4 McKinsey analysis based on numbers from iResearch. The value of China’s live-commerce market grew at a compound annual growth rate (CAGR) of more than 280 percent between 20, to reach an estimated $171 billion in 2020 (Exhibit 1). Penetration is defined as gross merchandise value (GMV) of livestreaming divided by total e-commerce GMV. 3 McKinsey analysis based on numbers from iResearch. Live commerce has evolved rapidly in China, taking less than five years to develop into an innovative sales channel with an estimated penetration of 10 percent. Some companies are seeing their share of younger audiences increase by up to 20 percent. It can strengthen positioning among existing customers and attract new ones, especially young people keen on innovative shopping formats and experiences. Done well, live commerce increases a brand’s appeal and distinctiveness and pulls in additional web traffic. Improving brand appeal and differentiation. Companies report conversion rates approaching 30 percent-up to ten times higher than in conventional e-commerce. Time-limited tactics such as one-off coupons can be used to generate a sense of urgency. It also telescopes customer decision journeys from awareness to purchase. Live commerce is entertaining and immersive, keeping viewers watching longer. Live commerce can help brands, retailers, and marketplaces primarily in two areas:Īccelerating conversion. If China’s experience is any guide, our analysis indicates that live-commerce-initiated sales could account for as much as 10 to 20 percent of all e-commerce by 2026. What is clear is that it holds enormous long-term potential for brands and e-commerce platforms alike. How exactly this new channel will develop remains to be seen.
While retailers overall in the West are still behind China in the pursuit of live commerce, early movers are also starting to rack up significant sales. 2 “Chinese consumers rally for Singles’ Day but plan to shun foreign brands, says AlixPartners survey,” AlixPartners, October 28, 2020,. In a 2020 survey, two-thirds of Chinese consumers said they had bought products via livestream in the past year.
In China, live commerce has transformed the retail industry and established itself as a major sales channel in less than five years. Live commerce combines instant purchasing of a featured product and audience participation through a chat function or reaction buttons. This article was a collective effort by Arun Arora, Daniel Glaser, Aimee Kim, Philipp Kluge, Sajal Kohli, and Natalya Sak, representing views from McKinsey Digital and the Consumer Packaged Goods, Marketing & Sales, and Retail practices.
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