How Chinese Consumers Engage With Luxury Livestreamers

“It gives you a cooling sensation,” livestream host Haoran said, applying a small dose of cleansing cream to her face and wiping away the makeup residue with a towel. It was 10am on a Friday in New York City's West Village, and while there was barely any traffic inside the C.O. Bigelow store, it didn’t feel quiet. Almost 1,500 people from China were getting a glimpse of the products in store via livestream. “I heard it’s not good for dry skin?” “Haoran looks more beautiful without makeup!” “Could you turn around so that we can see the back of your sweatshirt?” The audiences were chatty and kept sending messages to the host and each other. Haoran's partner Wanwan read the questions aloud so Haoran could answer. Haoran and Wanwan are Chinese women who have been living in New York for years. When it comes to what to buy in the city, they are the go-to people for their friends and families back home, and now for fans online. After 30 minutes has passed, the chats were still going strong. Livestreams are the newest shopping experience in China, and with the ability to interact with trusted reviewers in real time, they offer shoppers a more immersive, informative shopping experience than most physical store, e-commerce platforms and home-shopping channels. Within a few minutes, it's easy to gain a full picture of the product in front of your eyes, including how to use it with other items, how it makes the user feel, and more. Making Brands Relevant in China Again To create this experience requires more than just two people, Behind Haoran and Wanwan are a team of over 50 people who run a company called ShopShops, a platform dedicated to connecting brick and mortar stores in the United States with consumers in China. According to Liyia Wu, the founder and CEO of ShopShops, shopping in the West lacks relevance for many Chinese consumers. They crave instant gratification, but also want to rationalize their shopping decisions, especially when it comes to high-priced goods. Their needs can’t be fulfilled by having a sales associate in the store. Livestreams are more likely to motivate a purchase because they're built on authenticity — they're about real people telling a real story about a real product at a real location. ShopShops is one of the many players whose business is built on reacting to consumers’ needs for transparency and experience. The pie is big — China is the largest market for online broadcasts. According to Deloitte, live-streaming revenue in 2018 is expected to reach 4.4 billion – up 32 percent from last year. Many luxury brands like Tom Ford, Tommy Hilfiger, and Michael Kors have cashed in on people’s interests in livestreams in recent years. However, livestreaming has not yet been established as a consistent revenue channel. Below, we list some of the challenges. The Challenges for Luxury Brands It's a delicate task to utilize livestreams well. Luxury brands must balance the temptation of making quick sales off consumers’ desires for instant gratification while maintaining the necessary distance to create a sense of exclusivity and aspiration. There may also be some distrust between livestreamers and brands. As hosts pride themselves on providing honest, transparent information, they need to maintain some independence from brands. At the same time, they need to be product experts, making sure they don't give out any misleading information. The brands that do choose to experiment with livestreaming are interesting. For instance, ShopShops is working with contemporary fashion label Anna Sui and Theory, as well as digital-first brands like Everlane and Away. A young designer brand from Connecticut called Welden recently made a striking debut in China via livestream, generating nearly 300,000 of sales in just two days. Zoe Zhang and Mark Yuan, co-founders of And Luxe Inc., a US-based retailer focused on introducing high-end fashion and accessory brands to Chinese consumers, has put together the livestream for Welden. They have partnered with Taobao global since April 2017, and frequently leverage the platform to help over 80 brands like Welden enter the Chinese market. “I thought it would be difficult [to enter China]. There are lots of taxes and logistics that we didn’t understand how to handle, but livestreaming has made it very easy to test the interest in this market," said Sandy Friesen, the designer of Welden. "We now understand the colors and functions that consumers appreciate.” Over 40 percent of Welden's consumers now come from China. Liyia Wu, the ShopShops CEO, said she understands the concerns of brands trying to enter a new market. Which sales channel they should use? How much should they spend on marketing? Who can they trust? Livestreams open a new route into the Chinese market, proving that brands can monetize in China without having a physical store. Because it's more emerging brands testing these platforms, the pricing tends to be lower compared to what premium luxury brands typically offer. Wu told us the most popular category of products are beauty and cosmetic items because they generally fall towards the lower end of the price range. Welden pricing is between 195 -595. While livestreams could be a shortcut to the Chinese market for some, many have questioned if they also expose brands to counterfeiting. “Yes, I am aware of the counterfeit concern, but I think the benefit outweighs the risk. You gotta try,” Friesen said. She told us Welden is currently working with Alibaba and feel that they're in good hands to proceed with trademark registration in China. “How we are making [our items] is pretty complicated. It’s all handmade. Hopefully, we wouldn't run into this issue.” “It’s hard to competently kill brands’ concerns about counterfeit,” Wu responded. "But I feel brands have come to the realization that you are already sharing everything on your social media, and the platform we offer is just another social media channel." The Future of Livestreaming Today, there are hundreds of streaming platforms in China, including both pure livestream players like Yizhibo, Meipai, Huajiao Live, Kuaishou, and Inke, as well as Alibaba’s e-commerce sites Tmall and Taobao. China-based blogger incubator Ruhan enables live streamers to monetize on their fan base by offering help with the manufacture of goods, social media marketing, and building Taobao stores. Zhang Dayi is the poster child for this business model, with her store reportedly pulling in 46 million in 2016, slightly surpassing Kim Kardashian's earnings (45.5 million). There is a real demand for Chinese livestreamers who live overseas, as the content they post is novel to local Chinese. Many of them operate independently, however, and mainstream e-commerce platforms have not invested in them just yet. It is likely to be a significant opportunity in the near future. Wu from ShopShops argued that traditional e-commerce is transaction-driven; their goal is to sell products as efficiently as possible. For that reason, they can't deliver the same sense of discovery and experience that livestreamers can. Focusing on the curation of shopping experiences, she said her business is not a competitor to e-commerce sites but an enhancement to their online services, though it does plans to launch a WeChat mini-program in May. ShopShops recently raised a 6.1 million seed round of funding led by Forerunner Ventures, Union Square Ventures, GGV Capital, and Founder Collective. They plan to expand out of the current U.S. retail markets such as New York, Los Angeles, and Miami, to Toronto and Seoul in the near future.

Sectors

Insights

Company

How Chinese Consumers Engage With Luxury Livestreamers