Talent helping to transform clicks into cash

Just after midday in the middle of last month, Gao Xizhi was busy making dumplings with a mixture of shrimp-and-pork fillings.

After she finished making three trayfuls of the savory delights, the 67-year-old wiped away sweat, cleared her throat, looked into a camera and asked, "Wouldn't you like to taste one right now?"

The presentation on the Taobao Live platform was watched by thousands of viewers on their phones.

Gao, who trained to host livestream broadcasts, said,"I usually make dumplings for fun, but when you're filming yourself live, a number of techniques come into play, such as what to say and when to say it."

She hosts her broadcasts at the Shanghai Sheshan Internet Celebrity Training Base, which in June began recruiting candidates seeking livestreaming careers.

Occupying a 26,680-square-meter site in the city's Songjiang district, it has training classrooms, themed livestreaming studios and an auditorium the size of a basketball court. Flashing lights and disco music are used to teach candidates how to conduct themselves in a relaxed manner.

Cao Yu, head of the company that set up the training base, said the decision to nurture online influencers was made as livestreaming took off across platforms earlier this year, when people were ordered to stay home during lockdowns imposed to contain COVID-19.

"Chinese shoppers have long used their phones to buy almost everything they need, and many retailers are struggling to stay afloat during the pandemic. There's clearly demand from both sides, and we just need to create a bit of catalyst. That's where Key Opinion Leaders, or KOLs, come in," Cao said.

Despite an uncertain start, livestreaming has rapidly become a mainstream activity in China. It basically involves people with the ability to influence potential buyers of products or services by recommending that they purchase them through social media or by phone.

During the coronavirus pandemic, livestreaming has accelerated, showcasing online retail to attract millions of people confined at home. Sales made on the internet have played a key role in reviving the sluggish sector.

Transactions made through livestreaming broadcasts accounted for 4.5 percent of the country's $2 trillion e-commerce market last year, but doubled in volume from the previous year, attracting advertisers.

A survey by marketing companies AdMaster and TopMarketing found that more than 66 percent of advertisers said they preferred to conduct sales through internet celebrities and online influencers.

Pei Pei, an analyst at Sinolink Securities who has followed the emerging sector since last year, said: "Key Opinion Leaders are definitely fueling retail growth, and are particularly noticeable when a similar type of merchandise is involved. They need both professionalism and a fun personality."

More people are making a living from livestreaming as it takes center stage.

Last month, the Ministry of Human Resources and Social Security added nine new professions, including "livestreaming sales personnel", to the official occupation list recognized by the government. Cities are looking to the burgeoning trade to stimulate their economies.

Shanghai has granted permanent residency to Li Jiaqi, an online host known as "the country's best lipstick seller". On June 29, authorities in the city's Chongming district published a directive identifying Li as a special talent, entitling him to faster approval for hukou, or household registration.

With the decades-long residential permit system nationwide set to be loosened, hukou in large cities such as Beijing and Shanghai is still prized, as it is considered a passport to better social welfare services.

Hangzhou, a city with a strong e-commerce presence, and also the capital of Zhejiang province, plans to nurture 1,000 influential online hosts and a batch of provincial-level livestreaming bases and public livestreaming studios over the next three years.

Other cities have rolled out livestreaming policies and training establishments, looking to attract and incubate talent to quickly turn clicks into cash.

Hu Jing, associate professor at the School of Economics and Management at Tongji University in Shanghai, said: "From personnel and policy, to technology and capital, provinces and municipalities have given all-around support to the development of the so-called livestreaming economy. It shows just how much livestreaming is boosting the economy and commerce, not just online but offline as well."

Questions answered

While some observers have questioned how livestreaming differs from its predecessor, television shopping channels, Pei said synchronization and interaction have been the ultimate gamechangers.

"With real-time connection, potential customers can get answers to urgent questions and gain a more comprehensive impression of products, making promotional activities more convincing and effective," he said.

