The underlying logic of community fission and private domain traffic

As the clock struck 24:00 on Double 11 Carnival Night, the live broadcast rooms of Wei Ya and Li Jiaqi finally closed, and this digital feast came to an end.

In the last live broadcast, Viya’s GMV was about 1.106 billion, while Li Jiaqi’s GMV was 696 million, totaling 1.8 billion. On the day of pre-sale (October 21), the two people created the myth of 8 billion GMV.

Alibaba data shows that Wei Ya and Li Jiaqi still sit in the first and second place respectively on Taobao Live; during Double 11, Taobao Live had 28 live broadcast rooms with transactions exceeding 100 million yuan.

GMV is the key to the success of e-commerce platforms in their promotional performance over the years. In the financial reports of listed companies, it is also a core indicator for measuring the competitiveness and market share of e-commerce platforms. This year's Double 11, live streaming played a leading role in selling goods, and the GMV of the live streaming room became a new round of arms race with platforms competing with each other and anchors trying to be more attractive.

"It's not as simple as everyone imagines. It's not possible for a live broadcast room's GMV to exceed 100 million or a brand to sell tens of millions at any time." An industry insider told Shenran.

The first concept that needs to be clarified is that GMV is the total transaction amount, which is not equal to the actual transaction amount. The statistical caliber is the amount of users' orders, that is, in addition to the actual transaction amount, it also includes the amount of unpaid orders, the amount of returned orders and the amount of fake orders.

For example, a user submitted two orders in a live broadcast room of a certain anchor, totaling 1,000 yuan, paid for one of the orders for 500 yuan, and then refunded the order. The actual transaction amount after 15 days is 0 yuan, but the GMV is calculated as 1,000 yuan.

More than one practitioner said that the inflated GMV of live e-commerce is mainly in two aspects, the number of online users and the number of orders. The former is frequently reported in the newspapers, but its destructive power is relatively small, while the latter is not only illegal but also harmful. Compared with the past e-commerce fake orders, the executors of "water injection" in live streaming have changed. Previously, it was a spontaneous behavior of merchants, but now it has changed to "anchors fake orders for merchants."

There is also room for "water injection" in the other two parts of unpaid orders and returned orders. Many industry insiders and merchants revealed some common practices to Shenran. They said that even for senior people, it is basically impossible to calculate the accurate actual transaction amount.

"In the current chaotic early stages of the live streaming e-commerce industry, you can give full play to your imagination as to how small the proportion of real transaction volume is and how much water there is," said the head of a third-party data company.

Today, we will squeeze out the water from the GMV of the live broadcast room in different sections.

The demand for fake orders on Double 11 has increased, and fakers are too busy to handle it. "It is said that Party A is the father, but in the field of live streaming by internet celebrities, Party B (MCN) is the father who has the final say."

This is the feeling expressed by Wushu Ge, the founder of a skincare brand, on a social platform. Why do you say that? The other party told Shenran that they originally wanted to find internet celebrities to promote products to boost sales during Double 11. As a result, more than 30 merchants, including him, had their orders faked collectively, and they lost both the wife and the army. All the booth fees and 20% commission they spent were wasted.

The live broadcast was scheduled for the prime time on the evening of October 31. The organizer announced that the host was the Douyin internet celebrity "Baoliao Sanjiang Guo" who has 16 million fans and claims to have set a record of 60 million sales. The live broadcast account was a Douyin account with a certain Chinese character on it and has 23 million fans.

According to his recollection, during the live broadcast, the "Sanjiang Pot" that should have been the protagonist stayed in the live broadcast room for only 5 minutes, and the sales effect was even more ridiculous - "after 12 o'clock in the morning, users who bought our products in the live broadcast room initiated refunds one after another."

Afterwards, Wushu Ge calculated that the order cancellation rate was as high as 97%. The transaction volume in the live broadcast room exceeded 50,000, but only 16 orders were returned, and the actual transaction volume was only about 1,000 yuan. However, before the show started, dozens of brands, including him, had already paid 100% of the slot fee into the organizer's account. In other words, almost all of the more than 100,000 yuan that Wushu Ge invested in this live broadcast was wasted.

