Shifting Landscape in China’s Live E-Commerce Sector Provides Fresh Opportunities
Recently, the hottest way to multitask on the Chinese internet has been to brush up on one’s English skills while buying promoted items on Douyin.
It might sound like an unlikely combo, but consumers in the country have been transfixed of late by the unlikely return of New Oriental, once a leading online education platform. The so-called “Double Reduction” policies, which took effect last year, are aimed at reducing extracurricular burdens on China’s youth by limiting access to additional private online tutoring. New Oriental’s core business model imploded.
Now, the firm is turning to the burgeoning livestreaming e-commerce sector in a bid to salvage its trade. Dong Yuhui – once a star English instructor on New Oriental’s tutoring platform – has captured the attention of web users with his novel blend of salesmanship, educational spirit, and humor, helping his flailing company generate revenue in an entirely novel way.
Koolearn Technology Holding, the subsidiary of New Oriental that has carried out this livestreaming transformation, saw its shares skyrocket in June, soaring from HK$3.69 ($0.47) apiece on June 1 to HK$18.84 ($2.40) at the close of June 30.
The company appears to be confident in its ability to land on its feet as a result of this new business path. In addition to its popular Douyin account Oriental Select (东方甄选), which mainly specializes in agricultural products, it has recently launched a new account called Oriental Select Personal Care Makeup. The move suggests Koolearn is doubling down on its newfound success in livestream e-commerce and will attempt to diversity its operations in the field going forward.
The abrupt comeback of New Oriental demonstrates the adaptability that is required for some firms to stay afloat amid a rapidly changing Chinese tech landscape, following a wave of new regulation that began last summer.
One key trend in recent years has been the growing popularity of livestreaming as a method for driving e-commerce sales. Pioneered by Alibaba’s Taobao Live in 2016, a pair of video streaming platforms – Douyin (TikTok for mainland China) and Kuaishou – have recently threatened to supplant the dominance of established e-commerce giants.
A 2021 study by McKinsey suggests that by 2026, livestreaming could account for as much as 10 to 20 percent of China’s entire e-commerce market. Considering the country’s total e-commerce sales last year were $2.49 trillion, the sector is certainly one to watch.
While livestreaming continues to grow, consumer demand is changing. “People are eager to spend on things they have not tried or experienced before,” says Sharry Wu, EY’s Greater China consulting business transformation leader. “New brands are now contributing to 40 percent of e-commerce sales growth according to recent research, and interest in local fashion brands has outpaced international brands.”
The desire to try out something new may help explain some of the recent success of New Oriental, with its unique blend of English tutoring and salesy promotions. “The main challenge will be around how enterprises can better adapt to the new norm of omni-channel consumption,” says Wu.
SEE ALSO: New Oriental Education Operates Bilingual Livestream E-Commerce
For traditional e-commerce giants such as Alibaba’s Taobao and JD.com, interest in live sales had been driven primarily by a new classification of internet celebrity: the livestream host. Two of Taobao Live’s top stars – Austin Li, dubbed the “Lipstick King,” and Viya – have recently encountered obstacles to their operations, creating a market opening.
Another key method has been the creation of various shopping festivals, led by the Singles’ Day period held each year around November 11, launched by Alibaba in 2009. The second-biggest event in China’s e-commerce calendar is the “6.18” shopping festival in June. During this year’s recently concluded activities, JD.com notched a total transaction volume of 379.3 billion yuan. While a new high in terms of scale, the figure also represents the slowest annual growth yet recorded for the firm during the period.
With the absence of some of the young sector’s leading celebrities and slowing growth for the established platforms, ByteDance’s Douyin and Kuaishou may see an opportunity to capitalize.
“Although we are seeing a clear trend of downward growth rates for major shopping festivals, every e-commerce platform is presenting its largest promotion scheme ever to attract consumers back online this summer,” says Sharry Wu.
There are also signs that Chinese authorities are seeking to shore up the regulatory framework for this emerging sector. Released on June 22, the new rules standardize the practices of livestream hosts, making sure that they are qualified to sell certain products. They also attempt to encourage more positivity and upright morals, clamping down on perceived fan worship and base consumerist values.