On May 27, Chinese e-commerce giant JD.com announced a strategic partnership with Kuaishou, one of China’s leading short-video and livestreaming platforms. JD will provide supply chain and logistics support for the e-commerce platform’s in-app store, Kwai Xiaodian, while also allowing users to purchase products from JD.com directly within the video app. This collaboration between JD and Kuaishou not only marks the acceleration of Kuaishou’s commercialisation but also points to a larger trend of e-commerce integration within short-video and livestreaming platforms.
Although from a global perspective the e-commerce market in China is clearly booming, livestream selling only really exploded in popularity in 2017 thanks to star livestreamer Li Jiaqi – making it still early days for this method of selling. With COVID-19, there has been a reduction of offline touchpoints, resulting in interruptions to the regular consumer journey. This has opened up the possibilities for retail on other channels, such as e-commerce. According to a report about livestreaming recently released by MobTech, active users on Taobao Live as of March 2020 increased by 470 per cent year-on-year.
China’s two short-video giants Douyin and Kuaishou – boasting more than 400 million and 300 million DAU respectively – have captured the attention of brands and e-commerce platforms in recent times with their advanced ecosystems and high traffic volumes. The current livestream shopping craze, coupled with the disruption caused by these short-video platforms, has culminated in a three-way battle for supremacy among Taobao, Douyin and Kuaishou.
According to data from iiMedia, the livestreaming e-commerce market size in China has proliferated from 19 billion yuan in 2017 to 433.8 billion yuan in 2019 and is expected to reach 961 billion yuan in 2020. Li made the high-volume, high-profit, high-ATV beauty category the darling of livestreaming – and luxury apparel, leather goods, and accessories labels are now eager to dabble in it, hopeful for a sales rebound in post-pandemic China.
Compared to beauty products, the experience of buying a luxury good is a huge part of its commodity value, and is highly integral within the consumer journey. However, it is challenging to replicate the offline buying experience via livestreaming – which is also one of the reasons why transactions of luxury goods online only account for a small share of the total personal luxury goods market. Secondly, luxury goods need to be showcased within a specific type of environment to maintain the brand’s image, driving up requirements (and associated costs) when it comes to the livestreaming host. Here, the Matthew effect – where the rich get richer and poor get poorer – is clearly dominant. Brands that can afford the high costs that come with effective livestreaming sessions are the ones that are already doing well financially, while smaller brands trying to crack the livestream selling model as an alternative stream of revenue in this crisis continue to struggle. It is a vicious cycle.
Whether they choose to livestream on e-commerce platforms like Tmall or video platforms like Douyin, brands need to start building autonomy, driving traffic and transactions back to their own channels, while minimising dilution of audience attention. How can they go about this?
The Digital Transformation of Hard Luxury Brands
According to the 2019 Luxury Goods Worldwide Market Study from Bain & Co., the hard luxury (jewellery and watches) categories accounted for only 11 per cent of total online sales of personal luxury goods in 2019. But since the launch of Luxury Pavilion in 2017, Tmall’s luxury e-commerce platform, top luxury jewellery and watch brands such as Breitling, Piaget and Cartier have signed up one after another, demonstrating the determination of hard-luxury brands to advance their digital journey in China.
At the same time, with the outbreak of COVID-19 in Europe, luxury brands have been compelled into embracing digital initiatives at scale. For instance, Watches & Wonders Geneva (formerly the Salon International de la Haute Horlogerie), which was scheduled to take place from 25 to 29 April this year in Geneva, was cancelled. Instead, organising body Fondation de la Haute Horlogerie took the entire event online. In China, it collaborated with Tmall Luxury Center to launch the “Watches & Wonders Tmall Cloud Watch Show”, livestreaming the year’s novelties through the Net-a-Porter official flagship store on Tmall. Viewers could purchase the timepieces directly through the Net-a-Porter flagship store over the course of the live broadcast. Participating watch brands have been positive about this novel, virtually untested, method of selling. Nicolas Gong, Managing Director China at A. Lange & Söhne (which showcased two novelties through the Watches & Wonders livestream) commented that the brand has been facing 2020 positively despite being affected by the epidemic, and will continue to cope with unpredictable situations swiftly.
