Is Chinese big host live commerce coming apart?

The live commerce market in China is 4.9 trillion RMB (~$700 billion), up from 19 billion RMB in 2017, and has 500 million users. Live commerce accounts for roughly one-third of all e-commerce retail sales and more than 10% of all retail sales.

But because of its very rapid rise the industry misses the maturity of other e-commerce channels in China. There are constant cases of false promotions, data falsification and after-sales disputes. Live commerce has boomed in the last five years, but complaints have also multiplied by almost 50 times.

Here are a few issues that have started to appear:

- Live commerce has been overly reliant on low prices and the dominance of top hosts ('star effect'). Sales were more about the popularity of hosts (and trust in them) than products. Top hosts can make 'whatever they sell popular'.

- Big hosts claim they have 'the lowest price on the internet,' but that's because they sign contracts prohibiting the brand from offering it cheaper anywhere else. Hosts don't provide the lowest price; they 'monopolise the market'.

- This pressures suppliers and brands to constantly lower their prices, making it difficult for them to earn money.

- Meanwhile, the hosts get rich. Small hosts ask 20% commission, but more popular ones want 50%. Some media revealed that 'lipstick king' Li Jiaqi received sales commissions as high as 80%. Li Jiaqi earned 2 billion RMB last year while the income of two others, Xiao Yangge and Simba, exceeded 3 billion RMB.

- Hosts claim that the products are of good quality, but they have been found to sell fake goods and are not liable in such cases. While consumers have put their trust in the host, there is a lack of after-sales service. In case of complaints, hosts often claim to be 'advertisers' or 'sellers' and refer consumers to the brands/manufacturers. The rate of resolved complaints of individual hosts varies from only 3.5% to 33%.

- Although the government has implemented several laws over the years, the entire live e-commerce industry lacks necessary supervision, and the rights and responsibilities of all parties are not clear.

Conflicts between live e-commerce companies (MCNs), hosts, suppliers, and consumers are constantly emerging. Some hosts are now even calling out other hosts for selling low-quality products.

Some big hosts have begun to expand beyond live streaming. They have developed their own brand products, entered overseas markets, and launched short dramas and variety shows, as well as physical stores.

While the popularity of some top hosts dwindles, more small and medium hosts have entered the market. The role of low prices has weakened, and live commerce companies have started to invest in supply chains and targeted product development. In time, the focus will shift from hosts to products.

Summary of an article by 第三只眼看零售.