The end of livestreaming-celebrities -
what’s changing in Chinese E-Commerce ?

February 24th, 2022

Digitization in China

The end of livestreaming-celebrities - what’s changing in Chinese E-Commerce ?

When it comes to digital trends, it’s a good idea to keep an eye on China: What’s new? What are new opportunities? And what’s technically feasible? Yet, companies and brands active in the Chinese market often find themselves asking more somber questions, like: What are the latest regulations, and what’s still legally possible? If we take a look at livestreaming, we can see this contradiction in play. Chinese e-commerce is lightyears ahead of western markets when it comes to utilizing livestreaming as a marketing tool, while new regulations are completely reshaping the industry, causing uncertainty among brands.

When Alibaba launched Taobao Live in 2016, it started a new era in China’s e-commerce. And livestreaming continues to go strong: A study by McKinsey predicts the value of goods sold via livestreaming in China to exceed USD 423 billion in 2022. A large part of that sum will be generated by a small number of top livestreamers. Until recently, two livestreamers had something of a duopoly on the market. Livestreaming superstars Austin Li and Viya managed to sell over USD 3 bn. in a single day during the pre-sale of the Double 11 shopping festival in 2021.

Their economic clout was substantial - so substantial that their agencies were rumoured to each plan a separate IPO. A remarkable success story - but only for a lucky few. Less lucky livestreamers (and brands) started to complain that the livestreaming duopoly destroyed the market, as the two livestreamers sucked away all the available traffic. Viya was able to attract an audience of 100 Million people at a time during Double 11. Great for Viya, not so great for other livestreamers and brands that couldn’t afford her.

Then came the allegations: Tax Evasion

Last year’s Double 11 Shopping-Festival was probably Viyas last time in the limelight, because shortly after, she was fined the equivalent of USD 210 million for tax evasion. Her career is over, as all of her profiles were deleted off social media platforms as a result. The Chinese government’s mouthpiece newspaper Global Times called the fine a “warning for others”. Viya wasn’t the only one affected by the crackdown. Around the same time, livestreamers Zhu Chenhui (Cherie) and Lin Shanshan were convicted as well. They were also handed fines worth millions of dollars, and their Taobao accounts were closed.

This all might sound very gloomy, but analysts assume that these measures might be beneficial for brands operating in the Chinese market, as the power of a few high-performers is reduced and smaller brand stores get a fair chance competing for e-commerce traffic.

A new beginning?

Despite these measures and sometimes unpredictable decisions, which can change established practices overnight, livestreaming is expected to continue and become an ever more important part of the branding journey in China.

An increasing number of platforms are joining the livestreaming industry, namely Douyin (China’s version of TikTok) and Pinduoduo. Even Minhong Yu, the founder of what was formerly China’s largest educational enterprise, New Oriental Education, announced plans to launch a livestreaming platform for agricultural products.

What foreign brands should look out for

One thing is clear: Foreign brands looking for international growth cannot ignore the Chinese market. Not only is China the most populous country on earth, but it also has the largest middle class with strong purchasing power and continuous growth. What’s also remarkable is that more than half of retail volume in China is generated online - and that rate keeps increasing.

Likewise, the importance of livestreaming in Chinese e-commerce will continue to increase. And the question is not whether brands should do livestreaming or not, but who to work with, where, and how:

1. “Where” is important. You need to find out on which platforms you can reach your target audiences.

2. Working with famous livestreamers is still a surefire way to gain exposure and increase brand awareness - but who to work with is a strategic decision not to be taken lightly.

3. The importance of in-house livestreamers, who know your brands’ products well, introduce them daily in your store and who can handle in-depth customer questions is still widely underestimated. In-house livestreamers not only increase traffic, but can also increase conversion rates and customer loyalty.

In Chinese e-commerce, it’s more critical than ever to not only understand the market, but also understand cultural and political subtleties, creating a forward-looking localization strategy and be ready to quickly adjust to changes.