Epidemic Fuels Online Push, Livestreaming E-commerce

Quarantine has attracted more users and businesses to the growing market.

Anna Vodopyanova
    Mar 23, 2020 8:45 AM  PT
Epidemic Fuels Online Push, Livestreaming E-commerce
author: Anna Vodopyanova   

"Online" is enjoying a revamping as more businesses turn to remote operations amid isolation in the face of COVID-19. In China, which last week reported its first days free from domestic-born infection, online operations have long been at the forefront of any progressive business. Now, more are turning to explore digital opportunities.

On Thursday, the founder of debt-ridden smartphone brand Smartisan, Yonghao Luo, announced that he seeks to delve into live-streamed e-commerce. Citing Luo's statement on WeChat, Caixin Global reported that Luo plans to use livestreaming to sell digital gadgets, books, and groceries.

Currently, China's top livestreaming e-commerce platform is Alibaba's Taobao Live. Two other main players are video sharing platforms TikTok (Douyin in China), operated by unicorn ByteDance, and Tencent-backed (HKEX: 0700) Kuaishou.

Primarily a global social app, TikTok dipped its feet in U.S. e-commerce last year. In November 2019, it began to permit links in users' accounts. The platform had tested ads earlier, but that month it had improved the shopping experience. Clicking a link would open up a page within TikTok, presenting products or services, and users could make purchases without exiting the social app. Its Chinese counterpart, Douyin, meanwhile, is benefiting from a deal it struck in March 2018 with Taobao to integrate external shopping into its social platform.

Meanwhile, Kuaishou is building its own e-commerce system that integrates six online retail platforms and has reached monthly sales of $1.4 billion last year. It also has a strong e-commerce conversion for key opinion leaders (KOLs), as Technode reported. The medium argued that Kuaishou is better-suited for e-commerce of the two social apps, thanks to a large percentage of lower-tier users, more livestreaming, and strong user engagement. It said, however, that Douyin is the preferred platform for brands to advertise on.

Luo did not specify which platform he will use for livestreaming. And while his interest in live-streamed e-commerce may not be a good indicator of a promising business, considering his failed startups (bacteria-repelling "sharkskin" plastic, e-cigarettes, debt-ridden mobile gadget company), market data support the claims.

China has the largest livestreaming market in the world. The number of livestreaming users may reach 524 million this year, state media Xinhua said in a February report, citing iiMedia Research. Last year, sales reached $62.3 billion – up 72% year-over-year, according to financial services firm Everbright Securities, as cited by Technode.

"Never bought anything from livestreaming platforms? That's because you've never seen us livestream," Luo said on his Weibo account last week.

This year, spurred by the coronavirus, content-driven livestreaming has attracted more attention.

A Change in Consumer Behavior

In a mid-February call with analysts, Alibaba Group (NYSE: BABA; HKEX: 9988) said the coronavirus halted its commerce and supply chain for at least two weeks after the Chinese New Year. It did say that the volume of purchases on fresh food, groceries, and daily necessities increased during the period but the segment experienced delivery limitations.  

Daniel Zhang, Alibaba's executive chairman and CEO, noted that the company's e-commerce business flourished after the SARS virus outbreak in 2002-2003. While online penetration is "already quite high" in China, it is now growing especially in less developed areas and low-tier cities.

"We believe that adversity will be followed by change in behavior among consumers and enterprises and bring ensuing opportunities," Zhang said in the call. "We have observed more and more consumers getting comfortable with taking care of their daily living needs and working requirements through digital means. We are confident in the ongoing digitization of China's economy."

Zhang did not comment on livestreaming e-commerce for the period in the call, but said that "digital working style" became more accepted and Alibaba's platform DingTalk, which facilitates livestreaming for work and learning, enjoyed "explosive growth" during the outbreak.

From January to mid-February, the number of livestreams on Taobao Live has more than doubled from a year ago, Alibaba reported. The company attributed the influx to its removal of some prerequisites to support businesses, as well as to retailers attempting to maintain sales and engagement amid the epidemic.

In a late February report, Alibaba's corporate news medium Alizila stated, "This month, Taobao Live users would have seen chefs broadcasting cooking tutorials in restaurant kitchens, real-estate agents giving tours of apartments, celebrities and singers performing in an online concert from their homes, rural farmers promoting their fruits and vegetables and even auto dealers showcasing the interior of luxury cars."

Earlier, Alibaba said that Taobao Live recorded $2.9 billion in sales during the 2019 Singles' Day annual shopping festival – that's 7.5% of its total sales in the event. In 2018, the platform generated $15.1 billion in gross merchandise volume (GMV), up 400% y-o-y, according to Alizila.

Separately, a Chinese platform for entertainment livestreaming, Bilibili Inc. (Nasdaq: BILI), enjoyed a nice growth curve in trading from late January through mid-February. Its stock hit a 52-week peak of $29.28 per American depositary share during the period, though it later slipped. It now trades  near its pre-epidemic level of $20 per share.