EP61 – The Impulso Podcast – What drives live commerce in China to be a trillion dollar business?

China’s live commerce industry is not just big—it’s a trillion-dollar powerhouse with a vast ecosystem, encompassing MCNs, enablers, logistics, and more. 

With only a month away from Momentum Works upcoming live commerce immersion in Shenzhen, China (where participants will have will visit/meet key players in this ecosystem), we wanted to address some common questions we’ve received from interested participants, as well as share insights into the ecosystem and trends of live commerce in China. 

Tune into this latest episode where we uncover the driving forces behind China’s live commerce boom, explore its potential in the US and Southeast Asia, and contemplate the future and influence of AI in this space. 

Tune into the full episode here:

Also available on Apple Podcasts.

Featured materials:

Live Commerce Immersion, Momentum Academy

Live commerce in Southeast Asia report, Momentum Works

How did this company reach $280m sales in Live commerce?, The Low Down 

Why are AI virtual hosts not yet dominant in live commerce?, The Low Down

 

[AI-generated transcript] 

[00:00:00] Sabrina

Hello everyone. And welcome back to the Impulso podcast by Momentum Works. Today, Jianggan and I are going to be talking about live commerce and more specifically live commerce in China, because we’re actually one month away from our live commerce immersion to Shenzhen, China, which is happening on the 19th to 21st, March.

So preparations are coming along quite nicely for the immersion, right? Jianggan. 

 

[00:00:20] Jianggan

Yeah, I think the preparations are coming along very nicely.

I just came back from China after a few weeks there. And, of course, first, there’s lots of drinking. And I’ve been speaking with lots of business people as well. The temperature has been weird over the last a couple of weeks and sometimes it’s like 20 degrees and the next day it goes to zero.

Yeah, so this is something that Sabrina when you go to China you experience, but we’re going in March. 

 

[00:00:40] Sabrina

So Hopefully it’ll be better. 

 

[00:00:43] Jianggan

Hopefully it will be proper spring, but you never know. So anyway So we have more or less finalized the agenda for the sort of three days And that will consist of visits to an MCNs fulfillment partners, brands, suppliers Logistics, SaaS as well as we have a few special guests who used to run the product and operations at major platforms who

we hope that will come in because they do not work for the platforms and give us a very candid sharing about, I mean, what you should see we do have quite a number of registrants already, and I think we’ve been talking to many of you for the questions and specific requests that you would want to have.

And it’s coming along very nicely. Yes. 

 

[00:01:27] Sabrina

And I think you mentioned, right. We’ve been speaking to a lot of people who registered their interest and we’ve received quite a lot of questions, which we wanted to discuss today, because we think that these are questions that our listeners or people would have about life commerce as well.

So maybe let’s start off with the scale of how big live commerce actually is in China, because I feel like everyone knows live commerce is big in China, but no one knows how big it actually is. So there was a research study that actually showed that the GMV of the top three players in China. Douyin, Kuaishou and Taobao in 2022 was actually estimated to be about 2. 77 trillion yuan. So that’s about 384 billion us dollars. So that’s huge compared to the GMV of maybe not this region, but even in the U S and all, it’s very big. And this is just live commerce. 

 

[00:02:21] Jianggan

I think we did some numbers about the total GMB of e commerce in this region of major platforms.

That works out to be about 100 something billion. So live itself in China is much bigger than that. And what is also interesting is that, okay, we have seen the 2022 numbers. 2023, we don’t see the full numbers of all the platforms yet. But in 2022 we saw at least for Douyin and Kuaishou collectively, it was almost like 40 percent growth compared to 2921.

Yeah. So, actually growing quite a bit as well and high numbers. And, obviously with this amount of goods exchanging hands that has fostered a very, very large ecosystem. During our previous immersions that we did for private clients and we’re visiting some of the MCNs, I mean.

And sometimes it’s just like unknown ones, right? Then they look at, okay, the operations. Wow. So big, right? And you look at, we could observe a real life session and you see the numbers of of sales in a dashboard. They’re wondering, so why are we not in that business? 

 

[00:03:26] Sabrina

So what do you think has been pushing the growth of life commerce in China?

So it was huge in 2022. It’s even bigger in 2023, even though the numbers are not out yet. Right. Do you think it’s the way consumers behave or do you just think that it’s because they have such an established ecosystem already in China? 

 

[00:03:43] Jianggan

I think Sabrina, we talked to some of the digital participants for this immersion.

And many of their question is that, okay, I’m looking at this in China and of course the platforms from China are trying to actually push that in Southeast Asia. And I think we got a question from two people saying that, how would you see that in the West in like the US, Europe, because I can’t foresee this behavior of people like watching live video and, buying things.

So this is a topic we actually covered in our live commerce report about a year and a half ago.

 

[00:04:15] Sabrina

We’ll link it in the show notes

 

[00:04:16] Jianggan

Is it for free or paid?

 

[00:04:19] Sabrina

It’s free I think.

 

[00:04:20] Jianggan

Okay, good. I mean, anyway if you join us for the live commerce immersion, you will get all the insights. But I think back then we actually did quite a bit of research about this particular topic.

