The trillion-dollar business of live streaming sales!

Amidst the attention of the entire nation and the hard promotion and cooperative warm-up by a number of brands, Luo Yonghao finally started broadcasting.

Douyin, which spent a huge amount of money to acquire Luo Yonghao, spared no effort in promotion and directly gave it the opening screen position. The first product to appear was not the Xiaomi Mi 10 from its rival Xiaomi, but the Xiaomi Super Writing Gel Pen. With the strong recommendation of Luo Yonghao and his old friend Zhu Xiaomu, the former vice president of product at Smartisan Technology, it was sold out in an instant. An additional 60,000 pieces were purchased and sold out in an instant again.

The products that finally appeared on Luo Yonghao's first live broadcast also exceeded the digital 3C category previously estimated by the industry. Xiaomi Super Writable Gel Pens, Nayuki Tea Cards, Xinliangji Crayfish, Ariel Laundry Detergent Beads and many other products were on the list, and the categories were quite diverse.

With the strong support of Douyin's opening screen resources, the number of people watching Luo Yonghao's first show online at the same time reached 2.8 million. In terms of sales of a single link, Luo Yonghao's record of 4 to 5 million for a single link has exceeded the daily level of 2 to 3 million of Wei Ya and Li Jiaqi.

Luo Yonghao's live broadcast results within one hour

When Luo Yonghao announced that he would start live streaming e-commerce, he once said: "Although I am not suitable for selling lipstick, I believe I can become the top seller in many categories of goods."

In fact, the 600,000 yuan pit fee circulated in the rumors is already far beyond the "top stream" level:

According to the prices learned from the "Hot Selling Law", Li Jiaqi's slot fee is around 80,000 yuan, and the commission ratio ranges from 20% to 30%; Wei Ya's slot fee is generally around 50,000 yuan, and the commission ratio ranges from 15% to 30% (the slot fee and commission ratio may also change with the brand's matching degree).

Judging from the current charging level, even if it is not calculated using this method of ranking first in a new industry, based on the level of the pit fee alone, Luo Yonghao has already become one of the top live-streaming e-commerce influencers .

However, along with the extremely high sales of Luo Yonghao's first show, many people also gave negative comments such as "nothing to watch", "poor business level", and "like reading a script" - after the high popularity of the first show, it is still unknown whether Luo Yonghao's live broadcast sales effect can maintain this record next time,

So, whether it is Luo Yonghao's "Make Friends" MCN or live streaming itself, can it really, as Luo Yonghao mentioned earlier in the research report of China Merchants Securities, take the total GMV of live streaming e-commerce exceeding 300 billion yuan in 2019 as a starting point and reach a trillion-yuan scale in the future?

In this live streaming carnival, platforms, brands, and anchors are all being swept forward by this era's torrent of trillion-dollar imagination.

01 Each platform has its own needs, and they rush in to bring goods

In the trend of live streaming sales, the most active ones are undoubtedly the platforms. Among all the platforms, Taobao ranks first in terms of investment intensity.

Taobao first started live streaming in 2016 when live streaming was just becoming popular. At that time, Taobao’s core goal was to increase the time spent on Taobao through live streaming content, solve the problem of consumers “buying and leaving”, and allow consumers to “shop around”.

Therefore, at the beginning, among the platforms that vigorously promoted overseas shopping live streaming, such as Mogujie, Taobao Live's actions were not very big: when it started testing in March 2016, it only recruited a small number of people, and the most prominent event was the promotion through Papi Jiang's advertising auction. After Taobao Live was officially launched, in order to complete the cold start, Taobao also found celebrities, top Taobao girls, internet celebrity store owners, and various content-based internet celebrities who became popular on social media, but the effect was not obvious.

The turning point of Taobao Live can be said to be the emergence of Wei Ya: Wei Ya, who was an unknown Taobao girl at the time, achieved sales of 100 million yuan in four months of live broadcast, proving the ability of Taobao Live to bring goods. Since then, the chain of Taobao Live's "Weibo preheating, live broadcast interaction, and Taobao transaction" has gradually matured. By 2017, Taobao Live had positioned itself as a "new ecology, big live broadcast," and its strategic position within Taobao has been rising.

