Is the Monopoly Era of Leading Livestream Anchors Over?

by Queenie Yao

In the headlines related to the last month's Singles' Day, besides the mind-blowing sales record, you can't miss the pricing controversy between L’Oréal and two of China's leading anchors, Austin Li and Viya.

The top two livestreaming sales stars have announced the suspension of their collaboration with L'Oréal due to a price dispute during the Singles' Day shopping festival.

The feud is an unusual public dispute in China's retail industry. Brands have become increasingly dependent on influencers as a sales channel, promoting products via livestreams followed by millions of fans.

Later, L'Oréal apologized to customers for the cumbersome and complex promotion mechanism while explaining that some customers could buy its products at a lower price because they applied several discounts provided by the brand and Tmall platform.

The cause of the incident was simple. Such controversy signalled the promotion mechanism conflict among the e-commerce platform, the store, and the anchor.

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<Austin Li's assistants demonstrated L’Oréal masks to the audience. Source: Taobao>

When taking a close dive into the phenomenon of brands' breaking prices, the core is the battle for traffic between brands and top anchors.

So far, customers have long embraced these star anchors to trust the lowest price promises. When customers believe they have purchased a product at a relatively high price in livestream sessions, they will side with the anchors to blame the brand.

From a brand's point of view, a large number of consumers those brands acquire at the cost of price concessions in livestream campaigns do not convert into their private domain traffic. Moreover, brands count on the next step to stimulate this traffic base for loyalty and repeat purchases.

To some extent, these price sensitive consumers have become loyal followdfx of the top anchors, acting as a bargaining chip for the anchors in their next price negotiation with the brands.

A lively discussion was sparked: Is top anchor livestreaming still worth the effort?

Values that leading livestream anchors bring to the brand

Whether it's a mature brand or an emerging brand, working with a top anchor is inescapable in China market. At every beginning, top livestream anchors with influential impact indeed provide brands with tremendous exposure all at once.

For a brand, especially a new brand, the cost of gaining exposure and traffic is high, as one of the shortcuts is to be presented on an A-list anchor's livestreaming campaign.

Brands hope that, if they appear on a leading anchor's livestream, the audience will flock to the brand's store livestream to make purchases. However, brands cannot cultivate user mindsets this way in a short time. Winning the hearts and minds of discerning Chinese consumers will not happen overnight.

Yet, the livestreaming campaign is one of the least costly ways new brands can test the market. The critical point is that the anchors know the consumers very well. If you are a new brand in the cold start phase, joining the anchor livestream to see how the sales, to some extent, represent the clear market view can offer insights that improve brand strategy.

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<C-beauty brand Florasis“花西子” in Austin Li's live-stream event>

The burgeoning C-beauty brand, Florasis, famed for its oriental style, capitalized on China’s livestream craze by teaming up with star anchor Austin Li.

Before reaching a partnership with Austin Li to livestream products, Florasis had been mediocre in sales. Florasis initially debuted on Li’s livestream session in March 2019, and the recommended product, air loose powder, quickly sold out. Later, Florasis appeared more frequently on Austin Li’s livestream, and sales reached 1.13 billion RMB[1] ($177 million US), a 25-fold increase over 2018. Rumors say Florasis had been offering 100% of revenue to Austin Li as a sales commission, thus being able to secure multiple livestream campaigns with a short interval between each one.

If livestreaming is a cold start engine for new brands, it is an indispensable must for mature brands.

Big brands that are very well known are willing to participate in livestreaming for three reasons.

·      When a new product is released, there is a need to attract traffic.

·      Reaching and activating consumer groups of different top anchors.

·      Drive livestream audience engagement to sales conversion.

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<Clinique(left) and Lancôme(right) worked with Austin Li to promote new products>

Brands need to be more cautious when working with top anchors

Apart from the conflicts between consumers and the brand, controversial incidents have also triggered discussions about the positioning of livestreaming anchors.

Firstly, brands need to consider the limits of top anchor livestream collaboration. 

For one, upper-tier anchors have their merchandise strategy; the product brands want to promote may differ from the anchor's selection. If the anchor is not satisfied and does not choose this item, the brand can only satisfy the anchor's demand. And this demand tends to be predictable, such as brands compromising with lower prices.

Another uncertainty is livestream schedule. The waiting period can be long, from the day brands contact the anchor until they finally get a firm scheduling confirmation. 

Additionally, collaborating with A-list livestream anchors is quite expensive.  Brands need to pay for the sky-high fixed cost, commission fee, even extra service fees for a multi-channel network (MCN) agency.

Lastly, as a growing number of brands join livestreams for the convenience of hyper-digitalized consumers, competition is heating up.

Nevertheless, there exist many hidden risks in the livestreaming industry.

Take Taobao Live, where the traffic of live e-commerce is concentrated on two super anchors (Viya and Austin Li), and brands have no choice but to continue to rely on these tier 1 anchors.

It is not an exaggeration to say that until new brands have established user mindsets or developed their self-livestreaming capability, they can only act according to the rules of the game set by the top key opinion leaders (KOLs, or influencers) in the livestreaming market.