For other brands in the same live broadcast, the return rate was an unimaginably high 99.99%. Some merchants even had refund requests filed for all orders, and not a single order was sent out. After checking the backend, the merchants discovered that the order addresses were "all made up" and the buyers' names were also strange, such as "Picture".

Source of some order addresses/Photo provided by the interviewee

After a live broadcast, the merchant did not send out a single order. Source/Photo provided by the interviewee

"When we were screening anchors, we analyzed third-party data sources and found that 'Sanjiang Pot' had impressive past live broadcast data. We estimated that a single slot would generate around 1 million in sales. In addition, its investment promotion team repeatedly emphasized that the live broadcast data had not been inflated." Before press time, Wushuge told Shenran that more than ten days after the live broadcast, more than 30 brands involved were still looking for internet celebrities and organizers to protect their rights.

It seems to be an extreme case of fake orders, but when Shenran searched through QQ, Baidu, and Zhihu, it found a large number of fake order teams providing live broadcast services. Because "brushing orders" is a behavior that is severely cracked down on, in QQ, these groups are named "make up orders", "refund orders", "order dispatch" and so on.

QQ search group chat

Li Xun, a practitioner at an MCN agency, said that since the era of live show broadcasts, a large number of teams that brush data have grown up in the market. When the trend of live streaming sales came, these teams naturally had to expand their business scope and start brushing orders. "In addition to the people who previously brushed orders for e-commerce, it is now very convenient to find people who brush orders to do GMV."

As for the cost, Bian Xu, head of e-commerce at a certain platform, revealed that with the development of the fake order industry chain and third-party service providers, the cost is not as high as imagined.

According to Shenran’s observation, the current “beautification” of live streaming sales data mainly focuses on the number of online users and the transaction volume of goods. In addition to brushing orders, the above groups all provide a full set of services such as brushing short video playback volume, likes, comments, reposts, fans, as well as live broadcast room popularity, barrage, scrolling, etc.

In most cases, the anchors/MCNs and matchmakers (organizers) actively place orders, and there are also cases where brands/merchants actively place orders.

Shenran joined the group as a merchant to inquire about the price. An intermediary staff member who provides live broadcast room order-brushing services said that taking the Douyin live broadcast room as an example, the minimum order is 50 and there is no upper limit on the order quantity. The commission is calculated based on the unit price of the SKU. The commission is 5 yuan per order for SKUs below 15 yuan, 6 yuan per order for SKUs between 15 yuan and 30 yuan, and 7 yuan per order for SKUs between 30 yuan and 50 yuan. An additional shipping fee of 2 yuan per order is required.

The commission of another order-brushing team is 16 yuan per order, including shipping costs. The other party also emphasized that prices increased during the Double 11 period and changed every day because there was too much demand and the sellers were too busy to keep up.

According to the two staff members, the process of brushing orders is that after receiving the payment and commission, the product link will be pushed to the buyer group to arrange for the buyer to purchase. After the order is completed, it will be sent to the brusher by "envelope express" or "empty box express". The express will contain rubber bands, cards and other valuable items, and then the data will be synchronized to the person who brushes the order.

It is precisely because of the prevalence of fake orders that brand merchants and MCN agencies behind celebrities are all "well aware of it". From the beginning of the year to now, the industry has become calmer, the anchor's pit fees are declining, and most of the agreements with merchants are commissions, that is, commissions are paid according to actual orders completed 15 days later.

In addition to various ways of inflating orders, such as unpaid payments, returns, and coupons, the "unpaid order amount" and "return order amount" in the GMV of the live broadcast room also have a certain amount of water content.

Many consumers who like to shop online in live broadcast rooms expressed their feelings to Shenran that watching live broadcasts is a waste of time and even more so a waste of money.

The rush-to-buy atmosphere in the live broadcast room and the strong interactivity between the anchor and the audience make it easier to make impulse purchases and overconsume. Song Yiqiao, who works in Hangzhou, said that in a city with a strong atmosphere of online shopping and live streaming, the previous variety show time has basically been replaced by live streaming. Because of the fear of not being able to get the goods, and the "7-day no-reason return platform" mechanism, people have developed the habit of placing an order first and then considering whether to pay, and even hesitate whether to get a refund after paying.

