7 steps to completely dismantle live streaming sales

Live streaming sales are very popular. It's more than just a hit, it's become popular beyond the circle. Not only are the familiar Viya and Li Jiaqi, who have been live streaming, still popular, but even Luo Yonghao, the first generation Internet celebrity, has started live streaming to sell goods. Now many CEOs have also started live streaming to sell goods, not to mention entertainment stars. So, many classmates asked me in the background how to watch the live broadcast. First of all, regarding CEO live streaming, I suggest that many CEOs should not be obsessed with live streaming. After all, you are not as professional as the anchors and you are more expensive than them. But I think live streaming will be a very important trend, but the problems with this trend are also obvious.

Today I will dare to try to analyze live streaming sales with you and find out why live streaming sales are so popular? What is its business logic? How do the parties involved make money? What are the strengths, weaknesses, and even the ceiling?

1.Why is live streaming so popular?

The answer is, there are dividends. What's the meaning? The so-called dividend refers to a temporary imbalance between supply and demand. Now a large number of users are attracted to short video and live broadcast platforms such as Douyin and Kuaishou. While watching live broadcasts, they will also buy products based on the host's recommendations. But at this time, compared with the huge number of users watching live broadcasts, there are actually very few sellers (or suppliers) on the live broadcast platform. At this time, there will be a situation where some people can make a lot of money just by selling something randomly. That’s the bonus.

2. How to keep the dividends?

The answer is to dig a moat. In any industry, all dividends will eventually be leveled by competition. What's the meaning? Once people see that live streaming can make money, countless people will flock in. At this time, competition will intensify, the dividends will be equalized, and many people engaged in live streaming will no longer be able to "make a lot of money by just selling some things."

If you want to make money continuously, you must build a moat. In previous articles, we have mentioned the concept of moat many times, which is divided into intangible assets, cost advantages, network effects, and migration cost moats. Let’s take the network effect moat as an example. For a certain live-streaming anchor, once the number of users reaches a critical point, there will be a network effect moat. Why? If the anchor has a large number of fans watching the live broadcast, it will attract more brands and the products will have more discounts. The more discounts there are, the less money fans can spend on purchases, which will attract more attention. Once this scale reaches the critical point of network effect, a moat will be formed, and the dividends will be protected, so you can continue to make money.

At the same time, it also means that many anchors who have not reached this critical point may only be able to earn a little "hardship fee" in the end because of increasingly fierce competition. Just like when Taobao first started, many people opened stores on Taobao to sell things, thinking that it was very profitable and it didn’t matter what they sold. But you must understand that at this time, what you earn are dividends, dividends, and dividends. There are not enough sellers and suppliers, and the demand for buying things on Taobao is huge and cannot be fully met. But later, after this bonus period, a large number of sellers no longer made money on Taobao. It is said that 95% of sellers can only barely make ends meet. Why? Because the dividend is gone. This trend is becoming more and more obvious in the field of live streaming sales. Countless sellers are pouring in. It is foreseeable that soon, within half a year at most, most live streaming hosts selling goods will no longer be able to make big money. The top anchors who have accumulated a large number of fans can continue to make money, or even make more, because of their moat.

3. What is the business logic behind live streaming sales?

The answer is that all three parties benefit.

The jaw-dropping product prices benefit users, the publicity effect in front of a large number of users benefits brands, and ultimately the publicity fees and commissions provided by brands benefit the anchors. In 2019, because a certain brand offered him a price 20 yuan higher than other channels, Li Jiaqi announced in the live broadcast room that he would "ban this brand forever" and even said that "I will no longer cooperate with any resources that give me Taobao pop-up windows." Once you understand the logic of live streaming sales, you will definitely know why Li Jiaqi does this. The anchor must give users the cheapest and jaw-dropping prices on the entire network. Only in this way can he attract more people to pay attention. During the live broadcast, brands received advertising publicity through the host’s product introduction. Of course, the anchor will also receive income from the slot fee + commission when recommending a product. Therefore, the logic of live streaming sales is a proven and very effective logic.

4.What are the strengths of live streaming sales?

The answer is that it can provide users with very rich and complex information. What does it mean? To see if a piece of clothing fits you well, you have to try it on; to see if a mattress is comfortable, you have to lie down on it; to see if a box of crayfish tastes good, you have to eat it. …

These are all experiences and complex information. It is difficult to explain clearly through pictures and text. For books and 3C electronic products, the information is relatively simple because they are standard products and a graphic and text introduction is enough. So Amazon started its e-commerce business by selling books, and JD started its e-commerce business by selling 3C products.

But with the development of technology, we can sell goods through videos and live broadcasts. The advantage of video is that it can display complex information to users. From text, to pictures, to videos, to live broadcasts, the information content of each unit of content is getting higher and higher, and it can penetrate more and more difficult consumer decisions. Therefore, the advantage of live streaming sales is that it can display complex information.

