China Consumer, Internet & Tech, Talking Point

People with influence

China’s e-commerce sector is increasingly being driven by KOL ‘influencers’

Zhang Dayi-w

Zhang Dayi: the influencer-in-chief can earn more than Fan Bingbing

In the true-story movie Joy, an inventor-housewife played by Jennifer Lawrence goes on a television-shopping network to peddle her Miracle Mop. After she nervously wields her invention, demonstrating how it self-wrings and how its head is detachable for machine-washing, she sells 18,000 of her mops in just 20 minutes.

Appealing mostly to middle-aged women, television-shopping networks took off by combining two of America’s favourite pastimes: watching television and shopping. Unlike in paper catalogues, the product gets demonstrated live on air and it’s also easy to track sales. When orders start to slow, a product gets pulled and the next demonstration is moved up. The use of colourful personalities like comedian Joan Rivers added to the attractions of channels like QVC.

In China, another type of home shopping network has taken off. While the live video-streaming industry has exploded in popularity, it has also become hugely successful as an e-commerce promotional channel. Both Alibaba and have launched livestreaming platforms for merchants on their sites, allowing shop owners and brands to broadcast live video on their own or work with influencers to market their products.

But even better than the home shopping channels in the US, the livestreams allow Chinese consumers to interact directly with merchants or their influencers. This has even given rise to some new fast-growing industries such as influencer incubators.

Why is e-commerce livestreaming so popular in China?

When we first reported on the growing number of “internet anchors” three years ago (see WiC313) many of their activities hovered between acceptable and explicit content (see WiC313). It has since prospered into a much more vibrant and sophisticated industry.

For a start, a lot of people tune in for the entertainment. The majority of viewers and consumers of Taobao Live, the livestreaming platform of Alibaba’s most popular shopping site, are women in their late 20s to mid-30s who live in smaller cities, where livestreaming borders on being reality TV. A large number of viewers tune in daily to watch their favourite web celebrities.

Their spending power is high: in 2018, Taobao Live sold over Rmb100 billion ($14.9 billion) worth of goods, a year-on-year increase of nearly 400%, with fashion and cosmetics being the two leading categories on the platform.

Yet this group of consumers tends to be picky or indecisive, so in order to promote sales, brands hire influencers to show a product and demonstrate various ways of using its features. Taobao Live also incorporates links that make it easier to buy goods from a smartphone, as well as offering coupons as incentives.

These online influencer (also known as KOLs, or key opinion leaders) are approachable enough that when they recommend a shampoo or a dress on the livestream, their advocacy seems as genuine as a recommendation from a friend. Moreover, audiences can leave comments during the livestream, which helps keep them engaged. The nature of a live broadcast also encourages impulse buying.

“Fans like their idols to share their own insights, all of which are conducive to ‘raising’ the temperatures of an online shop to create a welcoming atmosphere that entices followers to spend their money. In other words, it’s the “ambassador-like service of KOLs that pushes the sales,” Tiger Ai, chief executive of multimedia company Hifan, told the South China Morning Post. “It is like injecting life into the products to make shopping an authentic, personal and exciting experience.”

For big brands these influencers offer a quick way to reach consumers. French cosmetics giant L’Oreal was one of the first companies to collaborate with livestreamers, working with the influencer-incubator MeiOne as early as 2016 to transform some of its traditional salespeople into livestreaming hosts.

Li Jiaqi, a hugely popular beauty influencer, also got his start behind the beauty counter: “We used to help others sell things offline: I would come up to you and spend an hour fixing up your make-up and then sell Rmb2,000 worth of products. But after I became a livestreamer, I can sell up to Rmb2 million in an hour,” he told 36kr, a news website.

After beauty and fashion, a surprising sector that has gained in popularity is agricultural produce. Taobao recently announced that it was investing in talent management to turn more farmers into livestreaming hosts and KOLs so they can demonstrate how they pick their vegetables. In a country with food safety problems, some consumers are especially keen to learn about provenance and buy direct.

Who are the biggest names in livestreaming?

