Analysis of the leading players in live streaming e-commerce: Douyin, Kuaishou and Taobao!

01. Live streaming e-commerce, is it e-commerce or live streaming?

Live streaming is a content consumption product. The content consumed includes not only the video but also the host himself.

The characteristics of live streaming are the super instant interaction and super connection between users and anchors, super money-making ability and extremely heavy consumption patterns. It is a huge consumption of user attention and platform traffic. Therefore, live streaming products are opened less frequently but can retain a group of loyal users.

Therefore, the core HVA (key user behavior) of general live broadcast products is paid rewards, followed by forming a long-term relationship with a certain anchor.

That is, a closed loop is formed after following: watching content - interacting to strengthen connections - rewarding support - more frequent interactions - high-frequency rewards; the ultimate goal of the product is to increase reward income.

Live e-commerce: It abandons the gift function and rewards, and uses the super-strong instant interactive nature to fully display products and establish relationships between viewers and anchors (brands/stores/anchors);

The ultimate goal is to increase product sales from two perspectives:

Therefore, the primary HVA of live broadcast products is to place an order to purchase, followed by following the anchor or store.

In this comparison, live streaming e-commerce has replaced live streaming rewards with purchases, thus changing the way of monetization.

After all, there are only four ways to monetize the Internet:

However, this does not mean that the essence of live streaming e-commerce is live streaming!

The essence of live streaming e-commerce is not to display content in exchange for recognition. All content of live streaming e-commerce revolves around products. It is more about "using live streaming to display product introductions, user reviews, etc. on the business details page." It is also the sales logic of introducing products to gain recognition, identification, and subscription. How the anchor can obtain better and cheaper products is the core of e-commerce - the supply chain issue.

Therefore, the essence of live streaming e-commerce is e-commerce. We need to consider how to better display products, how to impress consumers to place orders, and do e-commerce live streaming just like doing e-commerce .

If you do live streaming e-commerce according to the live streaming method, focusing on volume, fun and attractiveness, I am afraid that the viewing data will be very good, but the purchase volume will be very bleak. This is a big reason why celebrity live streaming frequently fails.

02. What is the value of live streaming e-commerce?

Live streaming e-commerce emerged in the second half of 2019 and grew rapidly during the epidemic. Everyone was talking about live streaming e-commerce for a while.

So what is the value of live streaming e-commerce that is favored by the public?

The stakeholders of e-commerce include consumers (users), merchants, and platforms.

The emergence of new things is bound to benefit all three parties. We analyze live e-commerce from these three aspects:

1) User side: Currently, the biggest pain point for users when shopping is that there are too many products to choose from and the decision-making costs are too high.

When shopping on e-commerce apps, users often make rational decisions and think slowly. They will compare other products and think about whether the product is necessary to buy. Live streaming e-commerce, on the other hand, uses low-price discounts, rush sales, and more immediate and comprehensive product displays to shorten the user's decision-making chain, guide users to think quickly, and save users time in choosing and comparing - just come and buy from me.

2) Merchants: The main pain point for most non-big-name e-commerce merchants is the high marketing costs;

It costs a lot to open a store on Tmall or JD.com, but since you are not a big brand, the conversion rate is not high; the market is gradually being squeezed.

In this case, it is better to give it a try on live streaming, pass on the channel commission and other benefits to consumers to lower the price and sell more goods. In addition, live streaming can also cultivate private fans, cultivate one's own fan user group and increase the repurchase rate. Just in time for the rise of domestic products, a group of new brands such as Huaxizi have accumulated a lot of users through live streaming.

3) Platform: Short video platforms need to monetize to increase revenue, and e-commerce platforms plan to create content to increase traffic, purchases, and time spent;

Tik Tok’s advertising efficiency in making money is comparable to that of a money printing machine, but the frequency of advertising insertion is already very high.

As the world's number one live streaming platform, Kuaishou has naturally formed a certain e-commerce ecosystem, and this year it has further increased its investment in e-commerce live streaming.

On the e-commerce side, Alibaba set the goal of making Taobao a "super consumer media" in 2016, but the content ecosystem has been slow to produce results, the big entertainment industry has changed leaders several times, and Youku has been left behind by iQiyi and Tencent. Fortunately, Taobao Live has ushered in the spring of live e-commerce - the platform has cultivated two star anchors, Li Jiaqi and Viya, and naturally has given more support to live e-commerce.

In addition, the rise of short videos has created a group of internet celebrities with their own fans, and e-commerce has also given them a new way to monetize.

