Livestreaming is becoming mainstream

Tapping into livestreaming has become a hot trend in China. Short video platforms including Kuaishou and Douyin are banking on the country's rapidly growing livestreaming e-commerce segment, which has become a powerful sales channel for traditional industries as more consumers switched to online shopping amid the COVID-19 pandemic.

Kuaishou announced that it will invest 3 billion yuan ($428 million) to set up its livestreaming e-commerce headquarters in Chengdu, Sichuan province, as part of its broader attempt to expand its presence in the booming e-commerce industry and speed up monetization efforts.

Located in the Chengdu Hi-Tech Industrial Development Zone, Kuaishou wants to build a livestreaming ecosystem in the city, with the nation's first 5G-powered short video industry base, a short video incubator, a public technology service platform for video creation and a training institute.

"We will give full play to the advantages of technology, products and platforms to attract multichannel network institutions, well-known internet celebrities and brand owners to jointly build a good livestreaming e-commerce ecosystem," said Yu Haibo, senior vice-president of Kuaishou.

MCNs are third-party service providers that affiliate with short video platforms to offer services that may include audience development, content programming, creator collaborations, digital rights management and sales.

According to an action plan from Sichuan province released in April, the local government is aiming to make the province a regional center for live broadcasting e-commerce with annual sales volume reaching 10 billion yuan by the end of 2022.

Livestreaming e-commerce has been gaining traction in China since the outbreak of COVID-19, as tens of millions of Chinese were confined indoors and moved shopping online due to restrictions on large gatherings and travel.

The announcement comes a month after Kuaishou and Chinese e-commerce giant JD signed a strategic partnership with a focus on supply chains in June. Kuaishou users will be able to purchase JD's products without leaving the app, and enjoy fast delivery and after-sales service offered by JD.

That agreement also enabled Kuaishou's key opinion leaders to choose and promote products to their audiences through livestreaming during this year's 618 Midyear Shopping Festival. Some 1.42 billion yuan worth of products was sold via live broadcasting during a 24-hour special online shopping campaign on June 16.

Since the coronavirus outbreak began, many physical store operators have turned to short video platforms to sell their products via livestreaming. The number of daily active users on Kuaishou surged 40 percent year-on-year during the Spring Festival holiday (Jan 24 to Feb 2). Douyin also saw a 26 percent rise in DAUs, according to QuestMobile, a mobile internet big data company.

Dong Mingzhu, chairwoman of Chinese home appliance manufacturer Gree Electric Appliances, sold over 310 million yuan worth of products during a three-hour livestreaming event via Kuaishou on May 10.

Ding Lei, founder and CEO of games giant NetEase Inc, generated over 72 million yuan in sales after a livestreaming debut on Kuaishou on June 11. Five days later, Zhang Yuqi, a Chinese actress, set a record of 223 million yuan in sales during her livestreaming debut on Kuaishou. Xinba, an online celebrity, attracted over 25 million viewers in four hours' time.

Livestreaming shopping is a brand-new way of thinking and doing business, a win-win solution for brands, manufacturers and consumers, said Dong.

"The COVID-19 pandemic had a significant negative impact on traditional industries and offline retail. Companies including Gree suffered from sudden drops in revenue in the first quarter of 2020," said Yu Shuang, vice-president of Kuaishou's e-commerce business.

"E-commerce livestreaming can help to unleash more spending. It will become the 'new normal' for more brands and provide a new kind of brand marketing scenario. We are dedicated to creating new marketing channels for business owners and making shopping easy, affordable and secure for consumers," Yu said.

Kuaishou first tapped into the already competitive e-commerce market in China in 2018 with the launch of Kuaishou Shop, a sales platform within the short video app. And now there are more than 100 million daily active users engaged in its e-commerce business.

The Beijing-based company said in a report that the number of daily active users of its featured livestreaming function reached 170 million during the first half, a 70 million surge since the end of 2019.

For the e-commerce function, categories that saw the most substantial increase in vendors were apparel, local services, household goods, automobiles, beauty products and cosmetics during the January-June period. Meanwhile, new businesses that took up livestreaming during this time primarily came from autos, smartphones, household goods, cosmetics and education service, the report said.

Zhang Xintian, an analyst from iResearch, said cooperation between short video apps and e-commerce platforms is an explosive commercial model as the former can drive online traffic to the latter.

As of March this year, users of livestreaming services in China reached 560 million, accounting for 62 percent of the country's total internet users, said the China Internet Network Information Center.

Revenue from China's livestreaming e-commerce market stood at 433.8 billion yuan last year, and is expected to more than double to 961 billion yuan this year, said a recent report from market consultancy iiMedia Research.

Beijing-based ByteDance, owner of the popular short video platform Douyin, is also eyeing the lucrative livestreaming e-commerce sector, as users have expressed an interest in combining shopping and creative experiences. Douyin recently launched an e-commerce department to offer users greater options on the platform.

In addition, Chinese retail giant Suning.com announced on July 30 that it inked an agreement with Douyin to carry out in-depth cooperation in multiple fields, such as supply chain services and livestreamed branding.

According to the agreement, consumers will be able to purchase products sold by Suning.com directly from Douyin's e-commerce livestreaming platform without leaving the video platform, where celebrities and livestreamers will promote products. Suning.com will also provide delivery and after-sales services.

"Through the in-depth collaboration, we can further reach young users and gain insight about their needs in an attempt to provide more high-quality and precise services," said Fan Chunyan, vice-president of Suning.com, adding that Douyin's e-commerce platform will help consumers find and get good products at good prices.

Chinese entrepreneur Luo Yonghao raked in more than 170 million yuan during his livestreaming e-commerce debut on Douyin in April, with 48 million users tuning in. Over 910,000 sets of products－including tech gadgets, foods and snacks－were sold.

Ma Shicong, an analyst with Beijing-based internet consultancy Analysys, said the commercial use of the superfast 5G and ultra-high definition technologies has boosted the livestreaming industry, adding that she is bullish on prospects for the sector.

"Short video platforms have entered a new phase by teaming up with online retailers and tapped into supply chain construction and the whole e-commerce ecosystem," Ma said.

Ma added that more efforts are needed to standardize the behavior of livestreamers and video-sharing platforms in response to mounting complaints over misleading or false information, substandard products and a lack of after-sales service.

Sun Jiashan, a researcher at the Chinese National Academy of Arts, said there is a lot of potential for e-commerce aspirations of short video platforms. "The introduction of professional MCN operators and paid knowledge services will generate profits for the short video industry," Sun said.