The value of China’s live-streamed e-commerce (aka live commerce) market reached RMB 2.27 trillion in 2021, and some estimates suggest that it could reach a value of RMB 4.9 trillion (US$704 billion) by the end of 2023. Douyin alone saw 1.5 trillion RMB in GMV from live streams in 2022, becoming China’s largest live streaming platform. For millions of Chinese consumers, live streams are a major part of the e-commerce experience, watched as much for entertainment as they are for convenience.
By contrast, live streaming brought in sales of about US$11 billion in the US in 2021, with the main players including Amazon, Meta, Twitch, and YouTube (which has partnered with Shopify for its live commerce initiatives). While live streaming has made a big impact in industries such as gaming and e-sports, viewership numbers have failed to translate into sales, and major platforms have seen limited success with live commerce initiatives. Meta pulled the plug on live shopping on Facebook in late 2022, and even TikTok has reportedly scaled back the development of TikTok Shop in Europe (although TikTok has denied these reports).
The reason why China and the West have taken such different paths when it comes to live commerce can be attributed to three main factors: the e-commerce ecosystem, consumer habits and influencer mindsets.
“China largely skipped the desktop internet generation and went straight into a mobile focused internet economy, with apps being at the core of communication and e-commerce,” explains Jimmy Robinson, director of PingPong Digital.
“The e-commerce landscape in China is largely based on platforms rather than individual onsite e-commerce,” he goes on to say, which has made it easier for platforms to quickly integrate new features such as live commerce.
Taobao Live, for example, is seamlessly integrated into the Taobao app, which is, in turn, linked directly to Alipay, meaning that consumers can purchase directly from live streams in just a few clicks.
By contrast, in Western markets, a much higher percentage of purchases take place on sites or apps owned directly by brands or retailers. This means that apps like Instagram and TikTok are used for discovery, not purchase, with customers then going to other sites to shop around for the best possible prices.
Consumers in China and the West approach e-commerce – and thus live commerce – in different ways.
Chinese consumers value the educational value of live streams and make purchases based on the live stream host’s demonstration (think “lipstick king” Li Jiaqi comparing two different shades of red lipstick).
“During live streams the host has a clear opportunity to provide brand and product education, explaining how products work and their key benefits and functions. Consumers value the chance to see products in action and trust recommendations from live streamers,” says Ryan Molloy, CEO of Redfern Digital.
On the other hand, consumers in the West generally don’t need to be sold to; they’re shopping online with a purchase already in mind. As a result, speed and convenience are key, and e-commerce websites often prioritise presenting the bare minimum of information as efficiently as possible.
Robinson also points out that multiple scandals have caused Chinese consumers to lose trust in big platforms, while influencers are perceived as more trustworthy and authentic. This has led to a rise in influencer-driven sales and the explosion of live stream commerce in China, “as it allows netizens to have authentic engagement with influencers and get their product questions answered from a source they trust.”
“Another key thing that makes live streaming in China unique from similar practices, such as TV shopping, is its role in socialising and entertainment,” says Qing Na from Dao Insights. As social anxiety has become more commonplace among China’s younger generations, digital spaces have grown into places where they can find comfort in communicating with strangers. “Live streaming allows for direct interaction with the host, and sometimes even celebrities. Such immediate interaction not only helps brands build consumer trust and intimate relationships with their target audience, but also enables a more playful and participatory online shopping experience, thereby fuelling consumer enthusiasm and further spurring consumption,” Na adds.
The role of hosts in the success of live commerce cannot be understated. In China, many of the best-known hosts became famous for live streaming rather than transitioning from another genre of influencing, as live commerce streams require a fairly specific set of skills – more akin to a salesperson than an Instagram content creator.
Moreover, many hosts are signed with a multi-channel network, a type of video production agency that helps them create high-quality, super-shoppable content and liaise with platforms.
Western influencers are less likely to want to sign up with an agency (although they do exist in the UK) as the independent influencer model works so well. Many of the most successful influencers in the UK and US built their following organically by posting authentic content, then transitioned to sponsored content that chimes with their brand only once they were established. Conversely, in China, people usually expect influencers to have a commercial component.
The lukewarm reception to live commerce in the West is yet another reminder of just how different Chinese preferences, culture and retail structures are from those in the West. So how should brands targeting the Chinese market adjust their mindset?
As with most aspects of digital marketing in China, any conversation about live commerce has to start with clarifying brand position and key messaging. As PingPong Digital’s Frank Ye emphasises, “It’s likely that a brand will resonate with a Chinese audience very differently than in its home market. Therefore, the first step is to have a properly localised brand strategy and corresponding key message, then choose the right channels that can optimise both branded communication and conversion.” (For example, if your Taobao is your key sales channel, then there is no need to set up live-stream channels on JD.com).
Sandra Weiss, media executive at RedFern Digital, also cautions that although live streams have a clear educational component and people do use them to discover new brands, “live streaming is most successful when brands already have some recognition in market.” Brands just entering the market may be tempted to shell out huge fees to work with larger live stream hosts, but even their endorsement may not be enough when there is a lack of brand recognition and trust. Instead, brands can consider working with micro-influencers (known as KOCs in China) on platforms like Xiaohongshu and Douyin or even creating their own channel hosted by knowledgable in-house staff.
Finally, pricing should be a key consideration. “Despite rising income and increased demand for premium products, China largely remains a discount culture,” says Weiss. “It is generally suggested that livestreams should provide the lowest pricing of the product across any sales channels within the last 30 days. Brands need to consider this when coming up with their promotional and discounting calendar for the year.” This may also mean that live commerce isn’t an ideal strategy for luxury brands.
This article was produced as part of a series for China Consumer 2023.
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