In general, e-commerce live streaming has only become popular recently because it is valuable to all parties. And this year, as everyone is staying at home, it has reaped the full benefits of traffic and has been able to grow rapidly.

03. Similarities and differences between short video platforms and e-commerce platforms

Currently, both short video platforms and e-commerce platforms have entered the live e-commerce market. Let’s analyze the similarities and differences between current live e-commerce players in terms of products and operations:

1. Commonalities

As mentioned above, there are pain points on both the user and merchant sides of current e-commerce products, and the product design and operation model of live streaming e-commerce focus on trying to solve these problems.

Therefore, although the gameplay of each live e-commerce platform is different, there are still common points.

1) Fast pace, shortening the user decision chain and time

Live streaming is a type of content consumption that requires users to immerse themselves in watching. Users’ main focus is on the live streaming content. When making shopping decisions, they will not think carefully and compare choices like they do on shopping apps. They will more likely just place an order and pay for the product if they think it is good.

During the entire shopping process, interference from other information should be reduced as much as possible to allow users to complete the order as quickly as possible. Anchors also often use methods such as "flash sale" and "only xx items left" to encourage users to place orders immediately.

Take Douyin Store as an example: click "Go to Buy" in the anchor's live broadcast room to directly pull up the SKU selection and even jump directly to payment and order, and you can buy the items you like in seconds.

Users make decisions quickly, and the host's live broadcast rhythm is also fast; live broadcast cannot have the same dense explosive points as short videos, and the density of live broadcast content needs to be increased to attract users and demonstrate the value of live broadcast in a short period of time.

For anchors who sell goods, they need to interact more and talk more about things related to the goods to prevent users from losing attention. During Luo Yonghao’s first live broadcast, he talked about his work story for a while and was criticized, “Don’t say too much, just give the link.” Celebrity anchors such as Viya focus on the selling points in every sentence when introducing the goods. Introducing more content and selling more goods in the same amount of time can not only earn more slot fees, but also improve user experience.

2) Pay attention to guiding attention

The live broadcast model is very complex, and it often takes more than a minute to judge whether a live broadcast is interesting and decide to stay - this time is enough to watch three or four Douyin short videos.

In other words, the trial and error cost of live streaming is very high, and it is difficult to recommend live streaming through public domain distribution. Users prefer to watch those anchors they already follow.

In live broadcast products, it is a very important user behavior for users to follow the anchor. Only with attention can there be long-term interaction and rewards. In the show era, the anchors repeatedly said to new viewers in the live broadcast room, "Follow me."

The same is true for e-commerce live streaming. The anchor will set up follow-up coupons or follow-up draws, and the platform will also pop up windows from time to time to remind people to follow the anchor; following also brings more private domain traffic to merchants and provides merchants with an entry point to reach consumers.

3) In general

The form of e-commerce live streaming is still live streaming, and it also has the characteristics of requiring immersive viewing and high trial and error costs. Therefore, its operational focus is similar to that of traditional live streaming.

2. Short video platform

Will traffic strategies and low prices lead to the formation of three Pinduoduos in the market?

In the early days of the rise of e-commerce live streaming, short video platforms played a more important role in bringing goods. The live streaming room would attract traffic to product pages on external sites such as Taobao and JD.com and place orders, and the anchors and platforms would collect commissions.

However, Douyin and Kuaishou are not content to just be traffic diverters. Once users jump to external sites, there is a great risk of user loss. Therefore, they have begun to build their own e-commerce systems. Douyin and Kuaishou have both opened their own stores and provided support.

Short video platforms are best at traffic gameplay, distributing videos that users are interested in to users, maximizing the number of users and usage time, and also cultivating a large number of celebrities; massive traffic, numerous KOLs who can bring products, and the user's non-focused psychological state (which can easily trigger impulse consumption in short links) are the three huge advantages of short video platforms in entering the e-commerce live broadcast.

However, e-commerce is not entirely a traffic business, but a complete service system.

Users noticing the product is only the earliest step in forming a transaction, and the host’s detailed introduction and display of the product cannot completely convince users to place an order on the spot.

Price setting: Product display and other factors will be a reference for users to place orders;

Logistics system: Governance service systems such as customer service systems will take years of effort to build. Currently, the delivery cycle after placing an order on Douyin and Kuaishou stores is very long, and some stores even take more than ten days to ship.

In other words, building short video e-commerce is more like changing lanes and starting over, rebuilding the systems of merchant services, platform governance, etc.

