually become the number one source of revenue per hour in China, ahead of mobile games, television, radio, videos and music.

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Estimated revenue per hour generated by different channels of communication in China in 2016 (Kleiner Perkils, Hillhouse Capital)

The key success factors of this new channel : entertaining and event-driven formats, celebrity involvement and frictionless mobile payment solutions via Alipay, Alibaba’s payment service, or its competitor WeChat Pay. The first two develop content that engages potential customers whilst payment capabilities enable the final purchase.

At its last Singles Day, China’s biggest sales day, e-commerce giant Alibaba was broadcasting a “See now, Buy now” fashion show, where consumers could buy the latest clothes from over 80 brands including Adidas, Burberry and Gap, on its Tmall platform. Alibaba achieved a record total sales of US$ 17.7 billion, 32% more than last year. Singles Day also marked the take-off of the “Entertainmerce”, combination of entertainment and e-commerce.


Alibaba’s “See now, buy now” fashion show on its Tmall platform on November 11, 2016

The live-streaming service of Taobao, the main C2C marketplace in China (also operated by Alibaba) already has more than 10,000 celebrities reviewing beauty, sports, food and baby products, making shopping a real entertainment experience for the new generation. Alibaba had reportedly invested US$ 46 million last year in Ruhan, a celebrity incubator that teaches future stars to blog, pose for photos and interact with fans

Alibaba said the live shopping conversion rate is 10 to 20% on its Tmall platform and 30% on its Taobao platform. Alipay and WeChat Pay, with respectively 450 and 600 million active users, are making it very easy to pay while watching video on mobile.

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Chinese celebrity Dayi Zhang, owner of a shop on the Taobao e-commerce site, achieved a revenue of 2.7 million euros in 2 hours of live streaming.

What is the next step for the “entertainmerce”?

According to the  director of Taobao Live, Chen Lei, the future of live shopping is virtual reality, which has the potential to make the live interaction with the products feel more real than ever.

China clearly has had a head start in e-commerce innovations. In the West, a similar concept was launched in the form of a daily live shopping program “Style Code Live” by Amazon, in March 2016, but was canceled after just one year of broadcast. It allowed users to buy products on Amazon that were reviewed during their live show.

However, this explosive growth in online shopping could see a major slowdown, following the government’s decision in late June 2017 to ban live streaming on three platforms, including Chinese Twitter equivalent, Weibo (313 million users in December 2016). The restricted ability of the government to regulate the content of these video, censoring videos that may contain propaganda, has been cited as a key reason behind the banning of these platforms.

 

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Amazon’s “Style Code Live” daily live show was canceled in March 2017

 

This content has been published first in IEV Premium Retail (July-August 2017), our magazine for digital transformation in the retail industry across Asia & Africa for business leaders.