The Retail Revolution will be Live-Streamed

January 10, 2024 | Hamilton, ON
Contributed by Izabela Shubair, DeGroote Contributor

With orange boxes stacked ceiling-high behind her, the sophisticated woman with a sleek hairstyle wearing a black halter dress holds up a sweater for three seconds. She states the price, places the item in its orange box, and bats the box off-screen. The entire routine takes three seconds. Almost immediately, she expertly stops another box as it flies across the surface before her, and repeats the routine. The woman, Zheng Xiang Xiang, is a viral Chinese live-streamer. Her unique approach to the live shopping business model — in which influencers sell products through live-streaming channels — recently earned Zheng a whopping $18.7 million in sales in just seven days. She is one of many online personalities taking advantage of this elevated form of influencer marketing, which has skyrocketed in China and is an emerging trend worldwide.

Live shopping, which aims to provide customers with an immersive and interactive experience, is not only taking influencer marketing to the next level. It is also primed to disrupt the retail industry, says one McMaster University researcher.


Changing Consumer Behaviours

Live shopping is so effective that in 2018, annual sales in China were $16 billion. Just four years later, annual sales jumped to $500 billion. The phenomenon is being repeated globally. One study found that live-stream purchasing increased by an average of 76 per cent worldwide from pre-pandemic to 2021. Of the regions included in the study, Europe saw the highest growth during this period, with livestream shoppers increasing by 86 per cent, followed by the Middle East (76 per cent) and North America (68 per cent). In 2020, North American live shopping sales were $6 billion. In 2021, $11 billion. In 2022, $20 billion. It is anticipated that in 2023, the amount will jump to about $32 billion.

“Previously, when we go shopping at a mall, we linger around, get some food, check out small stores,” says Ruhai Wu, associate professor of marketing at McMaster’s DeGroote School of Business.

“With traditional e-commerce, we just buy products. There’s not much fun in that as a customer. Live shopping brings back the fun. The influencers do not simply sell the product. They give you a show. Some sing, some dance, and some do a talk show.

“In China, we observed that with the boom of live shopping, traditional mall businesses have shrunk dramatically. Previously, people went to malls on weekends. Now, every evening, they lie on the couch, take out their cell phone, and watch live shopping. That’s become a routine for a large population. The people watching are ready to be entertained and to purchase.”

While traditional e-retailing is a 24/7 business in which companies post products on a website and customers purchase at any time, with live shopping, 99 per cent of sales occur during the stream. This makes the show’s timing as crucial as an influencer’s preparation to sell the product and be ready to answer questions and address comments in real time. In China’s live shopping market, for example, Wu found that while most influencers prefer to work during the weekdays, weekend shows generate more views and sales.

“Everything needs to be very concentrated in that moment,” Wu says.

“Consider that live shopping can attract millions of audience members at one moment. Influencers must understand the product features and selling points well. They also need to instantly respond to the audience’s comments and use tactics to motivate the audience. It’s much more dynamic and interactive than any other online retail experience.”

Opportunities for Businesses

Platforms like Facebook, Twitter/X, Amazon, Shopify, and Walmart Canada are all launching live shopping streams. For more prominent brands, Wu says, live shopping is an opportunity to promote specific new products and enhance their brand image by collaborating with celebrities or mega influencers. For smaller companies, he says, the opportunities are even greater as every merchant, from local flower shops and candy stores to bakeries, can launch live-stream shows to attract local customers.

“If you sell on large e-commerce platforms, like Amazon, you face competition from all over the world,” he says. “Small sellers usually have a low margin, as they would pay substantially for targeted advertising and promotion. With live shopping, there’s an opportunity for small sellers to differentiate themselves and build up a group of loyal fans, especially if the industry is diversified.”

In China, three major live shopping platforms dominate the market, matching businesses and influencers and hosting the streams. In North America, Wu says there is a great deal of potential for a new diversified model to emerge, creating more opportunities for small sellers to thrive.

“There could be live shopping channels directly from the merchants,” he says. “There could be live shopping channels supported by giant e-commerce platforms like Shopify or Amazon. There could be live shopping channels run by social media, which are often local and community-based. These diverse options could be highly beneficial for the merchants, the influencers, and society.”


Live Shopping Risks

As the popularity of live shopping continues to grow, some risks are becoming evident, namely the possibility of data manipulation. Wu says there have been instances of influencers registering fake customer IDs or using artificial intelligence to create robot accounts on shopping platforms to boost audience numbers. These bots then comment during live streams, manipulate the shopping atmosphere, and entice people to make impulse purchases.

“The platform that provides these live shopping shows could control the data manipulation, but the issue is whether they want to do it,” Wu says. “I’m questioning their incentive because large audience and sales numbers make the market look active. As you can see, there are many opportunities and problems to solve in this new business model. I am interested in the evolution of live shopping. This is just the start.”

Ruhai Wu

Associate Professor, Marketing

Ruhai Wu is a tenured associate professor in marketing at DeGroote School of Business. He received Bachelor and Master of Finance from Tsinghua University, China, and Master and Ph.D. of Economics from University of Texas at Austin. His research expertise is in industrial and retail marketing strategies including pricing, advertising, channel relationship, online customer relationship management, and platform management. In his recent research projects, Dr. Wu uses game theoretical models and empirical methods to study platforms’ pricing and management strategies in sharing economies, location-based price competition in mobile marketing, and WOMs manipulation in social commerce. His research has been published in top journals in Marketing, Information System, and Operation Management.

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