China's livestreaming e-commerce: The million dollar business fueling product innovation
Recently, Xinba, one of the biggest influencers on Chinese streaming platform Kuaishou, sold US$300 million worth of goods in a single 12-hour session, in a testament to the enormous pull of livestreaming e-commerce. Research shows that crowdfunded products often rely on livestreaming e-commerce to convey product information and funnel early adopters. Such an ecosystem creates a positive business environment for producing and marketing new products. Technology specialist Yin Ruizhi looks at how live-streaming e-commerce is fast giving China the edge in product innovation.
Taking account of the key rising industries in China and the US in 2020, livestreaming e-commerce would be among the top three. Globally, only China and the US - major players when it comes to the internet - have sufficient support for livestreaming e-commerce in terms of the industry chain and communications infrastructure.
Many people underestimate the significance of livestreaming e-commerce and think it is just a more sophisticated version of TV commerce. In fact, livestreaming e-commerce is significant in macroeconomic terms, because it expands the reach of new product information to users through a combination of short video clips and live broadcasts. In turn, such a business model can widen a country's product spectrum and indirectly increase its business competitiveness.
Whether traditional TV advertisements or targeted e-commerce ads, the time for passive reception by users is just three to eight seconds (the average view time for app open ads and video roll ads is also just a matter of seconds), and many users scroll away as soon as they see an ad. Even soft advertising inserted in TV programmes generally only has an air time of 10 to 20 seconds. Such a level of publicity for new products has very limited impact. This is also why in the era before e-commerce, rolling out a game-changing new product often involved an expensive and aggressive publicity spiel, coupled with the traditional advertising blitz. Only an adequate publicity blitz would get users interested in reading about the product.
When product introductions are livestreamed, vertical livestreamers and trusted streamers can sustain one minute of their users' attention, stretching it to three to five minutes for short product videos.
Holding on to consumers' attention for at least a minute
Livestreaming e-commerce is an important model that officially lowers the threshold for the marketing of new products. First, there are "vertical" livestreamers who are generally experts with deep industry knowledge, known as influencers on "we-media". They churn out knowledge, products, and reviews in a particular genre, and their followers are mainly fans of that genre, whose trust they gain through content production. And in livestreaming e-commerce, this trust translates into how long users are willing to spend watching product introductions.
When product introductions are livestreamed, vertical livestreamers and trusted streamers can sustain one minute of their users' attention, stretching it to three to five minutes for short product videos. Such an attention span greatly improves the quality of product introductions while making it easier to gain seed users or early adopters. At this point, let us take a look at the figures for Mi Crowdfunding by Xiaomi, for a more concrete analysis.
Crowdfunding is currently the easiest method used in the Chinese market to produce new items.
Mi Crowdfunding mostly features new products from the Internet of Things (IoT). "Crowdfunding" already indicates that the products are only in the design phase and have not yet been manufactured - interested buyers have to first come up with the money before production begins on the designs. Crowdfunding is currently the easiest method used in the Chinese market to produce new items.
Livestreaming e-commerce the lifeblood of crowdfunding
Before the rise of livestreaming e-commerce, success rates on Mi Crowdfunding were low, but after its advent, almost all products have been successful. This writer's research team found that between 2019 and 2020, out of the top 30 successfully crowdfunded new products, 14 were recommended by the top ten livestreamers such as internet celebrity Luo Yonghao, Austin Li Jiaqi (known as the "King of Lipstick" in China), and actor Michael Chen He, while 26 were recommended by different livestreamers.
In the above case, successful crowdfunding is judged by the ratio of final orders received against the minimum orders required to go into production; the higher the ratio, the higher the market acceptance of this upcoming product.
And out of the top ten most successful crowdfunded products, only one had not been recommended by livestreamers. It is clear that livestreaming e-commerce is now deeply embedded in the crowdfunding business model for new products, and has played a key role in the process.
When it comes to a country's business network, the easier and more efficient it is to come up with new products, and the wider the selection, the higher that country's business competitiveness.
When it comes to a country's business network, the easier and more efficient it is to come up with new products, and the wider the selection, the higher that country's business competitiveness. Since World War II, the three traditional economic powerhouses - the US, Japan, and Germany - are all major product economies, particularly the US. Practically every era-marking product has come from the US, from industrial assembly line-produced automobiles, to personal computers, to mobile phones, to today's smartphones.
Crowdfunding success stories builds climate of innovation
Whichever country comes up with the most cutting-edge product will have the advantage in building the industry ecosystem and developing the industry chain, because the appropriate business model and industry chain for that benchmark item will take shape in that country.
Right now, the whole world is at the beginning of the IoT era. The rise of a business model like livestreaming e-commerce will definitely give rise to "killer" products of the IoT era, and the product competitiveness of China and the US in relation to other countries may well strengthen even more in the foreseeable future.
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