By 2019, the annual number of Taobao Live users had exceeded 400 million, and the transaction volume as a percentage of Taobao's overall market continued to rise along with the department's internal importance.

If Taobao Live was just a part of Taobao's content strategy in the early days, its status within the company has risen sharply today:

In early March, Alibaba also carried out a strategic upgrade of Taobao Live and established a new Taobao Live business unit, which was composed of the original Taobao Live merging other business lines of the original content e-commerce business unit (Wow Video, Taobao Toutiao, etc.). Yu Feng (nickname Xuande), the former general manager of the content e-commerce business unit, served as the head of the new Taobao Live business unit and reported to Jiang Fan, president of Taobao Tmall.

On the Taobao side, we can also see the importance of Taobao Live today from its location: Taobao Live, which used to have a very deep entrance and was difficult to find in the content section, now occupies a very core section on the first and second screens of Taobao Mobile.

The position of Taobao Live on the first and second screens of Taobao Mobile

In 2019, with Viya and Li Jiaqi becoming popular and Taobao Live becoming extremely popular, it is impossible for other e-commerce platforms to turn a blind eye.

JD.com had tried live streaming as early as 2016, when Liu Qiangdong even appeared on camera cooking and selling products. However, compared with the booming Taobao Live, JD Live does not have a big voice in the market and still remains at the status of a content tool for merchants on the platform. Therefore, even though JD Live proposed a plan to "incubate 100 benchmark merchants and 10 billion-level merchant cases" at the end of last year, and to create an industry belt live broadcast festival, few people still knew about it.

Pinduoduo , a latecomer, also began experimenting with live streaming in May 2019. Merchants on the platform will access Kuaishou's anchor resources to promote products through live streaming. In November, it launched a content called "Good Goods Live Streaming" at the "10 Billion Subsidies" entrance on the homepage, opening live streaming reservations for users. The first broadcast stores are mainly maternal and child products, and daily necessities. According to Latepost, the assessment target of Pinduoduo's live broadcast in 2020 is the number of merchants settled in. Pinduoduo has also provided preferential policies and traffic support to attract industry players.

In addition to e-commerce platforms, the two short video platforms, Douyin and Kuaishou , are currently the most aggressive in the field of live streaming sales. Unlike e-commerce platforms that use live streaming to sell goods to promote conversions through content, the core purpose of short video platforms using live streaming to sell goods is to increase traffic monetization methods.

Douyin was not one of the first to enter the live streaming e-commerce market, but since then, it has been increasing its investment in this business: the shopping cart function was fully opened at the end of 2018; in 2019, Douyin gradually relaxed live streaming permissions, and there is no longer a limit on the number of fans for live broadcasts.

During the 2020 epidemic, Douyin began to promote a 1 billion live broadcast traffic support plan (providing 2 weeks of novice traffic support for offline merchants who did not use the live broadcast shopping cart function from January 1 to February 29), a green channel for small stores to enter (accounts with 0 followers can also open a small store platform), official training and other special policies (for new merchants) to attract merchants to settle in and accelerate the realization of online live broadcast layout. From all the signs, it can be seen that the importance of live broadcasting has become increasingly important in Douyin's strategic sequence.

In this competition with Luo Yonghao, Kuaishou, which failed to get Luo Yonghao to join, actually started to deploy live streaming sales earlier:

Kuaishou began to plan for live streaming sales in 2017, and launched Kuaishou Store in June 2018, entering the e-commerce market. Six months later, Kuaishou upgraded the store again, allowing consumers to complete all purchases and order checks while watching live broadcasts within the Kuaishou app, without having to jump to other platforms.

Kuaishou has never officially disclosed revenue data related to live streaming, but Youzan once mentioned that since it started cooperating with Kuaishou on live streaming e-commerce in July 2018, the transaction volume has increased significantly. At the same time, many industry insiders have also said that Kuaishou's e-commerce revenue performance is indeed quite impressive. Moreover, compared with Douyin, Kuaishou already has benchmark cases like Simba: in last year's "Kuaishou Sales King" event, sales reached 400 million yuan in 2 days.

