Chinese livestreamers can rake in billions of dollars in hours. How long will it last?

BEIJING — Even as China’s newly rich internet celebrities keep smashing livestreaming sales records, businesses are finding other strategies that might work better for their brands.

Livestreaming is here to stay, many analysts say, but relying on a system of internet personalities and views will no longer be enough.

The real-time online selling phenomenon — also called “live commerce” or “livestreaming e-commerce” — took off in China after the onset of the coronavirus pandemic last year, and is growing in other countries.

The difference from last year is that it’s not as easy for livestreamers to get consumer sales volume, said Xin Youzhi, a top livestreamer with 95.6 million followers on video app Kuaishou. That’s a challenge for the industry going forward, since he said it has grown to roughly 2 trillion yuan ($312.5 billion) in market size by relying more on sales volume than focusing on product quality.

Xin now also runs his own company, Xinxuan Group, which has a staff of 1,400 people to screen goods, develop products and train professional livestreamers. Xin said he hopes one day the company can have 1,000 of its own product designers.

The livestreaming sales trend in China, even before the pandemic, has been dominated by internet celebrities like 29-year-old Austin Li. He rose to fame by selling lipstick, and set a record last month by selling the equivalent of $1.8 billion during a single 12.5-hour livestreaming session on Alibaba’s Taobao in the run-up to the Singles Day shopping event on Nov. 11.

Fellow livestreamer Viya notched transaction volume of about $1.3 billion in roughly 14.5 hours during the same promotional event, according to industry research firm Hongrendianji. Skin care products and makeup were among the most popular products sold, the firm said.

Despite the massive sales volume that working with such internet personalities can bring, many companies are deciding to train their own staff to hold livestreaming sessions instead.

“Cooperating with top live-streamers is not the only way, and sometimes it could be a ‘bad’ way, particularly if [the company] is pursuing a profit, as the top players don’t have brand loyalty and often times have bargaining power,” said Jialu Shan, economist and scholar in Asian and emerging markets at the International Institute for Management Development.

Using in-house staff to conduct livestream sales sessions also helps businesses save on costs, since influencers charge a commission and about 20% to 30% of transaction volume ends up being returned, according to Oliver Wyman’s Dave Xie.

In particular for this year’s Singles Day, internet influencers have made a selling point of promoting prices that are at least as low as last year, said Xie’s colleague Pedro Yip, head of retail and consumer goods practice at Oliver Wyman.

But that means a smaller profit for businesses, and some brands that worked with Li and Viya have ended up in long negotiations over the final selling price for products, Yip said.

Initial figures on livestreaming sales also make it less clear how much of a return on investment brands are getting.

Outside of Taobao, the top three livestreamers by sales in October were all on Kuaishou — and from Xinxuan, according to Hongrendianji.

The livestreaming market can double or more, but it will take more businesses coming in and major changes, Xin said in Mandarin, translated by CNBC. “Whether this market can become 5 trillion yuan, 10 trillion yuan in size can only be seen after more [industry] standardization.”

Looking ahead, Xin said it’s increasingly important for livestreamers to show customers where products come from, or how they are made. That knowledge and connection with the manufacturing supply chain will help livestreamers become more professional and develop more targeted brands — all of which Xin expects will be critical in helping his company stay competitive.

He said his hope is, once pandemic travel restrictions lift, he and his team can travel to Europe to find brands that could do well in China, as well as share their livestreaming experience with the local market.