­The mega influencers are measured in sales per minute. They often collect commissions on volumes of the products sold. Small wonder then, the income of some of the most popular KOLs can even rival that of A-list movie stars.

Take Zhang Dayi, the so-called “No.1 web celebrity of China”. With her girl-next-door appearance and bubbly personality, the 31 year-old reportedly made as much as $46 million in 2015 (for comparison, megastar actress Fan Bingbing made $21 million that same year). Zhang became so successful she began selling her own branded apparel on Taobao and her store on the platform was the fastest to reach Rmb100 million in sales on Alibaba’s Singles’ Day in 2016 and 2017. Also sometimes dubbed “China’s Kylie Jenner”, Zhang now owns four business lines covering women’s clothes, lingerie and underwear, cosmetics and home products. In addition she’s the co-founder of Ruhnn, a top influencer incubator (more on Ruhnn later).

Another big influencer is Viya, who took Zhang’s crown to become the biggest sales driver on Singles’ Day last November. She sold as much as Rmb267 millionof goods in the first two hours and Rmb330 million by the end of the day. Her live broadcasts averaged an audience of 2.3 million, according to 36kr.

Viya has such a loyal following that she now sells everything from mascara to slippers and food products.

“A lot of people thought Taobao Live was just for selling things. In the beginning, I thought so too,” she told Ciwei Gongshe, a portal. “But over time, through my communication with the audiences on the broadcast I feel like we are friends keeping each other company. They log on every night at 8pm to follow me. I learn that a lot of their husbands are still busy at work; some are from a single-parent family. But instead of watching TV, they want to watch me. Taobao Live has transcended from e-commerce to a genuine interaction between two people.”

Li Jiaqi, 27, is another social media phenomenon, famous for recently selling over 15,000 lipsticks in five minutes. With his over-the-top catchphrases like “Oh My God” and “Amazing!” the beauty influencer – with short dark hair and sporting boyish looks with a bit of a Justin Bieber vibe – tries different lipsticks on himself and tells his legions of fans which shades are flattering. The lipsticks he recommends often sell out instantly.

Jack Ma even appeared alongside the beauty influencer in a promotional video for Singles’ Day that saw the Alibaba founder challenging Li on who could sell more. While Li gleefully describes each product in detail and tries it on for his audience, Ma clumsily follows suit.

It is not all glamour and glitz. Li puts on as many as 300 lipsticks a day and before Singles’ Day, Viya was on air at least seven hours a day for 20 consecutive days. Similarly, other KOLs often complain of having to work late into the night because that’s when online shoppers are the most active.

But it hasn’t stopped people from wanting to be influencers…

The latest brand Zhang Dayi tried to sell was Ruhnn, the KOL incubator that she helped start. Ruhnn went public in New York this month after raising $125 million.

It selects, trains and manages over a hundred social media mavens. Every influencer gets their own team, which manages their content, designs their own branded clothing lines, and runs their Taobao store. But the competition is intense. There are more than 200 influencer-incubators that exist solely to transform younger girls (and boys) into the next big internet celebrity. Alibaba invested $45 million in Ruhnn and became its fourth largest shareholder in 2016

Given Taobao Live’s penetration in third- and fourth-tier cities, its success has had the most competitive impact on Pinduoduo, the Tencent-backed e-commerce site that targets rural, lower-income consumers with cheap deals (see WiC404). Not wanting to fall behind, Chinese social media platforms like WeChat and Douyin have also incorporated e-commerce elements and are well aware of the success of the KOL model.

Industry observers believe that it won’t be long before other e-commerce firms make a big splash by poaching the biggest talents. “Now that merchants recognise how quickly influencers can move products, those who have a loyal following have become a commodity that all the platforms want to get their hands on. After all, if you miss out on livestreaming, you are missing out a market that is worth Rmb100 billion,” says 36kr. Jiang Fan, Taobao’s  CEO has even commented that “livestreaming will be the mainstream e-commerce model” in the coming years.

Wall Street investors are not totally ‘influenced’ by this view, however. Top KOL Zhang was on hand at Nasdaq for Ruhnn’s first day of trading on April 3, but that didn’t stop its share price dropping more than 40% in the next three sessions…

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.