In the past, you may have seen a home shopping channel while watching television. The home shopping channel was a broadcast where the show host gave an attractive description of a product and sold it in real-time. Even though showing an unattractive product, people watch it without knowing the time goes by because of the fancy speaking skills the show host has. This TV home shopping channel has developed into 'Live commerce,' which is a new and hot shopping format. It is also called ‘live-stream shopping,’ or ‘social commerce,’ ‘streaming e-commerce,’ but the word ‘live commerce’ is most commonly used in Korea. It is a new shopping format that broadcasts real-time using social media such as Instagram, YouTube, or on other professional platforms. What is different from traditional home shopping TV channels?
1. What Is Live Commerce?
As mentioned earlier, live commerce is a live streaming shopping broadcast where the host is chatting with the viewers. In particular, live commerce has become a useful non-contact system in the retail industry crisis due to COVID-19. Unlike TV home shopping, Live commerce is conducted live. Moreover, it is different in that customers can share their opinions through chatting, and sellers can answer them immediately. Compared to the Internet shopping mall sites, which consumers usually approach by chance, they should subscribe and wait for its live-streaming broadcast to see it. At first, live commerce is used on existing real-time streaming social media such as Instagram or YouTube. However, it has expanded to larger and more professional streaming platforms for live commerce. For example, in Korea, major companies such as Naver, Kakao, and Shinsegae[1] have entered it by launching streaming platforms for live commerce. According to the eBEST Investment & Securities report, the size of live commerce in Korea was estimated to be 3 trillion won in 2020 and expects it to grow to 8 trillion won by 2023. Live commerce is becoming very common in our lives.
2. Why Live Commerce Has Grown
a. Lightness for Single-person Sellers
First, live commerce is very light. From the perspective of the producer, live commerce is a very efficient way of promoting products. Unlike conventional TV home shopping channels, it transmits broadcasts through smartphone applications, not television. Furthermore, there is no transmission fee if you use functions such as Instagram Live, which anyone can use. The seller does not need professional equipment for filming. Just a smartphone, a product to sell, and the host’s joyful speech are enough. Therefore, small-sized companies without much capital can have enough opportunities.
b. Communication: The Power to Drive Higher Purchasing Rates
Second, the greatest power of live commerce is communication. When watching live-streaming broadcasts, you can see the seller greet some viewers who are often seen by mentioning their IDs. Also, sometimes the seller talks about the topic or answers questions that are not directly related to the products. Watching the streaming broadcast together, not only the seller but also all the other viewers, we can often see sharp comments pointing a product's flaws. Consumers can freely communicate with each other while seeing the broadcast. In other words, the communication of live commerce is centered on the consumers, not the sellers. The realistic content is also the unique advantage of live commerce. For example, Sokcho Central Market held the live commerce event on February 3rd. Seafood sellers in this market showed the fresh fish to consumers who were watching the live-streaming broadcast. They also showed cooking and eating fish in real-time. As such, it does not edit certain scenes in advance so consumers can obtain vivid information about the product. It is the reason why live commerce leads to a higher chance of purchasing reliable products.
c. Live commerce, Is It Reliable?
However, this live commerce format also has disadvantages due to its lightness. It is somewhat unreliable because private sellers can use it and barriers to accessibility of it are low. Recently, on February 9th, Korea Customs Service uncovered fake goods sellers who took unfair profits of 6 billion won. The fake goods can be promoted easily via live commerce. People easily trust the fake goods seller because these live-streaming broadcasts seem to show it as real. Another downside is that older people can be alienated from getting information because these live-streaming platforms mainly target young people. As a result, old people who are not good at the Internet cannot see the live-streaming broadcast even if there is necessary information the consumer must know.
3. The International Trend for Live Commerce
a. China
The trend of live commerce is even hotter in China. According to Kim Da-in Shanghai Trade Center in Korea Trade-Investment Promotion Agency (KOTRA), 388 million people registered in 2020 for live commerce business. Moreover, the population who shopped on live commerce accounted for a large percentage of the total e-commerce users. It has accounted for 66% of the total e-commerce users. According to the China Internet Network Information Center, (CNNIC) in December 2020, live commerce in China is worth 961 billion yuan (167.8 trillion won). It is an increase of 121.5% from last year.
The first reason why China's live commerce market grew is due to famous celebrities beginning their live commerce activities in 2019. Next, the government's policy support live commerce. Why does the China government support it? Because live commerce can expand the domestic consumption market and create jobs. China should lean on the domestic market because they had severe risk on export attributed to the China–United States trade war and COVID-19. China's local governments have implemented policies to more promote live commerce in 11 cities, including Chongqing, Hangzhou, Liaoning, and Guangzhou. They encouraged the start-up companies of live commerce, connection between them, and giving benefits such as tax relief. In addition, local governments of China policies, celebrities, and COVID-19 have expanded their live commerce dramatically. According to market research firm iiMedia Research, China's live commerce market in 2021 will be worth 1.1566 trillion yuan[2]. Also, it will continue to grow in 2022, reaching 2.854 trillion yuan.
b. USA
Western countries have paid attention to live commerce due to the influence of COVID-19. In the beginning, Facebook and Instagram launched live sales functions in May 2020, live commerce gradually settled down. Amazon also established Amazon Live, a streaming platform that can introduce daily makeup, cooking, and fitness products in real-time. Talkshoplive, a live commerce platform in the U.S. founded in 2018, has increased its sales about seven times since COVID-19. Furthermore, CommentSold, another live commerce platform's annual sales increased from $326 million to $1 billion. Not only existing social media but also professional platforms grow one after another, the live commerce market in the West is expected to be larger further in the future.
Live commerce is not just about watching products in real-time. In live commerce broadcast, sellers introduced not only the function of the product but also the story related to it. It makes consumers curiosity leads to them making purchases. In other words, consumers can buy entertainment, storytelling, and behind-the-scenes stories about the product. The point of live commerce is 'friendliness.' It makes consumers feel closer with the seller and product through live-streaming broadcast. This friendliness fascinated consumers more than home shopping channels on TV or short-edited advertisements. Even as you read this, live commerce is always streaming!