Song Yiqiao can no longer recall how many unpaid orders she had and how many orders she canceled during Double 11. "According to conservative estimates, I alone contributed 100,000 GMV, but in fact, the orders I have paid for are less than 20,000 yuan. I have already refunded one-third of the orders (if you have not received the goods, you can apply for a refund). In addition, for clothing orders, I have to receive the goods before I can decide whether to refund them or not." She estimated that her actual final transaction amount was around 10,000 yuan.

In other words, 90% of Song Yiqiao’s GMV is water.

"Many top anchors often say in the live broadcast room, 'Place an order first and see if you can get it.' If you get it, you make a profit. If you don't want it, you can refund it at any time." Another consumer, Xu Li, said that he had always wondered why these anchors encouraged consumers to refund. Now he understands that just place an order. For the anchor, there are only benefits and no disadvantages.

According to her recollection, in previous Double 11s, she often had to place orders again or even multiple times because she did not understand the platform rules. This year, shopping was mainly done in live broadcast rooms during Double 11, and there were many cases where not all coupons were used, and many orders were placed repeatedly.

Song Yiqiao and Xu Li are not isolated cases. At the end of March this year, the "Online Survey Report on Consumer Satisfaction with Live E-Commerce Shopping" released by the China Consumers Association showed that consumers had more feedback on two issues: exaggeration and false propaganda by anchors, and selling links that could not explain the characteristics of the products in the live broadcast room. 37.3% of the consumers surveyed encountered the problem of overconsumption in live shopping.

It seems that if the anchor or the brand hires a ghostwriter to take the photos without payment, that is, to increase GMV by placing unpaid orders, it is cost-free and difficult to regulate.

The return rate in the live broadcast room is higher than the overall data of the e-commerce platform. Without considering the artificial water injection, Hei Yan, the founder of the original data, judged that the proportion of return orders in the live broadcast room is about 20%. At the same time, it also depends on the unit price of the product. The lower the unit price, the lower the return rate. What this means is that the higher the unit price and the greater the contribution of the SKU to GMV, the higher the return rate.

In Bian Xu's eyes, the return rate is more watery, and a return rate of 50%-80% is normal, because even standard products have a large amount of impulse purchases, but for a brand or a store, this data is already very high.

Previously, an insider revealed that the return process also varies in length, and the platform will intervene manually in some ways. For example, returns are not allowed on Double 11. Some platforms also artificially lengthen the return order process, dispersing a considerable number of return orders, making it difficult for outsiders to monitor.

In addition, there are some relatively subtle ways to increase book GMV.

For example, issuing coupons is one of the methods that platforms and brands are vigorously promoting. Items such as stacked coupons and discounts on coupons will not be calculated separately as marketing expenses. For example, for an order of 100 yuan, a 50 yuan coupon is used and the actual payment is 50 yuan, but the GMV is still calculated as 100 yuan.

Bian Xu mentioned that a relatively new "way of playing" this year is that some large WeChat business brands will artificially move the purchases of offline dealers and private domain traffic to the live broadcast room. "For example, a popular celebrity who also comes from a leading WeChat business brand will call on all his offline and fan groups to conduct transactions in the live broadcast room instead of on WeChat. Of course, the price will also be set cheaper than on WeChat, so that GMV can be increased quickly."

A top anchor recently sold iPhone 11 (4789 yuan) in the live broadcast room, and the unit price was significantly higher than all other SKUs.

Wushu Ge, a merchant whose orders were faked, has recently been trying to understand the unspoken rules of live streaming sales. According to his observation, many anchors sell iPhones, gold jewelry, and travel products with extremely high unit prices in their live streaming rooms. "As long as there are people buying, it is easy to make GMV very high. If no one buys, GMV can be increased with very low fake order costs."

Live broadcast room GMV with different calibers
It is worth noting that the e-commerce platform has become very mature, the rules of the game are gradually becoming transparent, and the statistical scope of GMV has only been clarified recently.

Between 2015 and 2017, JD.com changed its wording nearly nine times. Today, this can be found in the financial reports of the leading e-commerce platforms, which is the total value of all confirmed orders for goods and services on the platform, regardless of whether the goods are actually sold, delivered or returned.

