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China Cracks Down on Livestream Commerce

Don Apgar by Don Apgar
December 23, 2021
in Analysts Coverage, E-commerce
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China Cracks Down on Livestream Commerce

China Cracks Down on Livestream Commerce

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One of the hot trends in payments that we called out in Mercator’s 2022 Outlook is the fast rise of what we’re calling social commerce. More than just static advertising that has moved to social media, social commerce is communicative and engaging, and gives shoppers the sense of community that the 90’s shopping mall provided. China is at the forefront of this emerging trend with the growing popularity of livestreaming commerce platform Taobao, powered by marketplace giant Alibaba. Chinese celebrity Viya, known as the “queen of livestreaming” in China, has partnered with international brands like L’Oréal, Unilever, and Adidas to sell consumer goods in a livestream format. McKinsey has forecasted that livestream commerce in China alone will reach $423B in 2022. 

“People were shocked to learn livestreamers make so much money,” said Liu Xingliang, president of tech consultancy China Internet Data Center. “With such profitability, Viya’s company could be valued at 100 billion yuan ($16 billion) if it went public.”

Unilever China’s Chairman and North Asia Executive Vice President, Rohit Jawa, said the interactive element was its main appeal.

“Questions can be answered immediately and be viewed, shared and commented on by others,” Jawa said. “There’s a real sense of community and livestreamers have incredibly loyal fans. … China definitely leads the way in livestreaming and is Unilever’s most advanced e-commerce market globally.”

The rising popularity of livestream commerce has not been overlooked by Chinese authorities, and last week Viya’s 100 million followers were surprised to see her e-commerce and social media accounts shut down following a fine of more than $200 million for tax evasion. Last month Chinese livestreamer Xueli was fined over 65 million yuan for tax evasion and her Taobao channel remains offline. China’s internet oversight agencies are also pressuring platform providers like Taobao to confirm the identity of livestream sellers (Viya’s real name is Huang Wei), and better monitor commerce activity so that income is reported and taxes are collected. In 2011, the US began requiring credit card processors to report transaction activity to the IRS in an attempt to flag small businesses who under-report sales numbers.

“Live commerce has become table stakes for successful consumer companies in China and much of the rest of Asia,” McKinsey concluded in a report earlier this year, “and is rapidly spreading to Europe and the United States.”

Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group

Tags: AlibabaChinae-commerceEcommerceregulationssocial commerceSocial Media
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