It is for this reason that some brands have expressed their understanding of the "rule of hot products", saying that they have already recognized the importance of investing in short videos on Douyin but investing in live streaming on Kuaishou. Therefore, for Douyin, which is increasing its investment in live streaming e-commerce, whether it can make Luo Yonghao a benchmark case like Douyin's "Simba" or "Li Jiaqi", and then attract more brands to invest in the Douyin ecosystem, is probably more important than the GMV of a single game.

In addition to short video platforms, live streaming platforms will naturally not miss out on live streaming e-commerce as a second income curve besides rewards.

For example, on YY, the live streaming revenue of non-standard products such as handicrafts, jewelry, jade, cultural relics and collectibles, which are centered on auction gameplay, is not small. Although YY began recruiting a large number of guilds in November last year in the hope of expanding the content categories of e-commerce live broadcasts, it is obvious that auctioning jewelry and jade is still the most important category of live streaming sales on YY.

YY live broadcast jade auction

In addition, there have been recent media reports that Douyu will restart its e-commerce live streaming business. It has recruited and trained a group of live streaming hosts, and is simultaneously recruiting cooperative brands in the fields of digital, clothing, fast-moving consumer goods, etc. It is expected to open an independent live streaming e-commerce zone "Ace Recommenders" around May and provide traffic support. If e-commerce commission income can be made into another income module besides rewards, it will naturally be very attractive to Douyu.

In addition to the two major categories of e-commerce platforms and short video live streaming platforms, social platforms have actually also set their sights on the "fat meat" of live streaming sales.

For example, Xiaohongshu recently caused quite a stir because it won the first broadcast of LV. Although the effects and reputation are quite differentiated, it seems that a route of self-broadcasting through cooperation with high-end brands has been found.

In fact, Xiaohongshu is an interactive live streaming platform that was officially launched in November last year. Currently, the live streaming permissions are still tightly controlled and the number of people who have opened accounts is not large. According to a cooperation data introduction from Xiaohongshu's brand marketing center obtained by "The Law of Hot Products", Xiaohongshu only opened up more than 2,000 live broadcast permissions in January 2020. Combined with its previous cooperation with LV, it seems that it is still taking the route of small-scale, high-tech content.

In the eyes of many people, Tencent Live is considered an "important traffic pool" along with Video Account and Enterprise WeChat.

In terms of positioning, Tencent Live Director Liu Shuopei mentioned in a recent sharing that in the short term, Tencent Live is private domain traffic + e-commerce conversion + live broadcast tool, suitable for small and medium-sized businesses with old customer groups, but in the long term it will be a live broadcast content platform of private domain traffic + public domain traffic, suitable for content producers + all businesses, and its ambitions in the field of live streaming are not small.

Currently, Tencent Live can be connected to WeChat through mini-programs, and distributed using official accounts, communities, and WeChat advertising traffic. It supports merchants’ own stores, as well as merchants without stores to directly connect to 20,000 SKUs on JD.com and Weidian.

But it is worth noting that Tencent Live actually belongs to Tencent Kandian, which is under Tencent PCG. Compared with WeChat, it seems to be closer to Tencent's information flow team. The resource support it will receive in the future will also be mostly in the product ends such as QQ Kandian Plaza and QQ Browser under the information flow. Due to the segmentation of its own team structure, it is still unknown to what height Tencent Live can reach in the WeChat ecosystem.

02 Brands caught up in the live streaming craze

So, as platforms are actively investing in live streaming, an important question is: can live streaming e-commerce really be effective for brands?

“ Most brands that do live streaming lose money on a per-show basis. ” An industry insider invested in various anchors, big and small, for his multiple products throughout last year. After communicating with his peers, he came to this conclusion about the “rule of hot products.”

In addition to paying the anchor a slot fee and commission, brands that do live streaming usually have to offer more favorable prices or gifts, and the losses caused by returns must also be deducted from the income.

Therefore, there is a relatively simplified algorithm to determine whether a brand can make money from live streaming:

• Revenue = live broadcast room unit price * sales volume
• Cost = slot fee + anchor commission + product cost + shipping fee + gift expenses
• Revenue minus cost is the gross profit of each game.