However, in the new world of live streaming e-commerce, GMV often appears frequently in the "battle reports" promoted by MCN agencies/brands/e-commerce platforms, and there is a problem of inconsistent statistical caliber.

In the battle reports of top anchors, three types of GMV appeared: GMV (order GMV), payment GMV, and guided GMV.

The sales in the live broadcast reports of Wei Ya and Li Jiaqi are calculated according to the conventional GMV method, that is, the order amount. As long as the consumer clicks on the order, regardless of whether it is paid or returned later, the order is counted in the GMV, which is also a common method in the e-commerce industry.

According to Luo Yonghao, the official battle report of his live broadcast room calculates GMV based on the actual payment amount. According to the data from his first live broadcast in August, the order GMV was 300-400 million yuan, and the payment GMV was 200 million yuan. Assuming a zero return rate, excluding the "unpaid" item, 30%-50% of the water was squeezed out.

Source/ Luo Yonghao's Weibo

Financial writer Wu Xiaobo’s first live broadcast announced the guiding GMV, which was 52 million. For example, when Wu Xiaobo was promoting the Gold Medal Cabinets, he sold 500 yuan cabinet coupons in the live broadcast room, but when the team calculated the GMV, it was based on the actual selling price of the cabinets, 20,000 yuan.

Guiding GMV is not an isolated case. During the Double Eleven period in 2019, both Wei Ya and Li Jiaqi’s live broadcast rooms disclosed guided transaction amounts.

Shenran learned from industry insiders that there are some other versions of GMV.

According to Xiaohulu Big Data, some institutions previously would "replace concepts" in order to improve data, that is, calculate the transaction amount based on the original price. For example, if the original price of a product is 1,600 yuan, and the price in the live broadcast room is 800 yuan, the GMV is still calculated at 1,600 yuan.

More than one industry insider has said that until now, there are differences in the GMV statistical caliber of live streaming e-commerce platforms. Bian Xu said that some platforms also count add-ons (the amount of items added to the shopping cart) into GMV. Heiyan believes that once the industry develops stably, the leading platforms will tend to calculate GMV based on the order amount in the future.

The platform eats the meat, the anchors/MCNs drink the soup, and the merchants are the most hurt. Overall, how much water is there in the GMV of live streaming sales?

Previously, an industry insider revealed that "unless the technology is very advanced and can obtain data from every link of the e-commerce platform", it is difficult for a third party to calculate the approximate transaction amount. However, there is an unwritten evaluation method in the industry. The proportion of real transaction amount in the GMV of e-commerce platforms is currently around 50%, which means that the GMV data must be discounted by half to be the real transaction amount.

According to Shenran, at present, there are some third-party data companies that can use technology to monitor whether there is abnormal behavior in the live broadcast room, but they can only cover the purchase link and cannot monitor the entire process.

Xiaohulu has two dimensions to judge whether the sales data of a live broadcast is "inflated". One is that the purchase rate of goods in the live broadcast room is too high, and the other is that the audience retention rate within a 5-minute time period is too high.

Specifically, there are three conditions that trigger the "water" alarm red line: the audience retention rate in the live broadcast room is higher than 85%, which means that there are suspected viewers who are brushing the volume and are always staying in the live broadcast room; the audience retention rate in the live broadcast room is lower than 15%, which means that most viewers stay in the live broadcast room for no more than 5 minutes; the purchase rate is higher than 50%, which means that there is a possibility that this product is purchased in bulk by the audience in the live broadcast room.

Source: Xiaohulu Big Data

As of 19:12 on November 11, Xiaohulu Big Data showed that there were anchors with abnormal data, including the big wolf dog couple Zheng Jianpeng and Yan Zhen, because some products might have been purchased in bulk by the audience in the live broadcast room.

In addition, canceling orders and returning orders are considered transactions between users and the platform. Xiaohulu Big Data shows that generally a 20%-30% cancellation or return rate is within the normal range.

