Updated Jan. 23, 2024 at 1:30 p.m.
SANTIAGO — TikTok, owned by Chinese tech firm ByteDance, has spent more than $500 million to break into online retailing. The app, best known for its short viral videos, launched TikTok Shop in August, aiming to sell Chinese products in the U.S. and compete with other Chinese firms like Shein and Temu.
Tik Tok Shop will have three sections, including a live or livestream shopping channel, allowing users to buy while watching influencers promote a product.
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This choice was strategic: in the past year, live shopping has become a significant trend in online retailing both in the U.S. and Latin America. While still an evolving technology, in principle, it promises good returns and lower costs.
Chilean Carlos O’Rian Herrera, co-founder of Fira Onlive, an online sales consultancy, told América Economía that live shopping has a much higher conversion rate than standard website retailing. If traditional e-commerce has a rate of one or two purchases per 100 visits to your site, live shopping can hike the ratio to 19%.
Live shopping has thrived in China and the recent purchases of shopping platforms in some Latin American countries suggests firms are taking an interest. In the United States, live shopping generated some $20 billion in sales revenues in 2022, according to consultants McKinsey. This constituted 2% of all online sales, but the firm believes the ratio may become 20% by 2026.
Pandemic mania
Live shopping began in 2016 with Alibaba‘s online show, Taobao Live. Like so much else online, it exploded during the pandemic. In the Americas, it was initially used by small retailers using influencers to sell on social media websites like Instagram or TikTok, says Pablo Rodríguez, Latam & Products chief with IT consultants Baufest. It was an excellent way of accessing a much bigger public with little physical and technological infrastructure, he told América Economía.
If corporations have yet to embrace the technology big-time, he says, it is because “hypersegmentation of audiences and personalization of the sales experience are essential” in live selling. That suits niche sellers better than a multinational needing to shift large quantities of diverse goods.
Almost anyone “with two phones and a bit of lighting can do a live show.“
Many will see live selling as simply a version of the sales channels one might watch on daytime television, particularly popular in the 1990s. However, it is interactive: you can buy and keep watching at the same time, says Carlos O’Rian, opening a smaller screen or clicking on product details. “The hosts are answering people’s questions … This is very different to Instagram, where to do anything you have to leave the page,” he says.
Currently, live shopping capitalizes on its use of social media sites like YouTube or Facebook, though its technology will allow sellers to register viewer data to create their own following. Its novelty is “to humanize the (online) shopping process,” says Marcos Pueyrredón, founder of VTEX, an e-commerce firm, while fitting into the “conversational commerce” model, which includes chatting online.
The promise of going live
Recently the Lima Commerce Chamber (CCL) organized a two-day cyber event that included live shopping experiences. The head of Digital Transformation at CCL, Jaime Montenegro, told América Economía the chamber has been working on bringing live shopping to Peru, “not just for big firms and big retailers … but to massify it a bit more, so people gradually understand what it’s about.”
It is early days for live shopping in Peru, he says. “People are quite accepting of it; some brands are already working on making the most of an event, with a presenter or influencer that fits the brand and is well-known and charismatic (promoting) a product.” It is not unlike “being in a physical shop in front of a salesperson,” he says.
Properly used, live shopping should find and target the right audience with the right product. Retailers will also need the right seller for a brand, product and customers.
Pablo Rodríguez of Baufest says retailers have “thousands of products for different types of consumers, which means you need technological capabilities and scalable processes.” Live shopping, he says, is now using new technologies designed even for gaming as leverage, which has reduced costs.
O’Rian says his firm can now fit live shopping features onto websites at little cost and in 10 minutes. As for users, they can connect with any smartphone bought after 2015. Typically online sellers have seen the cost of a live broadcast drop from U.S. ,000 to 0.
Almost anyone “with two phones and a bit of lighting can do a live show,” says O’Rian. The evolution of the technology, he said, is allowing sellers to concentrate on marketing, scripting and the business side. The operation will also need tools to answer queries through WhatsApp or chat.
Learning from China
Live shopping online has taken off in China. Pueyrredón says that about half of everything sold to customers in China has something to do with the Internet, and 30% of that half involves conversational commerce, including live shopping. Its share of all e-commerce in China may be around 10%.
In China, it has become a mature sector with deep involvement from sellers to buyers and all elements in between, says Weihan Chen of Momentum Works, a Singapore-based firm that analyses e-commerce. Its technical evolution, she said, has led directly to cutting costs and winning customers.
Analysts argue that the next stage will be live shopping in the metaverse and use of AI technologies and virtual hosts. This is being tried in China, says Chen, especially during periods of meager sales.
Forbes concluded livestream shopping would not take over e-commerce.
In spite of its dynamism, live shopping has yet to become an unstoppable juggernaut.
In Feb. 2023, the U.S. business review Forbes concluded livestream shopping would not take over e-commerce, and was better suited to the Chinese consumer mentality. While it took off in the pandemic, figures show that with confinement over, people resumed their pre-pandemic habits. Its success in the United States might be attributed to hype on social media, also known as FOMO or “Fear of Missing Out.”
For Latin America, “it’s the start of a world of opportunities” for brands, says Rodríguez, who believes that firms here have yet to forge an integral vision of live shopping’s utility to e-commerce. He said live shopping must ease itself into the mass internet experience, support large user numbers, mesh with social media and instant messaging, allow for shared content and include payment, delivery and analytical tools. As Chen put it, synchronicity was key to improving the user experience.
Pueyrredón believes Latin America must “tropicalize” an essentially Chinese product, for regional consumers. “We shouldn’t do exactly what they’re doing there, but adapt it in a professional way” to meet local needs. For now, he said, sellers must seek out their customers wherever they are hanging out, be it on Instagram, TikTok or YouTube.