For hard luxury brands, livestreaming on leading e-commerce or video platforms serve as a good means of exposure. But increasingly, brands are looking to deploy more focused strategies that allow them to reach existing prospects and clients more precisely.
Laurent Perves, Chief Marketing Officer of another participating brand Vacheron Constantin, told Luxury Society: “In the future, I think we are going to continue on that route of livestreaming. Instead of one-to-many, the interesting format for us to look at is the one-to-one or one-to-few livestreaming. In China, Vacheron Constantin is conducting live discussions with clients and partners using livestreaming.”
The Watches &Wonders livestreaming session was a breakthrough for Richemont and its e-commerce platform Yoox Net-a-Porter. From a digital perspective, this might also stimulate other luxury product categories with more accessible prices to test out this model.
Historically a category that has been slow to embrace digital, these luxury watch brands that previously had to deal with the online grey market, have gradually built their official online stores and started cooperating with leading global e-commerce platforms. In Perves’ opinion, hard luxury brands may seem slower than other categories in terms of digital adoption – but it’s less about speed than about taking the time to identify the appropriate e-commerce channels and develop a relevant omnichannel strategy for one’s product and category.
Maximise Conversion Rate Through Private Traffic
Brands can also leverage their private traffic on specific platforms, such as an official application or WeChat Mini Programs. Given that the majority of users on these platforms are already prospects and clients, their loyalty is even more helpful in driving sales online.
On 1 June, Farfetch invited 12 KOLs and Chinese designer Chen Xuzhi to livestream on its WeChat Mini Program, with product listings directly available on the page. Gucci has also recently launched its personalised video shopping service, Gucci Live, as an alternative to in-store shopping.
“WeChat is not a livestreaming platform, but using Mini Programs to livestream based on an established CRM infrastructure can significantly drive sales on a limited budget,” says Pablo Mauron, Partner & Managing Director China at DLG (Digital Luxury Group).
According to statistics, more than 90 per cent of leading luxury brands have established a WeChat Mini Program. With the popularisation of this channel, the establishment of a livestreaming module within Mini Programs that are coordinated with its e-commerce efforts can help brands to rebuild the consumer journey, while improving the retention of existing clients, continues Mauron.
Branding or Selling?
The Chinese market has gone through a sluggish first quarter, and overseas markets are still in various stages of lockdown. Luxury brands are focused on increasing sales more than ever – especially in China. But livestreaming as a medium is no different from social networking sites and media, and brands need to re-evaluate its value and discover more possibilities. “Luxury brands don’t have to choose between branding and selling via livestreaming, but they need to balance both, while resonating with their audience,” says Mauron.
Prada Possible Conversations on Instagram invites leaders from different fields to address social issues while donating to UNESCO. Although this livestream is not product related, serves to reinforce Prada’s position on social issues and helps to build the brand up as an intellectual one.
As technology continues to evolve, the addition of augmented reality (AR), virtual reality (VR), and other novel elements into livestreaming can be brought into play. At the same time, if brands are looking to generate substantial returns on their investment in livestreaming, then it needs to be clear that livestreaming cannot be a temporary promotional boost tactic. More thought needs to be put into the overall strategy when it comes to this channel, and real assets need to be created for this purpose. “For example, brands can launch different rounds of livestreaming on one subject to achieve different marketing objectives or to target various audiences,” Mauron adds.
That said, livestreaming does not function in a silo but should be a part of a brand’s entire marketing mix. Brands that are looking to explore this should embed it within their digital initiatives as a whole, looking for synergies with other existing digital channels as well.
Cover Image: Alizila