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A year ago, livestream video shopping was hailed as a panacea. By combining personal endorsements with e-commerce conveniences, the format’s success in China has inspired considerable investor excitement in the West. However, in this new phase of the Covid-19 pandemic, brands are still waiting for prospective viewers to have the same enthusiasm, and momentum has slowed.
“I remember having a lot of conversations about livestream commerce 12 months ago, and in terms of the number of interactions I've had about the topic recently, they've definitely declined,” says Matt Moorut, an analyst for Gartner for Marketers who specialises in luxury retail. Anecdotally, he adds, “I don’t know anyone who regularly signs up for livestream shopping events”.
Viewership hasn’t accelerated as quickly as predicted. Moorut estimates that livestream will be, at most, 2 per cent of digital commerce globally this year, including China.
“Livestreaming is one of those long-term trends that was greatly accelerated by the pandemic. As the pandemic subsides and consumers return to live events and in-store shopping, it's reasonable to assume that the hype will taper off,” adds Blake Droesch, an e-commerce analyst for market research firm Insider Intelligence.
For tech, this is a common trajectory: early excitement then disappointment as people underestimate how long it takes to reach critical mass. Both analysts and investors seem to have an overall positive outlook for the long-term; Moorut compares it to the long-winded adoption of technologies such as Facebook advertising or QR codes. Amid the pandemic, retailers such as Moda Operandi, Neiman Marcus, Nordstrom and Farfetch partnered with video commerce platforms that enabled one-to-many broadcasts.
Virtual commerce technology is helping fashion brands take online shopping to the next level, beyond Whatsapp and Facebook messaging. But it requires a major rethink of stores and staff roles.
Some of the year’s biggest e-commerce investments went to video shopping. In September, Whatnot raised $150 million at a $1.5 billion valuation; and Ntwrk received $50 million from Kering and Goldman Sachs. In July, Klarna bought Hero for an estimated $160 million; while Popshop Live raised $20 million. Meanwhile, big tech players including Instagram, Tiktok, Snapchat, Facebook, Pinterest, Youtube and Amazon are all investing in video commerce.
By working with Ntrwk, Kering will be able to inform how the format is executed for luxury brands, says Kering chief client and digital officer Grégory Boutté. While Boutté doesn’t feel that a successful luxury approach currently exists in the West, he sees promise; already, young consumers find product inspiration on platforms like Youtube and Tiktok, and the relatively high penetration of e-commerce for luxury in the US and Europe, compared to China, means that it could catch up, he says. “It is early days, but video shopping is a potentially powerful way to engage and create emotion around our brands, and done in the right way, it could be meaningful.”
Mathias Schilling, co-founder and partner at VC firm Headline (investments include The Realreal and Farfetch), estimates that it will be at least 18 months. Grant Lafontaine, co-founder of Whatnot, the US’s largest video shopping app based on downloads and gross merchandise volume, says it could be five to 10 years until it reaches levels comparable to China, which was estimated to be $171 billion in 2020. A 2020 survey found that two-thirds of Chinese consumers bought products via livestream in the past year. To get there, it will need long-term, consistent brand strategies; tech providers with appropriate infrastructure; and widespread, mainstream adoption from consumers.
Many brands have managed to find success in one-to-one virtual shopping appointments with remote customers, and in the US, live shopping is expected to reach $11 billion this year, up from $6 billion in 2020, according to management consulting firm Activate’s Technology Media Outlook 2022. “Live shopping sales are growing, but from a very small base,” says Droesch. He compares that to US social commerce sales of $36.6 billion this year, and total US e-commerce sales of $919.06 billion.
The stage has been set for consumer adoption to take off, and the fashion industry probably has more potential for success than any other category, Droesch says. “But the question remains if and when consumers will come around to it en masse.”
In July 2020, retailers such as Neiman Marcus and Moda Operandi described their video commerce technology as successful, and something that the companies planned to continue. But since then, retailers have gone relatively quiet on what’s next for these initiatives. Moda Operandi did share that it is continuing to integrate livestream shopping and shoppable video capabilities; one pre-recorded video with Paco Rabanne creative director Julien Dossena resulted in a 66 per cent increase in sales, according to the company.
Moorut has heard from retailers that conversion rates can be about 40 per cent on livestream events, but specific numbers around viewership or time spent are not really discussed publicly, he says. “People are being quite cagey; it still feels like the early stage.” While conversions are encouraging, a big challenge is driving enough people into the livestream. A year ago, the driver was that stores were closed. “Now they’re thinking, ‘How do we do a better job of explaining the benefit and carry on the momentum after the event?’ versus 12 months ago, which was, ‘How do we set this up, which platforms do we put in place and how to get staff to engage?’.”
Bambuser provides mobile live video for brands and raised $45 million last year. It has worked with Farfetch, Clarins, Moda Operandi, H&M and others.