Li Xun, who jumped from an e-commerce platform to MCN, said categorically that compared with e-commerce, the GMV of the live broadcast room is only slightly more inflated. Heiyan told Shenran that compared with the GMV of e-commerce platforms, it is easier and more costly to artificially inflate the GMV of live broadcast rooms.

There is no doubt that the GMV of the live broadcast room has a certain water injection rate, but the level of water injection rate depends on the anchor.

"GMV is not as simple as everyone imagines. It's not possible for a live broadcast room to exceed 100 million or a brand to sell tens of millions." Bian Xu told Shenran that it is reasonable for these to happen to Taobao's top anchors such as Wei Ya and Li Jiaqi, because the two have been deeply involved in the industry for four years and have a strong fan base. The real rate of GMV is relatively higher. The water content of other anchors is higher, and the water content of celebrity live broadcasts is even higher. Other interviewees also mentioned that compared with general anchors, the GMV of celebrity live broadcast rooms is more inflated because traffic and the ability to bring goods are not directly related.

More than one practitioner mentioned that the industry is still more concerned about actual sales or sales volume. When brands cooperate with MCN agencies, they will request commissions based on actual sales amounts. The GMV of the live broadcast room lives in the battle reports of the anchor/MCN and the platform. It seems harmless, but this "fairy tale" told to outsiders hurts the uninformed merchants. They may have stockpiled a large amount of goods for a live broadcast, but because the return rate is too high, they are dragged into the abyss of high inventory. Also unlucky are the merchants who were misled by the numbers in the battle reports. Many traditional merchants wanted to make a comeback through live streaming, but ended up having to bear expensive slot fees for inflated GMV.

Brother Wushu told Shenran that merchants all over China want to be on the live broadcast rooms of Wei Ya and Li Jiaqi, but the slot fee has been raised to 500,000 to 1 million yuan, but in fact the official fee is only tens of thousands of yuan. It is the intermediaries who add price layer by layer, and in the end the merchants have to pay the bill. "In the Double 11 war, merchants are the leeks."

"The brands are cheated, but the platforms benefit, while the anchors and MCNs can also reap the benefits," Heiyan concluded.

If the commission earned by the live streaming e-commerce platform is calculated based on the actual transaction amount, then the inflated part will naturally not earn any commission, it will only gain popularity. However, in Wushu Ge's opinion, the biggest beneficiary is undoubtedly the platform. The more prosperous the live broadcast room is, the more expensive the platform's information flow will be. No matter how the anchor injects water, he will eventually have to advertise on the platform and buy traffic, and the platform will make the money in the end. "GMV is inflated, and Douyin and Kuaishou are the hardest hit. They are new platforms, and their model relies on traffic to make money, not e-commerce."

Other beneficiaries include anchors and MCNs, which are now the "Party A" in the market, as well as surrounding industries such as intermediary agencies and order-brushing agencies.

From April this year to now, Wushuge's brand has hired anchors to sell products in more than 100 shows. He did some calculations and found that the average slot fee for many top anchors is 100,000 yuan, not counting commissions. In one live broadcast, the anchor sells 40 SKUs from different brands. Therefore, one live broadcast can earn a stable income of 4 million yuan in slot fees. Many anchors broadcast for 21 consecutive days during the Double 11 period. In other words, one anchor can generate more than 80 million yuan in revenue for the MCN agency.

But few businesses stand up to burst the GMV bubble. Wushu Ge said that merchants sometimes complain in the group, but it is limited to business complaints among merchants, and no one dares to offend the largest MCNs.

One is willing to fight and the other is willing to be beaten. The reason for such an imbalance is the imbalance between supply and demand. Many merchants have reported that the current MCN is very powerful. Before Double 11 this year, it was impossible to sign up. Even for merchants who have been exploited, most of them still have hope for live streaming sales, "If this anchor doesn't work, we'll try the next one."

What they expect is that after more and more businesses realize that "they have been cheated too badly", it will become difficult to attract investment from small and medium-sized anchors in the future. When small and medium-sized anchors find it difficult to survive, the slot fees will naturally be lowered, and the supply and demand relationship will be relatively balanced.

I believe that the water content of the GMV of the live broadcast room will drop by then, but I don’t know when that day will come.

Author: Jian Feng

Source: Jianfeng