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China tech

Move over Alibaba, here comes TikTok's 'live' shopping

ByteDance ready to reap $135bn market with direct access to streaming fans

A sales clerk at a Shanghai department store advertises products during a "live commerce" stream. (Photo by Naoki Matsuda)

SHANGHAI -- At a department store here this month, a cosmetics sales clerk touted the virtues of a product designed for sensitive skin. Moments later, customers were flocking to buy.

All this happened not in person, but online in a live video on TikTok. ByteDance, the Chinese startup behind the viral video sharing app, sees it as a tool for challenging Alibaba Group Holding's dominance in China's e-commerce market.

"Live commerce" -- mini-infomercials for the smartphone age -- is projected to become a 961 billion yuan ($135 billion) industry this year, according to Chinese data provider iResearch. That is double the year-earlier figure, and nearly one-tenth of all Chinese online shopping.

Into this crowded field enters ByteDance -- the world's most valuable unicorn, or unlisted startup worth over $1 billion, according to CB Insights.

Most of ByteDance's income stems from sales of advertising on TikTok. The $75 billion unicorn looks to diversify its earnings by expanding into e-commerce, but it faces the virtual duopoly of Alibaba and JD.com, which command 80% of the market.

Bailian Group, which runs four No. 1 Department Stores in Shanghai, started live sales on TikTok in May. On the first day, the company reported more than 300 million yuan in turnover in three hours.

ByteDance incorporated in-app purchasing for all users on TikTok this spring. Previously, those watching live commerce videos on TikTok would order products through Alibaba and other e-commerce sites.

Live commerce differs from regular commercials in that anyone beyond commercial brands can participate. Streamers range from ordinary store clerks and other amateurs to models and online influencers.

ByteDance has recruited Luo Yonghao, an internet celebrity and entrepreneur famous for his conversational style. Luo started streaming live commerce videos on TikTok in April, and his content generated sales of 170 million yuan in just three hours on the first day.

Early this month, ByteDance established a department dedicated to online sales. The company then partnered with retailer Wangfujing Group in product sourcing and other areas.

Success hinges on leveraging TikTok's identity as an interactive app powered by an army of private content producers. Live commerce streamers of various backgrounds have developed a wide following of fans.

Live commerce videos have a chat feature letting viewers communicate with the streamers. Unlike print or video ads, a seller can make a more persuasive pitch for the product through this route.

A TikTok celebrity can have millions of followers, granting ByteDance a potentially powerful weapon for e-commerce.

Yet live commerce sees heavy competition as major retailers throw their hats in the ring. Alibaba and JD.com have maintained their advantage by bringing rising-star influencers under their wings.

Since the coronavirus pandemic ripped through China, retail sales have underperformed year-earlier numbers. Live commerce has become an area of frenzied competition for sellers seeking an edge.

This may have had the counterproductive effect of distracting consumers. The sheer volume of live commerce streams during 618 -- China's second-biggest online shopping event, ending on June 18 -- was so overwhelming that "sales did not grow as expected," said an insider.

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