However, if you calculate carefully, there may be investments in purchasing resources and locations, and investments in operations... These expenses, together with the slot fees, anchor commission ratios, and gift expenses, can reduce the brand's profit for a single game to an extremely thin level .

Zhao Yuanyuan, the former head of Taobao Live, once gave a more detailed ROI conversion formula in his sharing.

From the consumer's perspective, selling goods through live streaming is a typical impulse purchase where consumers buy first and then talk about it. It is common for consumers to regret and return the goods the next day. So for brands, once the goods are returned, there is basically nothing left. Therefore, after a live broadcast, unless the sales volume is really considerable, it is difficult for the brand to make any profit.

But in fact, the current reality is that the head effect of live streaming e-commerce is quite obvious. Except for Wei Ya and Li Jiaqi on Taobao Live, and Simba on Kuaishou, the effects of other sub-heads, and even the effects of celebrities, are difficult to give an ROI that satisfies the brand.

Li Xiang is a new force in celebrity live broadcasting, but it was not smooth in the early stage and there was a slow climb.

A beauty and personal care brand once complained about the "rule of hot products" and said that it found a mid-level artist with considerable traffic on Weibo, and paid a placement fee of 30,000 yuan. However, in the last live broadcast, only 200 yuan worth of goods were sold. Taking into account all the resources invested, the net loss for a single live broadcast was 60,000 to 70,000 yuan.

This is more or less because the Matthew effect in the live streaming e-commerce arena has become quite obvious: the top anchors have better sales skills and a larger audience. Being able to increase sales means getting better discounts from brands, attracting more consumers, and at the very least increasing store traffic. All of this no longer exists among mid-level anchors, or even the second-top anchors.

Therefore, no matter how thin the brand profits are, they are willing to try their best to find top anchors to promote their products. There has even been scalping business around top anchor teams like Li Jiaqi and Viya, and brands have to pay more to get the position from scalpers. This is probably why, despite the high price of 600,000 yuan reportedly charged for Luo Yonghao’s first show, there were still thousands of companies competing to cooperate.

The dual giant effect of Wei Ya and Li Jiaqi is very obvious

In addition, while the slot fees vary in level, compared to the more clear, stable and traceable models such as the Through Train, there are still too many vague and uncertain factors in live streaming: what kind of anchor, what kind of product to broadcast, and how to broadcast in order to have volume and revenue? Is it even possible that during a live broadcast, there will be a mishap such as "scrambled eggs in a non-stick pan sticking to the pan", which will have the opposite effect? This is far more uncontrollable than real performance advertising.

Therefore, for brands, currently investing in live streaming sales can basically only rely on the performance of competing products or be a black box of "blind investment". They can only try again and again, and screen out a few anchors who are truly compatible with their own categories like a sifting through the sand.

So, with such uncertainty, why do brands continue to invest in live streaming to sell goods?

An industry insider said: " All I can say is that sales at a loss are still sales. " For brands, even if the ROI of a single show may not be ideal, there is indeed the possibility of a hit product appearing in live streaming, and marketers are willing to take a gamble on this probability; even if the profit margins are really too thin and the benefits are limited.

When it comes to Luo Yonghao, it is actually another level beyond ROI. An industry insider said about the "rule of hot products" that the high slot fee of 600,000 yuan for Luo Yonghao's first show is basically an idea of ​​​​a brand advertisement to gain exposure, and it is not a live broadcast sales that really focuses on sales volume and conversion .

Luo Yonghao's own statement on Weibo also indirectly confirmed this point: companies do not require sales volume when they approach Luo Yonghao, they can pay the "product promotion fees" just by introducing new products. From this perspective, Luo Yonghao is indeed following the traditional KOL brand advertising logic rather than live streaming to sell goods, but for such a big traffic user, brands are still willing to take advantage of it and pay the bill.

Of course, even for top streamers, not all categories can achieve good results. Luo Yonghao said that lipstick was not within the team's consideration for product selection.