Before the e-commerce system was fully formed, short video platforms mainly used traffic thinking to sell goods, and traffic thinking is inseparable from low prices.

We must use low prices to shorten the user decision-making process to the shortest possible level, so that users will place orders immediately after hearing the price.

Because the current live streaming e-commerce system cannot replicate the user's consumption chain on other e-commerce platforms, if users begin to make rational decisions and comparisons, the many defects of short video e-commerce will become apparent, such as incomplete business details pages, incomplete store information, etc.; therefore, it is necessary to first use low prices to bind the user's mind and quickly stimulate transactions.

Short video platforms have also realized their shortcomings in the e-commerce system and have turned their attention to the supply chain.

Douyin and Kuaishou both launched the Enterprise Account Plan this year, providing discounts for corporate live broadcasts and directly cooperating with industrial belts.

Douyin has a plan to support businesses in industrial belts, and Kuaishou has even invited anchors to go directly into factories to sell goods for brands, trying to obtain high-quality sources of goods from the production end and support new brands.

The logic of low prices: subsidizing the industrial chain to support new brands. These operations seem to have been seen once on Pinduoduo. The e-commerce path of Douyin and Kuaishou may really lead to the emergence of three Pinduoduos in the market at the same time.

3. E-commerce platform

Commodity-centric operations are part of consumer operations.

The core advantage of short video platforms is their large amount of traffic, while the core advantage of e-commerce platforms is their rich business ecosystem - many merchants and many products.

Live streaming has become a new operating channel for merchants - it can attract new customers and guide them to follow fans, it can set up exclusive discounts for the live streaming room to guide transactions, and long-term operations can also allow merchants to join the fan group. Therefore, the e-commerce platform has formed an ecological model in which stores mainly broadcast themselves, supplemented by influencers. Currently, 70% of Taobao Live's transactions come from merchants' live streaming.

User mentality: There are also big differences between e-commerce and short videos. Short video users do not have a strong desire to consume and require strong stimulation - low prices or novel goods, to tap into this consumer demand; users of e-commerce platforms come with a strong desire to shop, and their consumer demand is easier to tap into.

Therefore, the live broadcast content of e-commerce platforms has strong consumer guidance, everything revolves around selling goods, and the anchors are regarded as product guides for merchants.

At present, the transaction efficiency of live broadcasts on e-commerce platforms is generally higher than that on short video platforms. In 2019, the combined GMV of Douyin and Kuaishou’s e-commerce (including live broadcasts and short videos) was just over 60 billion, while the GMV of Taobao’s live broadcast has exceeded 200 billion.

04. Analysis of the top players: Douyin, Kuaishou and Taobao

1. Tik Tok: Massive traffic

Short videos with dense hit points + precise algorithm recommendations + single-column automatic playback create unparalleled content consumption efficiency, bringing huge traffic and super traffic distribution capabilities to Douyin. This is also Douyin’s biggest trump card in various fields, including live streaming e-commerce.

In March this year, the average daily usage time of Douyin users reached 36 billion minutes. According to the 400 million daily active users announced by Douyin at the beginning of the year, each user spends an average of 90 minutes on Douyin every day - five minutes on Douyin is equivalent to one and a half hours in the real world.

Huge traffic: Douyin is also very good at allocating traffic. Douyin uses recommendation algorithms to accurately match people and content, and has cultivated many Internet celebrities. However, this was once a point of doubt for Douyin live streaming - because live streaming requires trust and connection between people and anchors, and Douyin's centralized recommendation mechanism weakens the private domain. The relationship between creators (anchors) and fans is not close. The market once believed that Douyin is more suitable for brand promotion rather than sales.

On April Fool's Day in 2020, Luo Yonghao came to Douyin to live broadcast and sell goods. In this live broadcast, Douyin's traffic distribution capabilities were fully demonstrated: it provided support for the opening page and diverted large amounts of traffic within the site. During the 3-hour live broadcast that night, the cumulative number of viewers reached 48 million, and the cumulative payment transaction amounted to 110 million yuan. Douyin thus proved its ability to sell goods through live broadcast.

After Lao Luo's live broadcast, more companies paid attention to Douyin live broadcast, and the development ideas of Douyin live broadcast e-commerce have gradually become clear; it plays to its strengths and avoids its weaknesses, using familiar traffic strategies to solve the problem of lack of high-stickiness anchors, and on the one hand, it introduced a large number of celebrities to start live broadcasts, and successively invited Chen He, Zhao Wei, and Angelababy to the platform to sell goods; on the other hand, it held large-scale activities, encouraged merchants and Internet celebrities KOLs to start live broadcasts and provided traffic support.

