What Marketers Need to Know about China’s Live Commerce

This post originally appeared on Parklu, our content partner. Live commerce, the fusion of shopping and live streaming, is transforming the retail industry. It’s no secret that live commerce is hot right now. Actress Li Xiang’s recent Weibo sale success story is one case in point: Li recently used her own air conditioner to help Suning sell 30,000 air conditioners in just two hours. The live streaming effort resulted in a sales volume of more than 100 million RMB. Last month, Taobao teamed up with well-known KOL, Wei Ya, to host a Livestream sale of Starbucks branded products and gifts. After a five-second countdown for the product reveal, 3,000 items were sold out in seconds, and in the next five hours of Wei Ya’s live broadcast, Starbucks sold nearly 160,000 beverages. These are just a few examples. The list goes on: celebrity Aaron Kwok cooperated with personal care brand Simba for a sale on Kuaishou and sold 50,000 bottles of shampoo in just five seconds; actor and chef Nicholas Tse sold gourmet zongzi on Kuaishou; entertainer Wong Cho-lam sold 100,000 beauty masks on Kuaishou in 12 minutes, achieving a total of 660 million RMB in sales; and Dee Hsu, or “Little S”, sold a record-breaking 880,000 personal care products on Taobao Live in just one second. Live commerce is becoming an increasingly common phenomenon, leading a succession of brands to adopt this marketing method. Parklu outlines below where to find the right platform, how to cooperate with hosts, and the types of promotions to consider. Live commerce: 3 live sale cooperation models 1. Product seeding to boost brand awareness: This cooperation model is usually based on the needs of the brand. The vloggers use soft marketing methods to organically insert branded products into their own video content, and the brand receives exposure via the KOL’s established fans. This method is not recommended for smaller and medium-sized businesses. 2. Service fee + commission model: This is a more common method. The service fee includes the cost of matching the brand with the most suitable KOL, as well as distribution and promotion for the Livestream sale. Then there’s the actual sales commission, which is generally between 10 to 30 percent. 3. Pure commission model: This is generally the model that’s most suitable for small businesses, but the requirements are more demanding. This generally works well for Taobao stores with scores of 4.6 or higher. However, even the cheapest products still need to have a particular basic sales volume, and that can be difficult for the average vendor. The commission rate with this model is also very high—typically upwards of 30 percent, but the split is sometimes 50-50 or 70-30. Products with a high profit-margin are relatively suitable for this model. Types of live-stream flash sale promotions 1. Viral products: When choosing which products to promote, brands should consider whether they’re a natural fit for the vlogger they’re working with, and then prepare three to five “viral” products. This means these products should be good looking, have the potential to be popular, and cost-effective for the brand. Bloggers should also consider having comparable products from other brands to make comparisons for their viewers. 2. Flash sales: Brands can consider preparing some products for flash sales with deep discounts for shoppers. Brands might lose money on these particular products, but these types of sales are mainly intended to lure users to stay tuned in to the Livestream. 3. Limited offers: It can be extremely effective for vloggers to create limitations on either their supply or the amount of time of the discounts or the product’s availability because it puts pressure on viewers to buy before the time runs out. Because the host creates an atmosphere of “You can’t get this discount anywhere else, so buy it now,” viewers are afraid that it will be out of stock in the next second. Brands and bloggers also shouldn’t limit themselves to selling one item at a discount—they should feel free to get creative with their special deals to make a sale. Starbucks, for example, normally sells a Green Tea Java Chip Frappuccino for 38 yuan, but during their Livestream sales, they may do a deal where the first two cups are 72 yuan (which is already a discount), and the second two cups are free, which is cheaper than buy-one, get-one-free. 4. Free gifts with qualifying purchases: This deal is similar to the sales strategy of the typical gym membership; “As long as you buy a card today, I will send you a hat, a cup, a T-shirt, a wristband, a sports backpack, and an extra ten free experience cards.” The big gift bag full of fitness-related products will instantly make viewers feel that they are taking advantage of a good deal. So before the KOL’s live broadcast, they would, for example, showcase a series of free gifts such as a razor, a trimmer, bracelets, dental kits, pendants, portable chargers and more. These typically come with up to 11 items, so shoppers get 12 products for the price of one. Where can brands and KOLs host Livestream sales? Nowadays, nearly every platform contains a live commerce function, but some of the most popular include Douyin, Kuaishou, and Taobao Live. Additionally, WeChat and Xiaohongshu are both beta testing live commerce functions. Even Zhihu recently debuted this feature, but it was removed after just one day—their official response was that they were experiencing technical difficulties. Taobao Live: These live broadcasts are fun, useful and informative. Taobao Live’s audience generally consists of consumers in third- and fourth-tier cities, and popular categories are clothing, beauty, maternity, and childrenswear and goods with store conversion rates of more than 65 percent. However, Taobao Live’s rules are very strict, with requirements for merchant qualifications, goods, and geographic location. Kuaishou: Kuaishou is a very convenient platform to use as it supports multiple third-party e-commerce platforms, including Taobao, Tmall, Pinduoduo, Wudizhangui, and Youzan. Products that have a consumer unit price of less than approximately 300 RMB, have low gross profit margins, or are destocking items are typically the most suitable for the platform. Douyin: Beauty brands and bloggers will be the ones who get the most out of Douyin because as an algorithm-driven platform, Douyin’s followers are less sticky. Thus, for certain product categories, Douyin won’t be as reliable as platforms like Kuaishou, where the followers are more loyal to particular KOLs.6

What Marketers Need to Know about China’s Live Commerce

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Published November 01, 2019

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What Marketers Need to Know about China’s Live Commerce