Doing Live Commerce Right
In this edition of Outside In, we go ‘In-depth’ on another popular topic from my 2021 Predictions series – Livestreaming/Live Commerce. Recall that we had noted that “Livestreaming Will Ebb and Flow” going forward here at: https://outsideinlens.substack.com/p/branded-entertainment-will-rise-livestreaming. In this article this week, we try and explore how to do Livestreaming right – and by right, we mean that it not only helps in the brand building and marketing activities, but also drives Sales (Live Commerce). Frankly speaking, it is an area which is new to me (and probably to all of us); so this exercise is as much a discovery for me compiling it, as it will be for you reading it. Kindly bear any shortcomings that may appear in these efforts in a new domain. Jumping in…
Live Commerce Enablement
Live Commerce is the fusion of shopping and live streaming, and is transforming the retail industry in China. With a succession of brands adopting this marketing (and sales) method, Live Commerce is becoming an increasingly common phenomenon – with focus on aligning with Influencers/KOLs/Hosts for Live Sales, Livestreaming Promotion Types and choosing the Right Platform
A) Aligning with Influencers/KOLs/Hosts for Live Sales
There are 3 broad types of ‘co-operation’ models that have emerged so far:
Product Seeding to boost Brand Awareness: This co-operation model is usually based on the needs of the brand. The ‘influencers’ 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
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 live-stream sale. Then there’s the actual Sales Commission, which is generally between 10 to 30 percent
Pure Commission Model: This is generally the model that’s most suitable for small businesses, but the requirements are more demanding. Even the cheapest products will need to have a particular basic sales volume and that can be difficult for the average vendor. The commission rate with this model is very high—typically upwards of 30 percent, and sometimes even 50-50 or 70-30 percent. Products with a high profit-margin are relatively suitable for this model
B) Livestreaming Promotion Types
There are 4 broad types of promotion types that seem to be working best in China – which may be impactful even in other global markets:
Viral Products: When choosing which products to promote, brands should consider whether they’re a natural fit for the influencer they’re working with and then prepare 3-5 “viral” products. This means these products should be good looking, have the potential to be popular and cost-effective for the brand. Influencers can also consider having comparable products from other brands to make comparisons for their viewers, leading to a trial/purchase decision
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 and keep coming back for newer sessions
Limited Offers: It can be extremely effective for influencers 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 show 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 influencers 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 (Yes, Starbucks in China), 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
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 can, 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
C) Choosing the Right Platform
1) ‘Video-first’ Marketplaces: China, obviously, has a multitude of livestreaming platforms but the most popular ones are Douyin, Kuaishou and Taobao Live – each catering to a different market segments, product categories and consumer profiles. (Tencent-backed Kuaishou, in fact, has its IPO recently valuing the company at $159 Billion - It had an average of 275.9 million daily active users over a 9-month period before the IPO. While access to Kuaishou is free, the company makes money through selling virtual items which users gift to the creators of the videos, online marketing and commissions from e-commerce sales on the platform)
India’s Video/Live commerce market is different compared to China’s which is largely led by livestreaming of Videos. In 2019, China’s live-streaming market reached about RMB 90 billion (USD 12.77 billion) and is expected to have reached RMB 112 billion in 2020. Closer home in India, the likes of Simsim, Bulbul, Snapdeal, and Flipkart don’t have live videos on their platforms. But they are using the complete ‘influencer-led’ marketing and sales process (like China Livestreaming Brands) via pre-recorded videos of featured products. Bulbul claims to be the only platform to stream live-videos where creators talk about their favorite products and take questions from users and about 10% of its content on the platform is live videos. They do about 18 hours of livestreaming a day. But, most of the sales happen through recorded videos. Livestreaming as of now is more for engagement and interaction with users. The model of relying on pre-recorded videos to sell online is unique to India; this template has not been scaled up anywhere, yet. However, they are realizing that to increase more engagement, Bulbul will have to use a lot more live-streaming content
Video-first E-commerce platforms like Simsim and Bulbul are aiming to increase the component livestreaming videos instead of text and images that traditional e-commerce companies use to describe and market products. And, make the content is available in multiple local languages like Hindi, Marathi, Tamil, Bengali and others. “People who have come online in the past two to three years are video-first demography. We want to talk to them in their language and in the medium they are most comfortable with, which in this case is videos,” according to Sachin Bhatia, founder, Bulbul. While the likes of Snapdeal and Flipkart have separate tabs on their platforms where they feature videos for product discovery and purchases, the new e-commerce companies exclusively rely on audio-visual elements to portray their selection. A lot of the videos on Myntra and other traditional e-commerce platforms are catalog videos which works for these platforms as they already have a set of large customer-base that trusts them
Simsim and Bulbul also use mini-influencers who make demonstrative product videos which are more effective due to the personal touch. They aim to replicate the offline shopping experience. So, their videos are more demonstrative in nature. Their content creators would show you their beauty routine, and if it’s a juicer they are selling, they’d make juice, disassemble the juicer and show the ease with which it can be washed, among other things. This makes the potential buyer believe that the product they are buying is genuine and they will get exactly what they are seeing. According to Simsim, they were almost consistently seeing double-digit conversion rates on their platform compared to the standard e-commerce conversions which would be about 2-3 percent
The creators on both platforms earn commission on every sale that happens after a user watches their video. This gives them the incentive to share these videos among their friends and family circle, thereby increasing the traffic to these apps. As of now, none of these players work with influencers or celebrities to make promotional or explanatory videos. Rather, they rely on a set of creators who can make content in large volumes. They are vetted based on their video making and presentation skills. If they have a special promotional video to make for a festival, then they might ask a few TikTok stars to make videos for them, but that is not the primary model. They focus on people who they can regularly work with and whose income/livelihood depends on the platform.