At present, in addition to store live broadcasts, there are two main ways to play Douyin:

Both methods are ways to generate traffic, at least the exposure will not be bad, but now Tik Tok is more of a product promotion function, and e-commerce is still in the trial stage.

2. Kuaishou: The ecosystem of old friends

The biggest advantage of Kuaishou's entry into live e-commerce is the close connection and trust between the audience and the anchors in the Laotie ecosystem; the disadvantage is the low average order value. In addition, Kuaishou's established family system acts as a double-edged sword for Kuaishou's live e-commerce.

Different from the single-column recommendation of Douyin, Kuaishou’s double-column selection naturally emphasizes attention and has a stronger social attribute.

Therefore, the Kuaishou platform has formed a unique "old iron culture", and users have closer connections with creators.

This attribute is naturally suitable for live streaming. As early as 2017, Kuaishou became the world's largest live streaming platform.

This sense of trust has brought Kuaishou a lot of benefits in live streaming e-commerce. Users recognize people before they recognize products, and are more inclined to buy products from hosts they are familiar with.

If you want to sell goods on Kuaishou, you must first create good content, establish a good persona, and attract a group of fans.

As early as 2019, the total GMV of Kuaishou's live e-commerce exceeded 40 billion - this does not include the situation where many anchors jumped out of Kuaishou to conduct transactions on WeChat or Taobao.

However, the average order value of the old friends is not high - judging from the situation of the top anchors, nearly 70% of the products are priced below 50 yuan, and only about 5% are above 100 yuan.

On the one hand, the purchasing power of people in the sinking market is insufficient. On the other hand, Kuaishou’s anchors prefer to recommend cost-effective products to the audience, and the audience attaches great importance to “value for money”.

During the development of Kuaishou, a "family culture" with a strong Northeastern gang flavor has been formed. A "family" is formed around the core big anchors, and the big anchors "recruit apprentices".

Only when new anchors become family members and pay homage to the master (actually becoming contracted artists) can they gain the protection of the masters and the favor of the family's fans, thus having the real ability to make money. Currently, Kuaishou has six major families, with a total number of fans exceeding 800 million.

The family has played a significant role in the development of Kuaishou's e-commerce business, mainly in its strong ability to bring goods, and most of them are involved in the supply chain and are able to obtain goods with higher cost-effectiveness.

Simba, the core anchor of Simba Family, the largest family on Kuaishou, has been engaged in the supply chain business since 2017. He created his own brand "Xin Youzhi Yanxuan" and sold goods through many anchors in the family. In 2019, Simba Family sold goods worth 13.2 billion yuan a year. This year, 6 people from Simba Family were in the top 10 of the 618 Taobao Expert List, and their ability to sell goods is undoubtedly strong.

However, the negative effects of family-based operations have recently begun to emerge: the cake is so small, and if it is divided among several major families, how much space is left for new entrants?

The overly powerful family influence even formed the strength to threaten the platform in reverse - the Simba family brought in 13.2 billion yuan in sales a year, almost one-third of Kuaishou Live's annual GMV of 40 billion yuan.

On April 24, Kuaishou blocked the live broadcast rooms of Simba and Sanda Ge due to a fight between the anchors and their fans, intending to take a hit on the big family. When the ban was triggered, Simba directly sent a Weibo post to demonstrate the supply chain strength to Kuaishou. Many anchors of the Simba family also repeatedly announced in the live broadcast that Simba would be returning soon. On June 18, Kuaishou invited Simba back.

Dong Mingzhu and Ding Lei’s live broadcasts on Kuaishou clearly reflected the Kuaishou live e-commerce ecosystem, both adopting the combination of entrepreneur + professional host + family celebrity.

Dong Mingzhu's partners were host Li Xin and Erlu and Pingrong (Erlu family). On the night of NetEase's return to Hong Kong for listing, Boss Ding came to Kuaishou to sell goods accompanied by Hua Shao and Dandan (Simba family). The sales were 330 million once and 72 million once (Ding Lei's sales were mainly food with lower average order value, which lowered the GMV), which also proved the strong sales ability of the Kuaishou family's celebrities.

3. Taobao: a complete e-commerce ecosystem

The biggest advantage of Taobao Live is Alibaba's complete business ecosystem and super high monetization efficiency, with no shortage of goods and services. On this basis, Taobao Live's operating strategy has become more relaxed, gradually forming a live broadcast ecosystem of self-broadcasting + professional celebrity anchors + celebrities.