"The Law of Hot Selling Products" has also learned of a case: a certain liquor brand once paid a "slot fee" of more than 200,000 yuan, which was far higher than the usual price, to get Wei Ya's live broadcast position. However, after one show, the sales volume was a mess and the ROI was a net loss. However, if others are selling well during the same live broadcast while your sales are terrible, it cannot be considered the host’s problem – either they found the right person or chose the right product, they didn’t design the script well or there is a problem with the discount settings. The brand’s e-commerce department can only reflect on itself.

In addition to the fact that sales cannot be guaranteed, it is also difficult to determine the water content in the sales: now not only the people in the live broadcast room can purchase, but also the live broadcast scrolling purchase effect of consumers entering the store to browse the products can be purchased. The price of 200 store-entry effects is about 100 yuan, which can maintain the lively sales effect of the live broadcast room.

With the support of various gray industries, the final sales volume will not be a problem. In cases where the cooperative relationship is relatively close but the effect is not good, resulting in failure, some anchors will consider the long-term cooperative relationship and take the initiative to place orders in order to increase the GMV for the day first. This has led to some brands experiencing a situation where the live broadcasts looked lively during the broadcast, but when they woke up the next day, they found that the return rate was as high as 30% or 50%. You should know that for some well-performing brands, the return rate on Double Eleven was less than 20%.

In addition to the practice of the anchor team directly relying on GMV, there are also cases where the brand anchors collude to increase sales.

In order to make the live broadcast sales look good, some brands will give the anchor a very low price for selling goods, which is even lower than the channel price of dealers, and then the dealers will go directly to the live broadcast room to place orders and get the goods - but both parties are well aware of the water content in the sales results, and the sales volume will also be dehydrated when settling with the anchor. In this case, it is more of a brand marketing promotion, and it is really a matter of spending money to buy publicity.

But even if sales are dismal and inflated, brands will never give up on live streaming: whether it is changing SKUs or changing anchors, as all brands are using live streaming to develop online channels and platforms are heavily allocating resources, brands can only keep trying.

03 In the growth dilemma, anchor MCN must transform

For the anchors and MCN agencies in early 2020, the heavy investment of various platforms and brands in live streaming is actually a double-edged sword: on the one hand, live streaming creates another possibility for generating revenue, but it also means a transformation of the overall business model and personnel structure.

The uncertain industry situation has already posed a shock to anchors. The special circumstances since the Spring Festival have made the situation in the content creation industry, which has been unclear since last year, even worse. The income of anchors and MCNs has dropped significantly. MCNs have chosen to merge and form groups for warmth, and news of salary cuts and layoffs have been reported repeatedly.

There are several reasons behind this. On the one hand, live streaming and short video platforms no longer spend money to snatch creators, and only a very small number of cases can get high signing fees from the platforms. On the other hand, after Zhang Yuhan’s data overturned incident last year, brands are even less willing to invest in brand advertising whose effects cannot be seen. Under the impact of the epidemic, brand advertising whose effects are difficult to evaluate are the first to be hit.

Zhang Yuhan's incident ended with Weibo officially shutting down her account

In comparison, live streaming sales, which mainly rely on CPS profit sharing, can better meet the advertising needs of advertisers than pure brand advertising in such a special period, even though it is currently mostly loss-making.

Content creators and MCNs are gradually reaching a consensus on this. Zheng Kai, the head of Maoyan Video MCN, said in an interview with "The Law of Hot Products" that in the future, KOLs will inevitably increase the monetization model of performance-based advertising such as live streaming with goods, which is mainly based on CPS settlement. When the data in the industry is getting more and more watered down, coupled with the pressure of the economic environment, "the first step for all companies to cut their budgets is to cut this type of pure product promotion."

For MCN, this means starting to explore other models besides pure brand advertising as soon as possible. Live streaming with goods is the most direct "performance advertising" at this stage.

However, obviously not everyone can be a live-streaming host selling goods.

Zhao Yuanyuan, former head of Taobao Live operations, once said: "Currently, most anchors are from stalls, promoters, flight attendants, store owners and other groups, and there is a lack of experts, researchers, inventors, product managers and other leading figures in certain industries."

The core reason for this phenomenon is that live streaming sales actually tests sales skills and on-the-spot capabilities: What is more important than how well you know about the goods and products is how well you understand consumers and how well you can persuade them to pay.