And obviously there are different arguments, but the truth is that unless the platform spend a lot of money to force the ecosystem, to get the people to produce live content and to present this content to the consumers you will never know whether the consumers will receive it or not. I only imagine because many people have said a few years ago, the founder of ByteDance Zhang Yimin said that, okay, I will not do e-commerce because I don’t know why people buy e commerce for us, but look at their scale now.

So I do think that when they started trying out they figure out it actually works in China and now they look at it in Southeast Asia and say, Hey, it actually works in Southeast Asia. I do think there’s a significant percentage of TikTok GMV, which comes from life. Would it work in the U. S. and other markets? I think it depends on how the major platforms judge this market. If they themselves, I mean the platforms. I believe that the U. S. consumers will not be sort of buying things from watching live videos on Tik Tok, et cetera, then they will not make the resources.

They will not make the investments. They will not spend a lot of effort to force the ecosystem, then this thing will not come out. But if they believe that, okay, there is a market there, if you put enough good content, if you put enough good goods in front of consumers, they will buy it. And then they would dedicate the resources, make the investments, and maybe it will work out.

So I do think sometimes this kind of stuff is self fulfilling, right? But as ecosystem players, we are not a platform, so we can’t decide this for the platform. We know that, okay, Facebook and Instagram are not exactly doing that. At least to the same extent that the, TikTok is doing.

But , how TikTok is going to. assess this will probably impact, I mean, how the ecosystem players would plan their strategy and will probably impact, I mean, what consumers will see and that’s fair to them and in their live video feed. 

 

[00:06:29] Sabrina

Do you think the hosts have anything to do with pushing the growth?

Because in China, we’ve seen that they are huge hosts, right? Who are able to gain like a hundred million sales in just a week. Do you think that’s one of the key factors that would. 

 

[00:06:42] Jianggan

Just a two hour session or just a week

 

[00:06:45] Sabrina

A week, two hour session?

 

[00:06:47] Jianggan

A hundred million. That’s I think some people can do that in like a few hours.

 

[00:06:51] Sabrina

Okay. So that’s the extent of the scale of how the host are right in China. But when they come out like into the U. S. or Southeast Asia, I mean, you will need to have hosts like this as well, even if platforms push it. 

 

[00:07:05] Jianggan

I think that first there are different types of live commerce. There are the live commerce, which are run by KOLs and KOCs.

And there are also live commerce, which are run by factories and stores. Right. So on Taobao, you would only see that, the sellers and stores on Taobao which also have a small like live session there, but basically having someone who demonstrate to customers about the products they’re selling and also answer customer questions.

So many of these would have, I don’t know, 200 or even like 15, 20 viewers, but if you think about that, the behavior for that kind of a store live broadcasting is the same as hiring shop assistant in a physical shop to explain things to customers, but then you have the other side, which is the, the KOLs and KOCs which at one session can sell like, you know, dozens of millions of worth of goods. The funny thing is that for this nobody has actually figured out a formula to make things systematically work. So and there are a few like, you know, really, really top KOLs and then people look at them saying that, oh, these people became successful because they did this, they did this, they did this, right.

In their short career of like, you know, three to four years but when they try to replicate that with other people, sometimes it doesn’t stick. So there are a lot of nuances here. But some of these KOLs, their MCN is actually expanding to Southeast Asia. The Three Sheep Network in China, which is the, I think one of the top hosts across platforms.

I think they have like a hundred million followers on both Douyin and Kuaishou and WeChat. So they recently established a subsidiary in Singapore and they are trying to work with some hosts in Singapore and let’s see how that works out. But it’s very hard to figure out a formula. And also at the end of the day for the platform’s point of view.

Yeah, probably happy that you have a lot of people there doing different kinds of live streaming, but you don’t have anybody who is like super, super popular that eclipses the platform, because I mean, if you are a host, if you are a top host of the platform. Then the platform will depend on you rather than the other way around.

 

[00:09:13] Sabrina

That’s true.

So who do you think are some of the key players in the Chinese market right now that are driving this growth or maybe that you think would potentially make big changes in the live commerce industry? 

 

[00:09:24] Jianggan

I think the platform definitely plays a huge role. So there’s this discussion that we’ll be having with quite a few confirmed participants, which is about the AI avatars, the virtual hosts, and many of them asking that, okay would that work or whatever?

And , I think we have two companies, two leading companies in this area that will be visiting during this immersion. One of them is started by a team, which has like hundreds of patents in video and live streaming. So they extend their offerings into e commerce and it has been doing quite well.

You know, quite well in terms of adoption. Not sure how well it is in terms of monetization because it’s very, very competitive. 

 

[00:10:01] Sabrina

Yes. Yeah. 

 

[00:10:02] Jianggan

But and the other team is, started by the product team, which was in charge of Taobao’s live product for many years and when, they look at it so what they are seeing is consistent, right?

The platforms are looking at, I mean, how to keep people engaged and of course, and how to balancing this engagement with monetization, which is through e-commerce and other means. So good content. It gets amplified, bad content gets pushed out and sometimes banned. So I think the same goes into live commerce.