5.What are the shortcomings of live streaming sales?

The answer is, total national time. This is not only the shortcoming of live streaming e-commerce, I even think it is its ceiling. What is National Total Time? This is a concept proposed by Luo Zhenyu, which means that a user has limited time, not even a minute or a second more. If a user spends time doing this, he won't be able to do that. Netflix CEO Reed Hastings also said that Netflix's competitors are not a certain TV station, but game companies, film companies, publishing companies, Twitter, Facebook, and all these companies that take up users' time are actually Netflix's competitors. Live streaming to sell goods also takes up a fixed period of time from users. Many live broadcasts are held between 20:00 and 22:00 in the evening. What are you doing at this time? work overtime? Of course, there are still many people studying, chasing TV series, watching variety shows, accompanying their families and children, dining at KTV or playing games. Therefore, live streaming is actually competing with various industries that are trying to grab people's attention during this time period.

This is the ceiling of live streaming sales. When the ceiling is obvious, the competition in live streaming e-commerce will soon enter the competition for existing stock, which is what we said in the second breakdown, that the short-term bonus will soon be smoothed out due to full competition. Top anchors will always worry about the emergence of new anchors who will divert their users, while mid-level or even small anchors may lose users because they have weak bargaining power with brands and cannot offer users the lowest price. The dividends disappear, and the money that fell on your head in that era can never be earned again. At this time, if you don’t use the money earned from dividends to build a good moat, then you will most likely lose all the money by your own ability.

6. What should I do if there are a large number of order returns after impulse purchases during live streaming?

What else can I do? retreat. You might say, why? The quality is no problem either. I can't pay for the user's impulse. Yes, but I still suggest you to retreat. Why do users cancel their orders in large numbers? It’s because we didn’t choose the right products, which led to user dissatisfaction. Since it is our problem, of course we can “retreat”. Only in this way can you truly care about the users, and the users will trust you unconditionally and will not leave you. Therefore, in order to reduce losses and increase profits, your product selection ability is particularly important. There was something that Bi Sheng, CEO of Bixu Mall, once said that almost all e-commerce companies will eventually fail due to product selection. I totally agree with this statement.

Live streaming with goods is also a form of e-commerce. When we were still young at the beginning, there were fewer categories and it wasn’t a big problem. However, as the scale grew and the number of products increased, the weakness of the anchor's insufficient product selection ability was exposed. After all, it is impossible for everyone to understand all products. Without such professionalism, some mistakes in product selection are inevitable. What should I do then? Refund promised. This will indeed cause great losses and be heartbreaking, but it is also a sword of Damocles hanging over the host's head that he has actively chosen in order to control quality. Tell all users, you can buy with confidence, if there is any problem, I will cover it. What is the nature of this sword of Damocles? The essence is that since the front end cannot completely solve the problem, it should be solved through the back end. Since it is impossible to select the perfect products, the after-sales service must be sincere.

7.Whose interests does the anchor fight for?

Finally, let’s analyze this: Is a host fighting for the interests of users or for the interests of merchants? The answer is the interests of users. Why? Some people may say that whoever pays is the boss, and the money the anchor earns is given by the merchants. In order to make more money in the future, the anchor should of course represent the interests of the merchants.

No. Indeed, the money earned by the anchor is paid by the merchants. But why are merchants willing to pay? It’s because there are many users watching the anchor, so the publicity effect is good. Why do anchors have so many users? That’s because the anchor fights for benefits on behalf of users and provides better products to users at cheaper prices. Therefore, the anchor should be positioned as a user agent, and never a brand agent.

Final Words

In 7 steps, we break down live streaming sales step by step. After disassembling it, you may get the feeling that, oh, this is what live streaming e-commerce is all about, it’s quite simple. It means standing in the user's perspective, acting as the user's agent, and truly considering the user's interests. In this way, users will trust you, and you will attract more and more users;

The more users watch your live broadcast, the more brands will come to you, and the stronger your bargaining power will be; the stronger your bargaining power, the bigger the discount on products; the bigger the discount on products, the more users you will attract. Such a reinforcing loop is formed. Is it like Amazon's flywheel effect, using lower prices to promote scale, using scale to reduce cost structure, and using cost structure to reduce prices?

Is it that simple? It's that simple. Oh my god, this sounds too obvious, doesn't it? Everyone knows that the greater the sales volume, the cheaper the product is, and the more users there are, the greater the room for negotiation. Yes. Everyone knows. But the difficulty lies in that some people don’t think this way. They don’t want to be user agents, but want to take advantage of the bonus, cash in, reap the benefits and leave. It took Amazon 20 years to drive this flywheel and become profitable. The flywheel of live streaming e-commerce is definitely not comparable to the scale of Amazon. It may only take half a year, instead of 20 years. But even half a year, there will still be many people who can’t wait. After all, as Buffett said, no one wants to get rich slowly.

Author: Liu Run

Source: Liu Run (ID: runliu-pub)