Does the booming live-streaming e-commerce already lost its shine?

Jan 12, 2022 Live Broadcasting


If you are looking for the key nodes in the development of China's e-commerce history, the year of 2021 must be a huge turnaround ups and downs moment that cannot be ignored.

The sector increased in the second half of 2019 and became the hottest topic on Chinese internet in the first half of 2020 as the Covid-19 outbreak hit, forcing people to refrain from going outside and tending to their shopping needs.

The first month of 2021, live-streaming e-commerce seems to be the biggest windfall. Luo Yonghao, founder and chief executive of smartphone company Smartisan Technology, paid off his debts through live streaming; Michael Yu Minhong, the founder of New Oriental Education & Technology Group also hosted his first live-streaming e-commerce session on ByteDance-owned short video platform Douyin ... A new wave in live-streaming e-commerce once again set off.

But by the end of the year, the situation took a sharp turn for the worse. The taxation authority of Hangzhou municipality has imposed a hefty RMB 1.34 billion ($210 million) fine on top Chinese live streamer Huang Wei, also known as Viya, for tax evasion.

The fine comes less than one month after two other high-profile live streamers – Zhu Chenhui (or Cherie) and Lin Shanshan – received a combined RMB 93 million fine for the same offense. Chinese authorities have been stepping up regulation of the country's live-streaming e-commerce industry in recent months while tax evasion has also become a key area of focus. The live-streaming e-commerce craze seems to come to an end.

When it comes to live-streaming e-commerce in China, you may think of influencers like Viya and Li Jiaqi (aka Austin Li), which are regarded as the King and Queen of China's booming live-streaming e-commerce industry. Before Viya was exposed to tax evasion, the live-streaming data can fully support their influence in the sector:

On the launch day of this year's Double 11 event, Viya and Austin Li are the big winners. The related data shows that the cumulative transaction amount between Austin Li's live streaming reached 11.538 billion yuan and Viya's reached 8.533 billion yuan. What does this set of numbers mean, perhaps it's this tax evasion fine on Viya that gives the public an intuitive feeling.

It can be said that such a wealth effect means that these two live streamers have been able to challenge the Double 11 event which has a history of more than ten years. If we put in a broader perspective to observe, it can be found that this group of data crushed the annual revenue of 4,000 listed companies, more than the revenue of Haidilao Hot Pot in a year.

On the one hand, influencers marks the emergence of a new ecological model of e-commerce, which also provides new options for customers to shop; on the other hand, his success means that the open Internet ecology has brought ordinary people more circulation space for upward class flow, and also represents the positive changes brought by entrepreneurship and innovation.

But at the same time, for the industry, the emergence of the two also conveys a new signal - the Internet e-commerce, once characterized by "decentralization", is returning to a centralized sales model after subverting the traditional brick-and-mortar retail industry.

Not only that, this centralization is further devouring the original business ecology: the controversy between L'Oreal as a product brand and the two influencers' price dispute is a manifestation of this backlash between the live-streaming e-commerce.

On the one hand, the brand side needs the exposure of the influencers, on the other hand, they hope to reduce the dependence on the head influencers, saving the unaffordable pit fee expenditur.

Against this backdrop, the industry began to ponder: Is the presence of live streaming giants an act of pricing monopoly? Could the gimmick of attracting consumers with the lowest price be unfair competition?

In addition to the dispute between brands and head influencers, the e-commerce platforms' troubles are overwhelming - the anti-monopoly regulatory, the user's dissatisfaction with e-commerce shopping, the dispute between brands and live streamers, ... since Jack Ma put forward new retail in 2012, e-commerce has never suffered a heavy setback like this year's all-around deathless.

But this is only part of the complex business picture of online consumption today.

Behind these endless complexities, there is actually a deeper underlying logic of social anxiety: Nowadays, the live-streaming e-commerce that merely enhance sales efficiency without creating productive value are already enough to defeat China's best listed companies. What's more, the huge wealth they amass is often also able to skillfully avoid tax responsibility, then who will be willing to engage in the real economy and value creation in the future?

In December, tax audits and penalties for the live-streaming sector were a major step in response to social anxiety. Taking live streaming as a starting point, many events in the Internet industry over the past two years have actually pointed to a core question: as a new industry that has emerged in recent years with the help of digital technology, is their existence creating wealth or hindering fairness?

In the past, Internet companies were eager to show their DAU and MAU traffic data to prove their amazing business influence, but nowadays, these data can also fully prove that they need to match their amazing influence with corresponding social responsibility.

More importantly, this social responsibility does not only include promoting social justice, reducing the gap between rich and poor, protecting minors, etc. as we superficially understand, but also involves the legitimacy of an industry itself. People want to know whether the live-streaming e-commerce, which has grown up wildly, can have a higher sentiment and a farther goal to make a greater contribution to the human community society while accumulating huge social wealth?

Since the occurrence of trade friction between China and the United States in 2018, the emergence of problems such as chip shortage and core technology trapped has exposed the fact: the Internet economy, which looks like a smashing number, has not changed the reality of the core technology field experiencing "stuck neck".

According to the latest study by He Zhiyi, chief expert at the Global Industry Research Institute of Tsinghua University, 40 local giants in China's Internet industry are no match for an American Amazon. And this gap in market value, even if a few more Austin Li, is also unable to make up. Not only because of the sheer size of Amazon's e-commerce empire, but more importantly, Amazon's leading position in cutting-edge technology such as cloud business. Google's parent company Alphabet and Tesla can lead the world is actually for the same reason.

If we stand in this perspective on the development of live-streaming e-commerce, we will also be able to more clearly foresee the future development logic of the industry.

As an important channel to promote consumption and encourage internal circulation, the consumption enthusiasm inspired by live-streaming e-commerce cannot be ignored. The live-streaming e-commerce model means a further step in the change of the retail industry, and the supply chain ecosystem, too, needs to be constantly adjusted and even evolved according to the changes in the market.

But, how to reshape the relationship among influencers, products and platforms in the live streaming, and better seek a new connection mode between products and consumption while breaking the channel barriers for consumers, and continuously create value in the retail ecosystem, is also a proposition that needs to be considered in the future.

Of course, the premise of all this is that only in the case of compliance with the law, live-streaming e-commerce can have a sustainable future.