Singles Day warfare: Taobao looks serenely down on carnage below

By XIAO Fang

November 11, Singles Day, was once a simple, almost jokey, celebration of bachelordom, partly in response to China’s many “lovers’ days” and the like. But in recent years, thanks to the e-commerce platforms, the “double eleven” has become the annual shopping bonanza. On November 11 last year, over 450 million viewers tuned into Viya’s live-streaming sessions on Alibaba’s Taobao and splurged 2.7 billion yuan ($400 million) during her orgy of consumerism. This seismic event in China’s live streaming economy crowned Viya undisputed queen of ad hoc shopping channels.

Just a year later and live streaming is the only game in town, and platforms like Douyin and Kwai have spent millions trying to sign up their own hosts.

FOMO-20 epidemic ravages market

Amid the hype, Viya’s rates have tripled than usual. It costs at least 100,000 yuan for her to simply mention a product during a five-hour session, booked and paid for at least two months in advance. Even then products may be rejected simply because they are “not a good fit” for her style.

Thanks to mega-influencers like Viya, FOMO (fear of missing out) has gripped online sellers who will do almost anything for a few seconds basking in majestic Viya’s luminescence. Less Olympian influencers are struggling to get live-streaming deals. Without Viya’s magic touch, medium influencers don’t generate much extra traffic of sales for the sellers, a million yuan or two is considered a success for them, but not for the stores.

Sellers and wannabe influencers, dismayed by dealing with the meg-controlling ravenous monster that is Taobao, have turned their attention to platforms like Douyin and Kwai, leaving Alibaba, JD.com and Pinduoduo to their private battle of the giants.

In Taobao’s system, web traffic is everything. Viewership can only be as high as the number of shoppers, and if they are all crowded into one or two streaming rooms, there is nothing left for anyone else. Taobao’s new policy requires sellers to open their own live streaming channels as a prerequisite to participating in any sitewide promotions, but opening a channel is one thing, and having viewers is quite another.

Daoxiangcun, a confectionary brand that claims to be 200 years old, is lost in the jungle. ZHOU Dongsheng, head of Daoxiangcun’s e-commerce sector, told Jiemian News that the company’s live streaming channel is of little help, even though the channel itself has occasionally appeared on the trending list on Taobao’s front page. He concedes that live streaming has some value if customers have questions or are completely unfamiliar with the product.

Taobao sellers often use short videos to boost traffic. Embedded links in Douyin and Kwai channels directed viewers to buy at Taobao. Douyin has, understandably, put a stop to this practice and now sales must go through Douyin’s own channel. Sellers and influencers haven’t taken to this idea have moved to Kwai, a windfall for MCNs – agents brokering deals between influencers and video platforms. LUO Jun, who runs an MCN, said business on Kwai increased by at least 30 percent during the run-up to Singles Day.

Choice is everything: Choose now

The live streaming is dominated by Taobao, Douyin, and Kwai. Taobao dominates with 450 billion yuan in sales this year, with Kwai (250 billion) and Douyin (200 billion) trailing behind. The sector is still at the growth stage, with each player exploring strategies that fit their business models. Although further consolidation is unlikely in the foreseeable future. Tensions simmer.

Douyin started to concentrate on live streaming e-commerce in March, after CEO ZHANG Yiming’s celebrated “underwhelming performance” rant. The company appointed a new e-commerce director, signed up influencers, went on a hiring spree to expand its sales force in lower-tire cities.

Kwai is also tinkering with its algorithms and has started recommending new content to its users, a practice Douyin adopted long ago. But, if the skirmishes between Douyin and Kwai are largely limited to copying each other, Douyin and Taobao are at war, marked by the Douyin’s link ban in October. Big brands are being pressured to choose between the two. Failure to yield to Douyin’s iron will may lead to a sudden cut off of live sessions without warning. Many smaller sellers will choose one platform or the other in the next year.

Despite the strain, Douyin and Kwai don’t seem to pose much threat to Taobao. YU Feng, head of Taobao’s live streaming, said in June that he had “no qualms about Douyin’s foray into e-commerce” and his sangfroid is supported by the numbers. Only a small percentage of the company’s sales come through live streaming, even counting the autumn promotions.

Still, FOMO-stricken Daoxiangcun is expanding its live streaming across platforms. Zhou feels that different platforms serve different purposes: Douyin is great for going viral, while Taobao opens wallets.

Other MCNs have the same idea. Sellers of clothes, cosmetics and household goods, are pushing less popular products through Douyin. The site’s algorithm works hard to turn products viral for short periods.

Pay up or shut down

Focusing solely on Douyin or Kwai perhaps misses the point. The two make most of their money through promotions where sellers pay for their content to appear in the feed of potential customers. The promotions make live streaming on Douyin less relevant. A spokesperson from an MCN said that it is “close to impossible” to sell anything without paying for a promotion, regardless of how many fans a channel has. One multi-million-follower influencer recently made a few hundred yuan of sales in a promotion-free session.

It’s no surprise that promotions are becoming significantly more expensive. Douyin’s “Dou+” deal has at least doubled in price since the beginning of the year. With seller margins already razor-thin, there soon won’t be anything left. And if there is nothing left for the seller, that means nothing at all for the platforms.