One of the first questions some clients ask us when they move to E-Commerce in China is why shouldn’t they spend all their marketing investment inside TMall as this is where the buyers are?
Not so long ago, it was believed that the early stages of the buying process could only happen outside E-Commerce platforms or at least, that some touchpoints were needed outside, particularly to build awareness and consideration.
Justifying this, has become increasingly difficult with the rise of a new type of content which has seen a phenomenal growth recently: “Live streaming” on E-Commerce platforms or “Live commerce”. This is because Live commerce has the capacity to cover the entire purchase journey in just one touch point. It is seen by some as the solution to all their problems. Is it really?
China has been the historical leader in the global live streaming industry, from the sheer number of live streaming platforms and viewers, to the creation of the virtual gifting phenomenon, to the use of technology to improve the live streaming experience, particularly on mobile devices. Chinese E-Commerce platforms have brought the shopping experience to a new level with the fusion of E-commerce and Live Streaming.
One could say that this is nothing more than TV shopping Online, but it is, in fact, much more than that. It is live, natural, interactive, and therefore much more personal. Influencers broadcast in real time which gives an authentic feel to what they are doing and makes it highly persuasive. They film themselves
wearing clothes, interacting with goods. Consumers can ask questions and learn application techniques and when convinced, they can immediately purchase via an embedded link. The whole buying process from: awareness to consideration to preference to buying is squeezed into one touchpoint.
The performance is spectacular. The conversion rate for traditional E-Commerce is around 0.4%, but for “star” live streamers such as Austin Li & Viya, this rate can be as high as 12 to 14%. One of the keys to this success is the way Chinese live commerce integrates the livestream with the store and ultimately the payment. Recently, Singles day live streams on Taobao live have generated $ 2.85 Billion in sales.
So, is live commerce a Marketing Director’s dream, of building awareness and consideration while driving sales at the same time, come true?
For sure live commerce is an extremely efficient communication tool, nevertheless it comes at a price.
First you will have to pay for a slot/insertion fee, which will vary depending on the caliber of the KOL and the product category. Slot fees for food and beverage for example will be on average 65 to 75% cheaper than for cosmetics. Austin LI in the make-up category will charge a 200 K RMB fee during 11.11. But to this you will have to add a commission on sales. Austin Li, as most others, will charge a 20% commission. If you hire on top of this someone to source the KOL, do quality control, propose scripts and USPs, it could cost you an additional fee and sometimes even another commission on sales which could go up to 10%.
By the way, it is no news that the cost of advertising inside E-Commerce platforms is high and quickly eats up your margin. This is why you ultimately want to bring in free traffic and therefore grow your awareness outside of the platforms.
Another cost to take into consideration is the discount you will have to make. At the core of KOL live commerce are discounts and low prices. Live streamers want to promote products which will be easy to sell. Products featured in the shows of top live streamers are usually at the lowest price you will find online: 30% to 50% off the original price.
The questions you need to ask yourself are whether you can afford to make such discounts and whether it is good for your brand or not?
So does this mean premium and luxury brands can’t do Live commerce? Luxury brands have been asking themselves this question for a long time and seem to have decided in favor of sparingly using it. The only difference seems to be in the approach which is more upmarket in the set up and the choice of the host and less hard selling.
Louis Vuitton, last month, was the first international luxury brand to host a live streaming session on Little Red Book. The live stream featured two digital influencers sharing styling tips of accessories and ready-to-wear from the LV summer 2020 collection.
Another thing to take into consideration are the intrinsic limits of KOL live commerce.
When speaking to consumers on an E-Commerce platform, you are speaking to people who are in a buying mode. This is why KOL live commerce is best suited to target people with a “see now, buy now” mentality.
Live commerce is also best adapted to deliver a fairly rational speech. It is ideal to justify the qualities of a product, explain how to use it. But if you want to build the equity of your brand at an emotional level it is probably not the best way to do so and also not the best place to do it.
So, even if Live commerce is a powerful tool which can help tackle many different objectives all at once, in order to use it wisely, think carefully about the key objective you want to achieve!