eCommerce: Market Trends

Live Commerce in China: Key Insights

• Expansive Market Growth: Livestream commerce is making major sales in China. The market has grown most notably during the pandemic, with platform providers and streamers participating.

• Top Platforms: Taobao and its livestream app Diantao are most popular among consumers in China. However, in terms of gross merchandise volume (GMV), other platforms such as Douyin and Kuaishou are surpassing Taobao and Diantao.

• Global Preferences: While live commerce exists in North America and Europe, its adoption has not reached the same levels as in China. Leading platforms in these regions typically prioritize short-form advertising content due to comparatively lower levels of consumer engagement with live commerce.

Live commerce is the integration of live video streaming with online shopping. This eCommerce trend is being driven most by Asian markets, particularly China, where live commerce first took off in 2016.

Since then, livestream commerce has skyrocketed in terms of online revenue: a development fuelled by the pandemic, when China's zero-covid policy forced consumers to stay at home.

But recent reports question the viability of the live commerce trend. Where China was the perfect example of a market where live commerce was thriving, recent developments point to an oversaturation of the market.

Live Commerce: Rapid Growth to Continue

Gross merchandise value, or GMV, calculates the volume of transactions on a platform or market. Data on livestreaming commerce in China confirms the spike in transactions, which was most pronounced during the pandemic but has continued in the years since:

A year after the widespread adoption of live commerce, in 2017, GMV approached US$3 billion. By 2019, that number had already jumped to US$60.8 billion. After that, live commerce transactions surged during the pandemic. This led to a GMV of US$179.7 billion in 2020, which continued to rise during the typical normalization period after stores reopened on a large scale in 2022.

Forecasts predict live commerce transactions to continue growing steadily, surpassing the US$1 trillion mark by 2026.

The amazing success of live commerce in China, coupled with favorable external conditions, has led to the emergence of a plethora of providers and livestreaming hosts. As the prospect of making large sums of money has been high with the development of this trend, its profitability is beginning to wane.

Rapid Live Commerce: Streamer Made Over US$14 Million in One Week

Zheng Xiang Xiang, a Douyin livestreamer, is redefining livestream commerce with her minimalistic approach, drawing attention for her rapid, no-frills product presentations. She shows each item for just three seconds — displaying it, stating the price, and moving on. Her background, decorated with Hermès boxes, contrasts with her products' surprisingly low prices, all under 10 yuan (equaling about US$1.4).

This approach has led to sales of 100 million yuan (about US$14 million at current exchange rates) in one week. Xiang Xiang's rise, marked by a substantial follower increase in just three days, illustrates how high the profit margins can be for the industry's most successful presenters.

Audience data indicates the popularity of live commerce among young Chinese consumers:

Gen Z in particular appears to be embracing the trend, with 34% of live commerce shoppers belonging to this cohort, compared to only 19% of online shoppers in traditional eCommerce. For all other generations, regular eCommerce participation is higher, with 38% of millennial eCommerce users versus 31% of millennial livestream shoppers, 27% of Gen X eCommerce shoppers versus 23% of Gen X live commerce participants, and 16% of boomer eCommerce shoppers, compared to 12% of boomer livestream shoppers.

Taobao/Diantao: China’s Most Used Live Commerce Platform

In recent years, the livestream commerce market in China has become more competitive as several players challenge Taobao’s lead.

Considering the latest usage data from October 2022, Alibaba’s well-rooted eCommerce platform Taobao and its flagship livestream app Diantao (formerly known as Taobao Live) lead in popularity among Chinese live commerce users, with a usage rate of 74%.

Douyin follows in second place with a usage rate of 51%. Pinduoduo and JD.com also exhibit double-digit usage rates, while WeChat Video Channel and Kuaishou account for only 8% each.

Taobao Outpaced in Terms of GMV

When it comes to GMV, Kuaishou and Douyin have already passed Taobao and Diantao, according to data from 100ec.cnm Forward Intelligence (Qianzhan) and Syntun.

Taobao had quickly become the leader in the livestream commerce market since its inception in 2016, accounting for more than half of the sector's GMV by 2020. However, Kuaishou and Douyin gained ground in the following years, contributing higher GMV shares than former leader Taobao/Diantao by 2022.