In a sense, the top anchors have formed a "de facto monopoly" and their current bargaining power is far beyond their proper scope.

Even when disputes happen, brands may confront the boycott from anchors' fans.

The new face of the skincare brand, Yuze, also became popular with a bang driven by Austin Li. Data from CBN Data shows that Austin Li and Yuze collaborated on 28 live broadcasts from January to June 2020. The gross merchandise value (GMV) from these livestreams accounted for 70%[2] of Yuze's total brand GMV.

But after last July, Yuze gradually disappeared in the livestreams, with Yuze and Austin Li's team announcing the cessation of their collaboration. Many fans of Li complained that Yuze sent more samples than Austin Li's livestream during the 618 store self-livestream and the product price increase is concerning. 

Following that, Yuze appeared on Viya livestream, which was viewed as a "betrayal" by Li's supporters, with many accusing Yuze of "coming to Viya after the insane price jump to engage in activities."

Mid-tier KOLs are worthy of brand attention as well

The e-commerce platforms also have realized that it is difficult to maximize their commercial value if they do not disperse the top anchor's traffic. Douyin is setting the rules from the start, "let capital determine the scale of traffic,"[3] meaning anchors can obtain traffic as long as they spend money. Video-sharing app Kuaishou supports mid-, micro- and long-tail anchors.

When platforms are trying to "decentralize", will the mid- and micro-anchors or a new gateway increase the sales volume? When the moat of the top anchors gradually disintegrates, there are growing opportunities for mid-micro anchors and even new anchors.

After all, there are only a few leading KOLs on each platform, and as they continue to develop, they are gradually moving away from influencers and closer to new celebrities.

For some start-ups and emerging brands, the trial and error costs are very high, and they do not have enough resources to partner with the top KOLs, so the middle-micro KOLs will become the primary choice for these brands.

Mid-KOLs are very demanding in terms of the quality of their content and are perfect for small brands to do cold starts in terms of cost and ROI. Moreover, this kind of placement can be adjusted according to consumer feedback as soon as possible, making it more controllable.

Compared with the upper-tier anchors of the whole category, many mid-anchors specialize in the vertical category. Mid-anchors may know more about consumer preferences for such things because they have been creating content in a given industry for a long time. As a result, it is easier for brands to choose such anchors to appeal to consumers' demands for each category and enhance the consumption experience. But mid-level anchors’ livestreaming campaigns may also likely become a flop, so overall, and the risk is not low.

On the other side, more brands have concentrated in the leading KOLs’ livestream rooms, and mid-anchor livestreaming would be an alternative.

If mid-level anchors livestreaming campaigns work, the overall will bring a good ROI. On Douyin, TikTok’s sister platform in China, mid-micro level anchors’ livestreaming performances are better than Taobao. 

Will brands' self-livestreaming offer a promising future?

While the top anchors and influencers dominate the livestreaming e-commerce business, brand self-livestreaming sessions have also become a vital core asset among these businesses.

In the first week of Taobao's pre-sale on November 11, Taobao Live recorded 165 livestream rooms with a turnover of more than 10 million RMB[4]. ($1.5 million US) Brand self-livestreaming accounted for nearly 90%. Estée Lauder, Lancôme, Helena Rubinstein, L’Oréal, Shiseido, La Mer, and other livestreams’ turnover have passed 100 million RMB ($15 million US).

The rise of brand self-livestreaming provides an opportunity for small and medium-sized brands to be seen so that they can avoid the high threshold of top KOLs and accumulate private traffic through store livestreaming to achieve sustainable growth in sales.  In the past, brands lacked livestreaming experience and accumulated fans, so they could only trust the top anchors’ traffic and give up their bargaining power. And today's consumers, in making product purchase decisions, now pay more attention to the function and price, as well brand culture and values. 

Self-livestreaming is a comprehensive entrance for online traffic and the main place for selling products. It is also a vehicle for spreading brand culture and values, establishing direct and intimate interaction with consumers, and enhancing users' loyalty and brand trust.

However, this is not the key to standing out from millions of rivals in the fierce China retail market. For long-term planning, brands' self-livestreaming cannot replace the KOL livestream due to the pitfalls of livestream e-commerce strategy.

For brands, the prosperity of the livestreaming industry also provides them with more room for choice. They can deploy a multi-pronged livestream launch strategy with the top anchor, mid-KOL, and the brand's self-livestreaming in different e-commerce promotion periods for short-term sales growth and long-term operations.

Will the solid, binding relationship between the brand and leading anchors loosen up in 2022? Perhaps the 6.18 mid-year shopping bonanza will provide the answer.

[1] Caijing Analysis: The controversy between L’Oréal and Austin Li, 2021; URL 

[2] 36kr: Why Yuze stopped the collaboration with Austin Li, 2020;URL

[3] CBN Data: New brands trapped in the top anchor’s live stream, 2021; URL

[4] CBN Data: Singles’ Day Presale Performance, 2021; URL

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