ONLINE STREAMING LOSING STEAM
Overhyped live commerce causing bubbles in the market: experts
China’s live commerce, a promotion model that combines streaming videos and e-commerce, has been applauded as a game changer in retailing at a time when brick-and-mortar stores are shutting their doors.
However, there are doubts over whether the model can move from short-term success to long-term profitability, amid concerns over costs and excessive excitement among investors leading to bubble risks.
Bursting bubbles
On Tuesday, Mendale, a textile company listed on the Shenzhen Stock Exchange, saw its stock price drop below the market floor limit after queries over its soaring price since it signed a cooperation contract with Viya, one of the top Chinese influencers on Taobao’s livestream.
The company secured its partnership with Viya on May 11. As of May 20, merely 10 days later, a whopping 3.4 billion yuan ($475 million) was added to the company’s market value, despite Mendale’s rather unremarkable performance in the recent year, with an operating net profit slipping from 10.3 percent in 2015 to 3.64 percent last year, eastmoney. com reported.
It is not the first time that live commerce has been in the spotlight. Yujiahui, a domestic brand of cosmetics and skincare products, also witnessed a sharp plunge in its price after confirming with the Shenzhen Stock Exchange that the revenue generated by the streaming sessions accounts for only 10 percent of the company’s total annual revenue.
The drastic fluctuation of Mendale’s share prices, according to Liu Dingding, a Beijing-based independent e-commerce industry analyst, is a clear indication of the market’s overreaction to the livestreaming industry, where the influencers’ ability to bring in an overnight sales boost is so overhyped that a contract with a famous influencer can increase a company’s value by hundreds of millions of dollars.
“Companies cannot expect to rely on the livestreaming influencers as a magic pill, because with this model, the customers stay with the person, not the brand,” Liu said.
“Ultimately a company’s stock price relies on the size of its sales and a healthy overall performance,” Liu said. “Hiring a big name streaming influencer can help the niche and emerging brands find their customers, but without solid products or the right distribution channels, the attention will eventually fade away.”
Overpriced influencers
With the hype over live commerce, many companies are facing rocketing appearance fees for inviting a celebrity influencer to promote their products. According to a report by domestic tech media 36kr.com, the fees for Li Jiaqi to promote snacks in his show is at least 60,000 yuan, and for cosmetics products, the price starts from 150,000 yuan.
Viya is already one of the most popular influencers, but sensational sales volume, usually prompted by good timing of festivals and platform promotion, is not the full picture of livestreaming. Despite that local media thehour.cn from East China’s Zhejiang said that Viya’s peak sales record of more than 267 million yuan-worth of products within two hours during the Double Eleven shopping festival in 2018, the seven streaming promotion shows Viya hosted for Mendale only generated 12.81 million yuan, according to a report by financial media jwview.com under China News Service.
According to media reports, there are currently more than 21 publicly listed companies that have secured some form of commercial cooperation with Viya or Li Jiaqi, and most of which saw robust growth in their share prices in May. The companies range from food, jewelry and textiles to medicine, and many companies with otherwise mediocre performance saw their stock prices soar the moment they signed a contract with the well-known streaming hosts.
But many companies are now seeing the overreliance on the streaming promotion of the companies as a lesson.
Dahankou, a brand of instant noodles in Wuhan, increased its sales by three times in April with a nationwide livestreaming campaign featuring Li Jiaqi. However, Liu Xiaoting, general manager of the company, told the Global Times on Wednesday that the company is now going back to its traditional marketing strategies – offering discounts both online and offline and decreasing investment in livestreaming.
“Only the biggest names in the industry such as Viya and Li Jiaqi can generate a decent amount of sales,” Liu said, “but they are also incredibly expensive. For now we are running other promotions on our e-commerce channels. Sales generated from livestreaming make up for only a fraction of our total revenue now.”