Some retailers, he says, are still evaluating various platforms in anticipation of eventual adoption. “It still feels like brands are probably pushing [livestreams] more than consumers actually want them. But it’s a case of making sure that they're in a good position so that if the demand does rise, they can maximize that opportunity.”
This can include finessing regular, in-house broadcasts and partnering with external video-specific apps. The most successful brands often work with influencers and treat the technology as an “e-commerce amplifier” more than an event tool, says Bambuser chief commercial officer Sophie Abrahamsson, whose clients include LVMH, Farfetch and Ted Baker. Betabrand CEO Chris Lindland recommends regularly scheduled broadcasts, rather than one-off events.
Video-specific companies including Ntwrk and Whatnot have found success appealing to niche communities who are drawn to limited-edition drops and collectors’ items. The focus for Ntwrk, a mobile-first platform known for streetwear and sneakers, is a “fandom-driven audience”, for which livestream drops help magnify hype, says CEO Aaron Levant. “People are less likely to buy things that feel commoditised or not new or special. It is a little more appointment-based.”
This is a key difference from China-based livestreams, which tend to be more mainstream. Levant compares it to “Amazon plus livestream”. That might be why Amazon’s own attempts at livestream shopping have not taken off to the extent that the tech giant might hope. “The culture is different here,” Levant says. “If you make a hammer in Philadelphia, it might be a great product, but what about it is urgent or entertaining? It has to lead with urgency or perceived scarcity for people to tune in.”
Ntwrk primarily prioritises revenue growth and repeat purchase growth, rather than other numbers. Levant says that while he didn’t know what to expect coming into this year and following Covid-19’s e-commerce boost, he had hoped for triple growth. Instead, it has been double growth, and he’s still very happy with it. Growth slowed a bit over the summer, he says, as places began to open up. About 10 to 15 per cent of the audience is coming from overseas, he says, even though the company hasn’t yet marketed to or optimised shipping for international regions.
“Ntwrk is getting inspiration from what is happening in China and making it relevant and authentic for its target audience in the US, and it’s resonating in a meaningful way,” Boutté says.
The next phase will be aided by this year’s wave of investments. Ntwrk, for example, will be able to expand advertising and its geographic reach. Klarna is making Hero available to all its retailers, and plans to add influencer-led livestreams to its app. “Liveshopping is interesting — everyone is talking about it and no one has cracked it,” says Klarna CMO David Sandstrom. “The question is, who will crack it and how will it look in the Western world? In China, most sales go through a live event but it hasn't been cracked here, especially not for the mainstream and luxury.”
In September, Ntwrk raised $50 million from Kering and Goldman Sachs, among others. Its “QVC-meets-Twitter-meets-Twitch” approach includes regular shows and virtual events.
While it’s not a “winner take all” landscape, Schilling, of VC firm Headline, says he has yet to find a favourite platform for fashion in the US, in terms of interesting content that is produced well.
Bambuser, based in Sweden, has been a clear favorite among fashion brands. It has raised more than $100 million and won last year’s LVMH Innovation Award. “What started out as proof of concepts in many cases in 2020 have now become long-term agreements, and many retailers are starting to integrate live video shopping as an integral part of their e-commerce strategies, Abrahamsson says. “Most recently, Clarins Group expanded its implementation after a successful pilot in the APAC region, and it was accepted to The Disney Accelerator.
“The promise of live commerce platforms is that they can create personal experiences between a consumer and a product or brand, while inviting fans to be a part of the story, which can foster a sense of community,” says Kelly White, VP of consumer experiences and product strategy at Disney Media & Entertainment Distribution. Over time, White predicts, it will be a pervasive and natural way for people to connect with brands and discover products. “We are very excited about the potential and direction.”
As video viewing increases overall — thanks in part to Tiktok and Tiktok-inspired tools — this broader trend is likely to translate into shopping, Morut says. “You can see that luxury brand engagement rates on Instagram have dropped off, but views on IGTV videos have increased, which fits into the broader trend of people engaging with video in ways that they weren't doing before… It will be really exciting in five years’ time — but for now? It still feels really nascent.”
To expand to the ubiquitous status that investors are banking on, “live shopping still needs to grow from a destination for limited-edition drops to a more common discovery platform for general merchandise,” Droesch says. The industry’s on the right track, Whatnot’s Lafontaine notes, although he admits it’s still a “ways away” from a brand such as Gucci selling on Whatnot. “With a lot of tech trends, people get over-excited pretty quickly. We are still in a phase of tuning the system," he says, pointing to details such as supply, consumer behaviour, the right product mix and the overall experience.
Boutté, of Kering, says it’s too early to establish a set conviction on the successful luxury formula. “We don't have a set conviction, because it is such early days, and just like anything innovative, it requires a lot of iterations before the model that really resonates with our target audience kicks in. My bet is that it will develop fast as soon as they make the connection between discovery and purchase; the minute this happens, it will take off quickly.”
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