Live shopping: in 5 years, between 10% and 20% of global e-commerce 

The arrival of Alibaba's Taobao Live in 2016 ushered in a new era in e-commerce, linking a live online broadcast with an e-commerce store to allow viewers to watch and shop at the same time
Live shopping: in 5 years, between 10% and 20% of global e-commerce 

Live shopping or live commerce established itself as an ever-present element in sales campaigns for Single Day, the major shopping event in China, and more generally, as a digital tool to drive sales and customer engagement. In 2020, the first 30 minutes of Alibaba’s Single Day pre-sale campaign on Taobao Live generated sales of $7.5 billion.

What’s behind the success of this way of shopping? What elements need to be considered for a successful live shopping experience? What can be expected from live shopping in the future? 

The success of live shopping is a consequence, among other factors, of having the first dynamic catalog, which allows customers to better see a product as they would if it was in front of them, and to resolve doubts about quality or design, for example. It also helps to replicate the relationship that can be established with salespeople in a physical store.

Today, potential buyers spend most of their time on YouTube, TikTok and on Instagram Reels. According to some estimates, 7 out of 10 Gen Z users spend more than 3 hours a day watching online videos, they are used to a very different type of content than on a traditional website, and live stream shopping takes advantage of this consumption habit.

The customer can ask any question to the seller, learn more about the product and have a more direct contact, receiving personalized suggestions.

So, by combining entertainment with instant shopping, live commerce offers retailers, brands, and digital platforms a new channel with enormous scope for value creation.

What data is there on the growth of live shopping?

In China, sales are estimated to have seen a 280% growth between 2017 and 2020, going from USD 3 billion in 2017 to USD 170 billion in 2020, and accounting for 10% of e-commerce sales in China. The pandemic has undoubtedly accelerated this growth, and live sales in China are projected to exceed USD 400 billion by 2022.

Following China’s lead, Western markets are setting up their own live commerce companies and events to promote their products, especially in beauty and fashion. One of the early adopters of this channel was German beauty company Douglas, which broadcasts several programs show a week, from workshops with experts to talks with influencers. On the fashion front, Tommy Hilfiger recently extended its live-streaming program to Europe and North America after China’s success. Another example is Walmart, which in December 2020 piloted a live fashion event on TikTok that grew its follower base by 25%.

 

How does live commerce create value?

It can help brands, retailers and marketplaces primarily in two areas.

On the one hand by accelerating conversion. Live commerce is entertainment, which keeps viewers watching longer. Time-limited tactics such as one-time coupons can be used to generate a sense of urgency. Some companies report conversion rates approaching 30%, up to ten times higher than in conventional e-commerce.

On the other hand, the value creation of live commerce comes from enhancing brand appeal and differentiation. If done well, live shopping increases the appeal and distinctiveness of a brand and attracts additional traffic to the website. It can strengthen positioning among existing customers and attract new ones, especially young people interested in innovative shopping formats and experiences.

What does the experience show? What kind of products should be promoted for live shopping? For which audience? 

To ensure the campaign appeals to the consumer segments most relevant to the brand, it’s critical to know who makes up the audience, what matters to them and how to get their attention. Using sources and analytics tools to understand who has viewed your content in the past can help build “type” leads to guide actions on your target demographic. 

In fashion, beauty, and luxury goods, for example, millennials are the biggest spending segment, with 30% of the U.S. market, according to McKinsey estimates. Boomers are second with 25% of the market. 

Knowing your audience also means knowing who and what influences them the most. Generation Z adults get 75% of their influences from social media, online content and celebrities. Millennials are slightly behind this figure, but again, social media influence is important.  

Different audience characteristics also imply different formats for live shopping. What are the most recommended formats?

Tutorials, such as makeup demonstrations hosted by models, are effective not only for showing the audience how to apply or use a specific product, but also for suggesting how to combine it with other products, which opens up cross-selling opportunities.

Interviews with an influencer from a relevant segment feel more personal and genuine, and can be good for generating awareness and traffic.

Videos that showcase a product or company’s story help build brand image and loyalty in a target segment; for example, an ethical fashion retailer could showcase its sustainable supply chain to environmentally and socially conscious consumers.

Regardless of format, many successful events feature interactive elements such as games, quizzes, and giveaways to keep viewers engaged and entertained. They maintain high production values in photography, location, lighting and sound, and ensure that scripts are not too product-focused. 

In addition to these variables we just reviewed, what additional elements need to be taken into account when planning a live retail event? 

We can point to three main enablers: technology, monitoring and marketing. 

The key technology choice is which platform or marketplace to use to stream and provide e-commerce functionality Some providers offer one of these features; others, such as Instagram and Facebook, offer both functionalities. The right choice depends on a company’s level of maturity with live commerce. It also involves considering which technology provides the largest target audience, what features it offers (live chat, “likes”) and the level of commission to be paid. Companies that want to fully customize the customer experience and functionality often create their own solution.

Regarding the other enabler of live commerce, tracking, measuring the impact of the event by audience, time slot, is critical to understanding what works and what doesn’t work. It’s important that the live trading operating model is flexible enough to act quickly on that data. After a ahow, for example, you can send a link to a recording of the show to a viewer who watched it for a few seconds or offer someone who stayed ten minutes a discount to turn their interest into a purchase. 

Finally, regarding marketing, to maximize views it’s key to take an omnichannel approach, alerting the target audience to an upcoming program through newsletters, emails, websites, apps, push notifications and providing links and information on paid social networks. 

What are the expectations for live trading in the future? What can be expected? 

One of the expected trends is expansion into new sectors. As live commerce increases its reach, it is likely to move into industries such as healthcare, finance, and eventually B2B sectors.

Another expected trend is the use of innovative formats. Augmented reality and virtual reality can make the shopping experience even more engaging and allow shoppers to view a product from all angles. An example of this was done by Ulta Beauty, which partnered with augmented reality developer Perfect Corp to include virtual trials in its live broadcasts. In the future, consumers are expected to be able to have virtual face-to-face conversations with the host of a show, as if they were talking in a store.

And all projections point to the growth of live commerce. If China’s experience is any guide, McKinsey projects that sales initiated by live commerce could account for 10% to 20% of all global e-commerce by 2026.


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