Hello, fellow members. I wanted to say that summer this year is not too hot, but it seems that we will be experiencing humid heat around the time this column is released. I hope you spend a healthy summer of 2020, which began with COVID-19 and will also end with the pandemic. Today's column will be about live broadcast that is creating a huge craze at the company, or 'Live Commerce'.

Today, ten years since Steve Jobs announced the iPhone, we face many changes in our ordinary lives. And live commerce has appeared in China, halfway across the world from the birthplace of iPhone, California. In any other country, the history of distribution started from naturally established individual stores to large distribution channels run by corporations, followed by the emergence of e-commerce along with the Internet and then finally a transition to mobile. But in China, they skipped all this and went straight to mobile with the emergence of a distribution platform centered around not images, but videos. The key here is that these are not simply videos, but 'live' videos and that they are combined with 'commerce'.

The live commerce platform released by Taobao in 2016 is now growing at exponential speed every year. Live commerce, which was still only popular in China, is now deeply penetrating the distribution industry with the continued practice of social distancing in 2020 due to the COVID-19 pandemic. Live commerce is spreading throughout the world from the US with Amazon's Amazon Live, to Japan with Mercari's live commerce, and Korea with Naver's Selective and Grip.

In China, even global automakers such as Tesla, BMW, and Audi have begun selling cars via live commerce to boost sales. According to Alibaba, more than 1,500 dealerships sold cars through Taobao's live channel during the 2020 Chinese New Year. And on April 30, Chinese car brand Dongfeng Motor Corporation invited Wanghong (online celebrity) Viya (or Wei Ya) and sold about 1,700 cars in 7 minutes. ¹⁾

One of the main features of live commerce is that it happens through mobile devices in the palm of our hands, making it easy to buy what we want whenever we want. Home shopping channels, which appeared in the 2000s as a new shopping channel, only broadcasted unilaterally programs scheduled by broadcasters and consumers had to see the offers on TV only. Live commerce, on the other hand, is optimized to mobile environment unrestricted to time and location, in line with the trend these days and targets the MZ generation who are used to mobile environment. Also, live commerce is connected to Alipay and WeChat Pay in China and KakaoPay and Naver Pay in Korea, meaning a higher possibility in leading to actual purchasing. This is quite similar to the differentiation YouTube and Netflix have to the previous TV. YouTube differs from TV in that it enables two-way communication through comments section, not unilateral communication like the TV.

During the early 2000s when online commerce was on the rise, there was the story of the 4C marketing, the so-called 4Cs being Content, Communication, Community, and Commerce. It was difficult to pursue all 4Cs in the previous online commerce because it was challenging to communicate and receive feedback from customers real time. And you needed a certain 'Community' to reflect the feedback into your next 'Content'. However, live commerce became available as mobile environment of 4G, faster than Wi-Fi, was established. This allowed real time bilateral communication between customers and sellers, which was what differentiated itself from the previous online commerce.

The previous e-commerce had a sales method of explaining the specifications and features of a product on a details page and showing customer reviews to new customers. Influencers or celebrities promoted products on social media such as blogs or YouTube channels and customers had to visit the e-commerce site to place an order. However, live commerce is mostly made up of individuals with influence or in today's term 'fandom' selling their products in real time. This behavior can be interpreted as a purchase made based on the sincerity of trust in the influencers consumers know and like. Of course, there are still many companies trying to boost their live commerce by creating a buzz by casting popular celebrities. Korean fashion company LF launched a live commerce TV channel called 'LFON' and broadcasts Boom's Café featuring celebrity Boom for 30 minutes from 9:30pm every Wednesday. Social commerce platform TMON expanded its platform by attracting viewers by casting Jeong Hyeong-don and Haha as professional show hosts since September 2017.

Other than the use of celebrities, some of our marketers and researchers have been on Naver's Selective to host a broadcast or social commerce platform's MDs appearing on their own live commerce platforms to introduce and sell products. Through these changes, customers can access honest reviews about products they could not get from previous ad videos. And because it is a direct communication between customers and manufacturers skipping over the various channels in between, live commerce is recognized as being more credible when it comes to the products and known for better access to information.

One advantage of live commerce is that any place can be a stage for broadcast such as a studio, a store, a kitchen, or even outside. Another aspect that can be considered a competitive edge (?) over the previous e-commerce or home shopping channels is that live commerce is not subject to broadcasting deliberation. Much like the controversy around the ride hailing service Tada and taxis, home shopping channels are restricted from using somewhat provocative expressions that can motivate purchasing desires because they must use certain expressions and be clear of facts to abide by broadcasting regulations. Live commerce, on the other hand, is not subject to broadcasting regulations and therefore it can be considered an advantage that products can be introduced and promoted aggressively. This is similar to how Wild West cowboys lived by no rules. We can also predict certain future risks. For example, false and exaggerated advertising of goods or the fact that the popularity of the host on live commerce leading to a higher dependency between the individual and brand and product may cause an individual's personal risk having an impact on the brand and product as well.

According to Chinese e-commerce market research agency iResearch, China's live commerce market this year grew by 111% compared to the previous year to CNY 961 billion (equivalent to KRW 165 trillion). It also predicts that the share of live commerce out of the entire e-commerce market will grow from the previous 4.1% to almost double to 7~9%. ²⁾ In particular, while traditional e-commerce conversion rate to purchase was less than 0.4%, the conversion rate of live commerce is 20%. The agency notes a more segmented and targeted customer group and the fact that sales promotion costs can be used efficiently. Korean social commerce TVON also showed more than three times higher the conversion rate to purchase on average compared to TMON and 25% higher repeated purchases. This demonstrates that customers experience a relatively engaging purchasing experience.

Unlike early in the year, when we thought that a temporary social distancing will allow us to return to our lives before COVID-19, it now seems that we are living 'with COVID-19'. The word 'critical point' we frequently use means in physics 'the temperature or pressure point at which the structure or property of the matter changes into another state'. For example, like when water turns to vapor at 100 degrees. The COVID-19 pandemic we are going through right now is that critical point and a new distribution channel based on that critical point is live commerce.

In the world before COVID-19, images exceeded videos and we consumed already created content rather than real time content. But now, in the post COVID-19 world, it is predicted that it will be real-time videos over already established 4G infrastructure that will connect us. It is not simply just a temporary channel to replace face-to-face contact because of the risks, but a change that is here to stay and dominate distribution channels. In the 2000s, there were only two large bakery brands run by corporations in Korea that dominated the bakery market nationwide, but now small neighborhood bakeries and local bakeries reentered the market through the use of social media like Instagram, blogs and YouTube. As such, many goods and products we consume will now be consumed in that way.


1) Source : 新浪, iiMedia Research, 人民网, 腾讯新闻, CNNIC, 中信证券, KOTRA Business Center Shenyang data
2) Source : iiMedia Research