So, if, you go and actually visit some of the MCNs, you see how much effort they put into analyzing and producing good content. And one of the MCNs we visited back in November for a private client. Oh my God. They have like, whole scripts been written and the host like actors, right?

I mean, you have the.

 

[00:10:55] Sabrina

The telecom where they show the text as they do the live. 

 

[00:10:59] Jianggan

No, they have to remember that. I mean, oh, they have to memorize the script. It’s not a prompt. They’re literally actors, right? I mean, we look at a script saying, oh, there’s two, young people they’re dating and they’re engaged and now they’re going for the wedding.

And at different points of time, they push different products. But you see, you create something that people want to follow for the long term. And this is just one of the examples. And then when we look at the room, you have the people acting You have a group of people not in front of the camera, but sort of sitting around the room, which are cheering and stuff.

And I always thought that this kind of cheering is sort of automatic song played, but sometimes there are real people there. 

 

[00:11:35] Sabrina

It’s like when TV shows do like live filming and then they have like people clapping in the background. 

 

[00:11:40] Jianggan

Yeah. Like when you look at a sitcom, right? Yeah. And it’s actually real.

You have people, people there. And they have like a few guys and ladies sitting quietly around the corner, looking at their computer screen. And, of course, some of them are asking customer questions, and some of them are looking at advertising on different platforms, whether they want to push a bit of budget to push this stream to more consumers by buying traffic for the platform.

So it’s a very sophisticated operation there.

 

[00:12:08] Sabrina

I think it’s very interesting. Yeah, because when you guys came back and told us that I think we didn’t expect the scale of the behind the scenes to be So big either right sometimes when we think of live commerce, we just oh, it’s someone in front of a camera selling things but behind there’s a team of like 10 to 15 people actually do it.

We have a very nice infographic about that, that I’ll link below. So you guys can see like how many people are actually involved in just one live commerce video. 

 

[00:12:32] Jianggan

Yes. And that’s not everything, right? That’s only the people you see in that room. Yes. Like the people there. But before that, you were people who negotiate on commercial terms with merchants and brands and people who do the sourcing and after this customer service and there are all sorts of things being over.

It’s very, very sophisticated. The operations. And also bear in mind, this sophistication is not planned, right? It came out of competition, right? Whoever was more sophisticated, they will, of course, be more successful. They have a better cost structure. And I think when it comes to Southeast Asia, we’ve spoken with a few of them who we either want to expand it in this region or who’s looking for partners in this region.

They said, okay, TikTok is investing in large and other platforms will probably follow suit. So this opportunity that I should seize , but for many of them if they have a large successful business in China, chances are they have the resources, but they don’t have the mental capacity to actually expand this market.

So I do think that there’s room for collaboration for people from this market.

 

[00:13:31] Sabrina

And I think, I mean, since you’re talking about like MCNs, we’ve seen the MCNs in China expanding as well, right? Some of them have gone into AI, some of them have gone to buy their own logistics companies. So why do you think that’s the case?

 

[00:13:43] Jianggan

Competition, competition. So some MCAs we visited last year, they built their own tech teams. Some of them are adopting their own avatar systems. Some of them bought logistic companies. Some of them also started software as a service for their ecosystem, because they have been dealing with so many suppliers. They said, okay, well, I mean, we can’t be having all this account managers. And it goes back to the term that we’ll be using like involution, neijuan. So it’s because it’s so competitive, it naturally forces people to do the extra to stay competitive. The good thing is that I think in this market in Southeast Asia, it’s not as competitive. And many of the Chinese players, when they come to this market they are not well-localized yet. So, I think there’s room for people who know the market well to, learn some of the tactics, some of the operations. And also, I mean, some of the sort of. supplies from, this ecosystem and actually make it work in Southeast Asia.

 

[00:14:41] Sabrina

Okay. So I think we’ve answered quite a few questions today. 

 

[00:14:43] Jianggan

There are a lot more questions and some of the questions are actually very specific. Sabrina, I see you and Yorin have been talking to you some of the participants, then the other parts of the team, Liz, Enzo, and Elody, who have been talking to the people in China to, coordinate business and stuff.

And very frankly this is a very, very good learning experience for us as well, because we have been uncovering more and more nuances in how people plan, execute, grow, and compete against each other. 

 

[00:15:11] Sabrina

Yeah. So if you guys are interested in joining our live commerce Immersion to China. The links will be in the show notes down below.

Do feel free to reach out to us if you guys have any questions as well, we’ll be happy to answer them. 

 

[00:15:22] Jianggan

We do have the full agenda now which we are not sharing to the public on our website, but if you do register interest, happy to send you a copy and and then we can discuss.

So if there’s something that you are interested in. We already have I think two parties who, basically are interested, but who can’t make it on a specific dates and we’re actually organizing private sort of immersions for them in Q2, and this is also possible. 

 

[00:15:47] Sabrina

So thank you guys for tuning into another episode of the Impulso podcast.

We hope you guys enjoyed today’s episode. If you did do like our podcast and follow us on Spotify, Apple podcast, or your preferred podcast platform to stay up to date on the latest happenings and trends in tech, new retail, and the broader digital economy.