2) Videos on Own Platform: Most E-commerce companies have started using visual search tools, livestreaming sessions and influencer videos to gain traction and increase customer stickiness. In India, the likes of Amazon, Flipkart and Snapdeal have all adopted these tools to integrate their information/education process with the sales process. With tools such as gamification and discovery centric shopping experience, Snapdeal has made a turn-around for itself by targeting new users from smaller cities that were eager to use a platform they were comfortable with. The lure of reaching new internet users has driven Flipkart and its fashion subsidiary Myntra to start using videos to showcase their products as well. According to Kalyan Krishnamurthy, CEO of Flipkart Group, around 50-60% of new users who come into the consumer internet funnel each year in India make their first transaction through a video platform
Popular Beauty and Cosmetics player Nykaa has developed an rolled out a dedicated “TV Channel” called Nykaa TV (https://www.nykaa.com/nykaatv/) as part of its online platform, which has only video/livestreaming content on various categories of Beauty, Skincare, Haircare and Styling. Its content ranges from pre-recorded videos to celebrity interactions to expert master-classes – leading to Commerce
KSFs for Live Streaming/Live Commerce
1. Creators Talent Pool: The key to livestream shopping is trust and influence. Making on-air talent paramount in this ecosystem. Influential personalities will lead audiences to the platforms and products they’re using. And commerce will follow. The platform that eventually owns livestream shopping will do so through cultivating user habits, which will be impossible to achieve without “lighthouse” personalities leading the way
2. Socially Interactive Content and Commerce Platforms: Influential personalities that engage audiences can help platforms to own the livestream commerce revolution. Consumers already go to these platforms to interact with friends and tastemakers. This habit is powerful. These platforms must capitalize on this head start by investing in best-in-class ecommerce and payment solutions that cleanly integrate into existing live content offerings. They need to leverage existing live-viewership behavior to begin cultivating the habit of livestream shopping within these environments (e.g. IG Live, YouTube Live), where the habit will feel most organic. And they should recruit, train, and incentivize A-list personalities to pursue livestream commerce programming, which will cultivate and normalize the habit of live shopping among their fans
3. Brand-Influencer Partnership: Livestream consumers follow the influencer. And when the influencer’s attention moves away from a brand’s product, he or she takes their audience with them. Branded live shopping shows may not have the same mass-appeal of a brand-agnostic channel (though we cannot conclude that even yet). Instead, brands can probably use popular personalities to host livestreams, and simulcast them across both the brand’s and influencer’s channels. This will allow brands to reach new audiences who will tune in to engage with their favorite personality. It’s could be an evolution of the traditional celebrity spokesperson mode
In Conclusion
To replicate the seamless user experience that powers the Chinese Live Commerce boom, platforms everywhere else – including India – must build frictionless continuity throughout the customer journey. However, despite the growing content and commerce landscape convergence, it’s significantly more fragmented than China’s. Chinese users spend their time on “super apps”, Alibaba’s being the biggest. Alibaba’s infrastructure powers platforms for content distribution (Taobao Live), e-commerce (Taobao and Tmall), e-payments (Alipay), and shipping/returns logistics (Cainiao). It even runs an incubator for influencer talent (Ruhan) to ensure that Taobao Live is always broadcasting premium personalities. This vertically integrated infrastructure enables a frictionless user experience that allows live-shopping to thrive in China. Alibaba’s technology allows the audience to watch, interact, discover and purchase – all without leaving the platform
Everywhere else the content platforms (product discovery) to the transaction systems (sales, inventory, logistics) to the payment systems (POS, MOPs) to social interfaces (influencers, communities) are unlikely to be ever as integrated as the Chinese ecosystem. They will need to cultivate their own “video-shopping” versions – which will be a unique version that oscillates between “Live 24/7” to “Pre-recorded Videos” at the other end. Irrespective of the multiple ‘Livestreaming/Live Commerce’ versions by market, however, it is a given that all players will need to cultivate their game plan for the emerging “video-first” demography. And, hopefully, these pointers will help them to start with…
References and Sources:
1) First Steps in Live Commerce: https://www.parklu.com/what-marketers-need-to-know-about-chinas-live-commerce/
2) Kuaishou IPO: https://www.news18.com/news/business/tencent-backed-kuaishou-more-than-doubles-in-hong-kong-debut-after-5-4-billion-ipo-3394187.html
3) India Livestreaming Platforms: https://kr-asia.com/these-video-commerce-startups-are-trying-to-take-on-flipkart-and-amazon
4) KSFs for Live Commerce: https://www.wearerockwater.com/blog/how-to-win-livestream-shopping
5) Seamless User Experience: https://www.wearerockwater.com/blog/livestream-selling-china-us