In a Douyin live broadcast product sharing obtained by "The Law of Hot Selling Products", there is also a special "Live Broadcast Room Drama Performance" chapter, which guides the anchor on how to use sales techniques to create a tense atmosphere for grabbing goods in the live broadcast room.

However, this emphasis on sales skills has also led to some chaos in live streaming sales:

On March 31, the China Consumers Association also released an online investigation report specifically on the problems in live streaming e-commerce, which specifically pointed out that anchors have the problem of exaggerating their promotions when selling goods, and consumers' satisfaction with the promotions was also the lowest.

There are many cases like Mu Yalan's previous "Nobel Prize in Cosmetics" incident where people are not familiar with the script and speak without thinking. Although it is still difficult to regulate live streaming at present, it will be included in the scope of supervision in the future as the rules are refined.

At the same time, this also means a challenge to the existing KOL and MCN personnel and capability structure: compared with the KOLs in the past who were mainly based on their talent and ability, anchors like Li Jiaqi who have a BA and sales background may be more valuable in the future.

To put it more directly, for brands, with booth fees rising sharply and results difficult to guarantee, it may be more attractive to build their own MCN and promote their own sales staff.

For example, Liangpin Puzi, which just went public this year, established its own content team in 2016 and started its own official live broadcast in 2018. In 2019, Perfect Diary, which was recognized for its good official live broadcast performance and had just raised US$100 million in financing, also built its own MCN and even opened it to other brands, which directly became a new business for the company.

The number of people online in the official live broadcast room of Perfect Diary store can reach 118,000

Under the platform policy, self-broadcasting by a brand actually means that it can obtain more resources from the platform.

As Taobao announced at the 2020 Taobao Live Festival, it will begin to focus on taking care of the middle and lower forces in the live streaming ecosystem, with the policy of "creating 100,000 anchors with monthly income of over 10,000 yuan" and "100 MCNs with annual sales of over 100 million yuan"; Pinduoduo and JD.com have begun to promote methods such as visiting factories and supply chain live broadcasts.

Under such circumstances, many brand owners have already started to do live broadcasts to attract traffic:

1. Lin Qingxuan CEO Sun Chunlai personally went live to do live broadcasts, and the revenue in 2 hours was equivalent to the sales of 4 offline stores in 1 month;
2. Septwolves CEO Li Shujun and design director personally participated in the event, with sales exceeding 1.28 million in one hour;
3. Liang Jianzhang, chairman of the board of directors of Ctrip, sold travel packages on Douyin live broadcast, bringing in 10 million yuan in sales in one hour.

Although it is impossible for the bosses to appear in the live broadcast room every day, the instantaneous traffic and conversion they can create in a single game are enough to exceed the effect of a second-top anchor. In the long run, brands that build their own MCNs that understand their own products and know how to sell them are likely to become a new force that challenges the high concentration of traffic among top anchors.

This also means that live streaming MCNs that have not yet stood firm on the cusp of the storm should start thinking about their next move.

Summary of different MCN types in China Merchants Securities research report

Qianxun, the company behind Viya, is currently trying to extend its reach into the supply chain, attempting to gain greater control over the upstream and avoid being eliminated in future competition.

Qianxun moved to Alibaba's Binjiang Park last year and transformed a complete two-story office building with a total area of ​​about 10,000 square meters into a large product selection site, attempting to build a "super supply chain base."

But on a similar path, there is also a listed company, Ruhnn: compared with its 52-week high of $12.14, Ruhnn's share price on March 31 had fallen to $4.36. It remains to be seen whether Qianxun can find success in blazing a new trail, but at least for now, Ruhan has not been able to create a second Zhang Dayi, and the capital market has not chosen to pay for the "Internet celebrity + supply chain" model.

On the day of Luo Yonghao's first broadcast, Simba led his apprentices to achieve sales of 400 million, Viya posted a special collaboration to sell rockets that looked like an April Fool's Day joke, and Li Jiaqi chose to take a rest. So who will join the ranks of live streaming sales tomorrow?

Author: The Rule of Explosive Products

Source: The Rule of Hot Selling