Taobao Live is the earliest entrant in the e-commerce live streaming industry. It was launched in 2016. At that time, the battle of thousands of live broadcasts was in full swing and the battlefield of show live streaming was hot, but Taobao still insisted on using live streaming to sell goods. Two or three years later, many show live broadcasts disappeared, while Taobao Live had an annual GMV of 200 billion, becoming the largest e-commerce live streaming platform and creating two major stars, Li Jiaqi and Viya.

From the product perspective, Taobao Live regards selling goods as its absolute core. Swipe right in the live broadcast room to open the live broadcast introduction and live broadcast imprint, so that users can quickly understand the store features and discounts. Replay and product positioning functions are also set up, so users can directly jump to the live broadcast of their favorite products to watch the introduction.

In order to tap into the content potential of the massive amount of merchandise on the platform, Taobao strongly encourages merchants to broadcast their own content and diverts a large amount of traffic to small and medium-sized merchants. Tmall plans to reach 100% self-broadcasting rate this year.

Faced with the situation where mid-level anchors on the platform are relatively weak, Taobao's solution is to introduce celebrity live broadcasts: on the one hand, it supplements anchor resources; on the other hand, it continues to expand the market and make the pie bigger.

Liu Tao joined Alibaba as the Chief Selection Officer of Juhuasuan and sold goods worth 148 million yuan in her first show. The live streaming shopping variety show "Towards a Better Future" hosted by Wang Han and Taobao achieved a transaction of 156 million yuan in its first show. The participation of these celebrities in live broadcasts can expand the attention of Taobao Live and attract more merchants to participate in live broadcasts.

There are often voices questioning whether Li Jiaqi and Viya take up too many resources of Taobao Live. In fact, Taobao Live cultivated 177 anchors with GMV exceeding 100 million in 2019. Most of Li Jiaqi and Viya's viewers are their own fans, which is precisely a model of private domain traffic operation.

05. Summary and conjecture

The live streaming e-commerce trend emerged in the second half of 2019 and quickly became a hot topic during the epidemic. Everyone was talking about live streaming with goods. However, the recent failures of many celebrities in live streaming sales have also caused the market to gradually calm down and re-examine the value and gameplay of live streaming e-commerce.

The author believes that the value of live streaming e-commerce is unquestionable, and it is an auxiliary business model of e-commerce. After the boom period is over, live streaming e-commerce will still exist because it brings value to users, merchants, and platforms, and will gradually become a standard feature of e-commerce like the business details page.

As the market gradually cools down and live streaming methodology continues to settle, the number of celebrities and mid- and low-end influencers will gradually decrease, and eventually a pattern will be formed in which stores broadcast live in the main stream and a few top influencers serve as a supplement.

With the entry of a large number of excellent anchors, the average efficiency of live streaming sales has been raised. The number of stars who only have brand promotion value but lack the ability to sell goods will gradually decrease. The stars who remain are those with a large number of fans and strong sales ability. At the same time, with the improvement of the store’s own live broadcasting capabilities, the value and bargaining power of mid-level anchors will gradually be weakened, and a group of MCNs that took advantage of the trend to enter the market will be reshuffled.

The top celebrity anchors who stay should have both the ability to command premium from the B-end supply chain and the support of a large number of user fans from the C-end, like Li Jiaqi and Viya at present; like Li Jiaqi in the beauty field, there is also the possibility of top celebrity anchors appearing in other sub-categories.

As for the short video platforms building their own e-commerce systems, the author has analyzed the key issues in the previous article - traffic cannot solve all problems, and Douyin and Kuaishou need to rebuild a complete e-commerce service system.

In my opinion, the fact that short videos focus heavily on e-commerce is more like a monetization experiment using 800 million DAU to tap into the platform's huge traffic pool and explore a new revenue model beyond advertising.

However, if short video platforms want to do e-commerce well, they must also consider where their core values ​​lie and how to ensure the original content atmosphere.

Currently, the methods adopted by Douyin and Kuaishou, such as inviting celebrities, organizing shopping festivals, and supporting category brands, are generally based on the logic of low prices to cultivate user minds. If this continues, three Pinduoduos will be formed in the market, or Douyin and Kuaishou will find a more suitable e-commerce development path to establish a differentiated positioning. This is worth continued observation.

Author: Lin Xiqingyun

Source: Lin Xiqingyun