Chen Wangyu, 29, who lives in Shenzhen, Guangdong province, was persuaded that she needed a $300 Dyson hairdryer during a livestreaming show hosted by Viya Huang, arguably the country's top-ranking internet celebrity by transaction volume. Chen bought the dryer just four days after purchasing a hair straightening product, which was also endorsed by Huang.

Yi Chao, a former TV host in Shanghai who is instructing potential livestreaming hosts at the city's Sheshan Internet Celebrity Training Base, said: "You need to be outspoken, react fast, know the latest trends, and tell jokes when necessary. Being familiar with products, along with having a well thought-out script, can really make a difference to sales figures."

However, while internet celebrities have the ability to increase a brand's market share, the cost of livestreaming can be prohibitive.

Wang Gao, a marketing professor at the China Europe International Business School in Shanghai, said livestreaming usually involves a preset endorsement fee and commission of 20 percent to 40 percent on sales.

"In some cases, businesses are spending big bucks only to find that users have become more loyal to the celebrity, rather than the brand itself," Wang said. "So, for most brands, it's more a case of a one-off deal that lacks sustainability."

This stark reality has led to some cash-rich brands setting up their own livestreaming teams and studios to keep a firm grip on online traffic.

For example, livestreaming is being developed at L'Oreal Paris, one of the best-selling beauty brands in China, with such broadcasts becoming part of its daily marketing routine.

The company's livestreaming team has adopted a three-pronged approach: using top KOLs; employing dedicated full-time hosts it has trained; and using marketing and sales teams who take turns to front broadcasts.

Zong Guoning, L'Oreal Paris China brand general manager, said: "We normally run several sessions a day, whether in offline stores or via e-commerce channels. I know the products well and want to have a direct conversation with the customers."

She said there is huge potential for livestreaming to attract new groups of customers. In her company's case, older clients are now taking to socializing and shopping by phone.

"Compared with simply promoting sales, providing premium services is more of an end in itself," Zong said. "Answering questions posed by livestreaming audiences has been an effective way to engage with customers, contributing to a huge brand asset."

Challenges abound

However, the road to internet stardom can be bumpy. Like many other businesses, gaining an initial advantage is crucial to success, with latecomers likely to find it harder to make an impression.

For example, China's top 50 influencers generated a combined 12.35 billion yuan ($1.77 billion) in merchandise sales in May, with Viya Huang and Li Jiaqi－the top two players－claiming about one-third of the total, according to a joint report from the consultancies WeMedia and Phoenix Entertainment.

Pei, from Sinolink Securities, said less than 10 percent of merchandise is promoted by professional livestreamers, but they have contributed to more than 50 percent of sales.

Lena Fang, a dealer representing a group of overseas niche cosmetics brands, decided to avoid working with online celebrities after carefully doing the math.

"Taking into account the one-off payment for an endorsement, plus the discounts we offer to attract customers, for each facial cream I sell through a leading KOL, I stand to lose in the region of 80 yuan to 100 yuan," she said.

To avoid working with less-talented KOLs, marketers need to find out if influencers are as popular as they claim, Fang added.

"It's not unusual for half the products purchased via livestreaming sessions to be returned later," she said."This is due to many of the 'consumers' essentially being paid viewers."

According to market experts, negative customer experience and a bad return on investment can affect the livestreaming industry's long-term growth.

Derek Deng, a partner at United States management consultancy Bain & Co, warned that livestreaming could "overheat". Being involved in the business does not necessarily guarantee success, and a livestream channel could fail due to a lack of good operating practices, he said.

"As this is a relatively new market for customers, merchants should manage it properly and comprehensively, just as they do with other businesses," Deng said. "As brands digitize their business, they should also design, decide and deliver accordingly."

Yi, the trainer, said that in the final analysis livestreaming is a combination of techniques and improvisation.

"Even if people improve their sales ability to become top influencers, they still need the right temperament and charisma," he added.