We are looking at the staggering growth of live commerce and its potential impact on current online and conventional retail models.
The rapid expansion of live commerce
Live commerce is experiencing phenomenal growth and popularity, initially in China and now mainly in Southeast Asia. TikTok live commerce, for example, is trending towards an incredible US$20bn Gross Merchandise Value (GMV) for 2023 in SEA, and it's growing at a staggering compound growth rate of 30% a month.
Putting that into perspective, recently published figures put the SEA ecommerce market at just shy of US$100bn, so in its first full year of operation, TikTok Shop, driven mainly by live commerce, could take up 15-20% of this year's total. An incredible take rate in a growing, but primarily established market.
Globally, other prominent networks like YouTube, Shopify, and Amazon are also boarding (or re-boarding) the live commerce train. Amazon recently launched Amazon Inspire, a platform with a similar live shopping functionality to TikTok, to leverage this growing trend beyond its previous offering, Amazon Live. YouTube announced they would allow direct live selling in their videos with the basket integrated, and the transaction happening in the video.
The impact on current sales channels
Impressive as these GMV figures and growth rates are, they beg one crucial question; if the overall pie isn't expanding at this rate, where are these sales coming from?
The primary victims appear to be (the other) online marketplaces with poor user experiences or lacking functionality. Apart from offering discounts to attract consumers, these platforms have no fundamental unique selling proposition. As consumers increasingly drift towards a more interactive and personal shopping experience, these marketplaces are experiencing a significant blow.
Physical retail stores
In the mid-term, a more severe casualty of live commerce could be high-street stores and mall-based multi-brand retail outlets. These physical stores, particularly those lacking experiential touchpoints, stand to lose the most in this raging current of live commerce.
Consumers are attracted to live commerce because it offers the best two worlds. They can connect directly with brands, interact with their experts, ask questions about the product, transact smoothly, and even receive discounts from the comfort of their homes (or on the bus, in the office or wherever they happen to be). This convenience and ease, paired with expert advice from product specialists, distils down to an e-commerce experience pressuring online marketplaces and physical retail stores to level up their game.
A retailer recently told me, "The weather is starting to get warm, Singaporeans will flock to malls for the air-conditioning, and we believe we have this advantage over any form of e-commerce” - a shocking admission of brand defence based on temperature control.
After dropping my son at basketball a week later, I was at that retailer’s store. I was in the market for a specific brand of headphones (specific due to the brand and unique functionality offered) - and once we established that they didn't stock what I was after, I was offered four other sets of headphones, none of which offered the functionality I was looking for. Still, more than that, they seemed to have no relationship to the functionality I was seeking.
They ranged from a $60 no-brand OEM offering to a $450 pair that looked like the OEM version with a logo from an old-school speaker company attached for some nostalgic meeting of the world. The salesperson was just hawking what was in front of them then—an entirely unsatisfying experience.
D2C: The brand marketplace edition
Since the pandemic, D2C has (in many instances) come to mean “unbranded curios sold through social” - what we might call tat (tat [tæt] is: cheap, tasteless, useless goods; trinkets) in the UK, but the model doesn't need to focus on this end of the market.
In Asia, most live commerce happens on brand-owned channels, even if those channels are on a marketplace platform. In China, significant groups run over 1,000 hours daily on their brand-owned channels. In Indonesia, we monitor skincare brands running six consecutive channels for up to 18 hours daily on their TikTok brand channels.
Using the old paradigm, they are fishing where the fish are - going in search of the consumers where they are buying, but in the rest of Asia outside China, we see less retailer activity. This has to be a risk.
In the US, we see Walmart and Target (along with many more) launch versions of live commerce, but these are clunky, often showing recorded "Live" shows (no, I don't understand that either) or trying functionality like Simulcast; where Walmart is broadcasting on their site and Facebook, and if a consumer likes the product they comment "buy” and then Walmart message them through FB Messenger a link for them to add it to their cart (the kind of experience like early ecommerce where your goods were delivered to a post office a few miles from your house).
Expanding the analogy, they are not going to where the fish are. They are trying to launch their pond with some weird multi-layer fish tank.
Outside China, multi-brand retailers see the opportunity to work on platforms or marketplaces as a risk rather than an opportunity, and this risk might cause them to lose out significantly.
What it all means
Live commerce has been a buzzword for a few years, but the global tweaks to platform functionality make it a game-changer in e-commerce.
First, it is fatiguing online marketplaces that fail to deliver engaging user experiences. Second, it poses a significant threat to conventional high street stores and multi-brand retail outlets that lack experiential elements.
As live commerce continues to storm the retail world with its interactive, engaging, and personal shopping experience, everyone else needs to quickly adapt or risk being left behind by stronger-than-ever consumer brands who have the chance to direct a consumer's attention and intention before they step foot in a store.
Fionn Hyndman is the founder of Stickler