But with broad adoption and a growing number of platforms and competitors, come the downsides of live commerce.

Live Commerce: A Shrinking Trend?

The example of livestream host Zheng Xiang Xiang is a clear outlier in a market that is being increasingly flooded with new businesses, livestream providers, and hosts seeking to gain influencer status through this business model. However, as more and more competitors join the fray, not everyone has the audience to generate the millions of yuan that was common for hosts when the trend first took of. As a result, host incomes are shrinking, consumers are being more frugal due to the economic recession and changing shopping habits, and AI influencers are doing the same jobs for less money.

Moreover, companies like Douyin are taking note of the rapid growth of sellers in live commerce and are moving to regulate it for several reasons. First, to protect consumers: livestreams often leave little room for detailed product information, potentially leading to uninformed purchases. Douyin's crackdown includes a ban on quick launches and penalties for violators.

Second, there's a concern about quality and environmental impact. As items are often inexpensive, they tend to contribute to waste and pollution. Third, there's a risk of exploitation, as low-cost items may discourage returns, thus ensuring the seller's profit despite potential customer dissatisfaction.

Potential for Live Commerce Beyond China

As the livestream commerce market in China follows its path, the rise of new hosts and providers shows that the market is becoming more diverse and competitive. Livestream commerce has redefined the way brands connect with their audience in China – and it has the potential to reshape eCommerce in other countries as well.

Cross-border activities in China’s livestream commerce market are growing – and big non-China-based eCommerce players like Otto Group and Amazon have already developed their own livestream shopping features.

Still, the topic is controversial. While platforms like TikTok or YouTube are still working on live shopping features, Instagram and Facebook have shut down their live shopping activities due to low consumer engagement and a move to emphasize more short-form content.

Live Commerce: Closing Thoughts

The expansion of China's live commerce market follows a natural pattern in terms of the number of players and the profit margins that can be expected from participation. Following the huge successes at the beginning of this trend, more hosts and companies emerged to take advantage of the expansive profit margins that were being generated. But consumer sentiment has changed due to the lifting of pandemic restrictions and the economic recession, and the plethora of providers are now facing significantly lower demand.

In all likelihood, live commerce will even out in terms of revenues, benefiting a few large players while leaving the vast majority of hosts and businesses at a lower level of revenue. As for the rest of the world, live commerce has the potential to follow the same steep curve as in China, but its implementation will have to cater to consumer tastes and strike a chord, otherwise it will not have passed beyond a short-term fad.

Live Commerce: FAQs

What is the meaning of live commerce?

Live commerce combines live video streaming with online shopping, allowing viewers to watch and interact with sellers in real-time while making purchases.

What are the benefits of live commerce?

The benefits include real-time interaction between buyers and sellers, immediate feedback, a more engaging shopping experience, and the ability to see products demonstrated live.

How big is the livestream commerce market?

In 2021, China's livestream eCommerce market reached approximately US$352 billion, up from US$18.1 billion in 2018, and is expected to approach US$700 billion by 2023. Livestream eCommerce sales were around US$17 billion in the United States in 2022, with projections of reaching about US$55 billion by 2026.

Why is livestream shopping popular in China?

Livestream shopping in China is popular due to the widespread use of smartphones, convenient online payment methods, the influence of social media, and the engaging format that combines entertainment with shopping.

How does live shopping work?

Live shopping works by sellers or influencers streaming themselves live, often demonstrating or discussing products. Viewers can watch these streams, ask questions, and make purchases in real-time during the broadcast.

Why live streaming eCommerce popular in China has yet to catch on in the U.S.?

Live streaming eCommerce in the U.S. faces challenges like different shopping habits and concerns about privacy. The concept is also newer in the U.S., and people might need time to adapt to it.

How do I sell on live streaming?

Choose a suitable platform, set up a good quality live stream, and engage actively with your audience while showcasing your products. Offer exclusive deals and use viewer feedback to improve future streams.

Sources: iResearch, 199IT, 8days, Sixth Tone, China Youth Daily Social Study Center, Wenjuan, Statista