Kuaishou: Grabbing a share of China's near-trillion-RMB livestreaming e-commerce market

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With 300m daily users, the short video app for the grassroots has partnered JD.com to offer discounts to convert users into online shoppers

As China’s second most popular short video sharing app, Kuaishou, the short video app “for the grassroots,” is gearing up to take on internet shopping unicorns like Alibaba’s Taobao in China’s multitrillion-dollar e-commerce market.

Kuaishou has its following mainly among the lower-tier city residents and rural users, a market often overlooked by its larger rival Douyin, the Chinese version of TikTok, and the internet giants, which focus on consumers in big cities like Beijing and Shanghai. Over the past two years, Kuaishou has also rapidly expanded into an e-commerce hub, converting its short video fans into digital shoppers of wares hawked by livestreaming influencers. 

Partnering with e-commerce giant JD.com, Kuaishou features top celebrities livestreaming product promotions to its over 300m DAUs. A recent milestone was the “Kuaishou-JD.com Double RMB 10bn" 12-day shopping promotion campaign launched on June 6. Kuaishou and JD.com each spent RMB 10bn to give shoppers discounts when buying mobile phones, digital home equipment, beauty and apparel and other items under promotion. Daily sales exceeded RMB 1.4bn on June 16 as celebrities and over 100 top streamers kept fans entertained with interactive promos to sell products in real time.

Kuaishou CEO and co-founder Su Hua has said the app’s user demographic mirrors that of the masses in China. Only 7% of the national population live in first-tier cities. Kuaishou helps people understand China better by targeting the majority based in smaller cities and rural villages, he added.

Livestreaming audiences in China reached 560m in March this year, a surge of 163m since 2018, according to China Internet Network Information Center. The research institute iiMedia estimated that the live e-commerce market will exceed RMB 961bn in 2020, more than doubling that of RMB 434bn in 2019. Market leader Taobao showcases over 4,000 livestream hosts every day, producing 150,000 hours of content and live promotions for over 600,000 products. Taobao saw livestream sales jump by 400% year-on-year with vendors securing total GMV of over RMB 100bn in 2018.   

The Covid-19 home confinements have also unexpectedly boosted demand for home entertainment like short videos and livestreaming apps during the coronavirus pandemic. A QuestMobile report revealed that people spent about 1,205 minutes watching videos on social media apps in March alone, 65% higher than in 2019.  

Untapped e-commerce markets 

Years ago, smartphone makers like Vivo and OPPO capitalized on loyal consumers from low-tier cities and rural villages to topple Apple and Samsung, becoming bestselling phone brands in 2016. Social e-commerce giant Pinduoduo followed suit, transforming into China’s third largest e-retailer within three years. 

Since 2013, Kuaishou has focused on building a vast grassroots user-base. Launched as a photo-sharing app in 2011, attracting 900,000 users within 12 months, the startup pivoted into short video sharing in 2013. Livestreaming was quickly added in 2016 to enable broadcasters to receive virtual gifts and tips from viewers during their live sessions. Besides generating revenue mainly from livestreamers, Kuaishou also earns income from advertising and gaming.

In June 2018, Kuaishou partnered with e-commerce service provider Youzan to offer livestreaming shopping services. Users could open e-stores and manage their business via just one app. The hosts only have to promote their own products during the live sessions, leaving all the sales and operational tasks to be handled by Youzan. Now, Kuaishou also sells on behalf of corporate clients like manufacturers of gems and garments.

In May 2020, Kuaishou teamed up with e-tailer JD.com to enable Kuaishou shoppers to directly buy JD.com’s selected products, track deliveries and get after-sales services without leaving the short-video platform. The collaboration bring a more streamlined shopping experience to Kuaishou users who used to be redirected to e-commerce apps to complete the purchases. 

Place for grassroots to shine

Kuaishou works differently from other social media apps in that it’s designed so that every short video filmed on its platform has an equal chance of being viewed by users. This is unlike other platforms, where more traffic is often directed to the top broadcasters. As a result, Kuaishou users are more likely to see content produced by people like themselves. 

Users from lower-tier cities and rural areas are also more motivated to express themselves and share their videos to bond with others online. Catchphrases like “laotie,” a slang used by residents in northeast China to greet each other, have gone viral even beyond the app.

Kuaishou influencers don’t teach people to make a cleansing smoothie or wear a fancy dress in picture-ready banquets. They are mostly ordinary folks telling their own stories. Yuan Guihua, a young woman living in a mountainous village in Guizhou province her whole life, has attracted 3m followers in just two years by sharing videos of catching fish, cooking local food and farming. Another streamer, a 23-year-old Tibetan villager with 2m followers, shares live videos of hikes up mountains to 4,000 meters above sea-level, just to find precious Tibetan herbs and fungi like cordceps and matsutake. 

Viewers are more inclined to trust the authenticity of such real-world videos, being more willing to buy the products or brands promoted by these Kuaishou streamers. The bond between streamers and their followers partly explains why Kuaishou’s e-commerce conversion rates are 3–5 times higher than those of Douyin that prioritizes content over social engagement. Today, Kuaishou entertains 300m DAUs with nearly 30bn videos posted on its platform.

Overcoming challenges

However, Kuaishou has sometimes been labeled “vulgar” or “low-class." To attract more followers, a minority of broadcasters had resorted to posting inappropriate videos, such as eating raw meat directly from a pig’s corpse and shoving flaring firecrackers into their pants. Underage teens also displayed their pregnancies online, making news headlines that attracted strong criticism. 

In response, Kuaishou quickly issued public apologies and rolled out a series of measures to monitor video postings more vigilantly, remove poor quality content and close down the accounts of offenders.

Kuaishou also offers practical assistance to grassroots users. The company has initiated several campaigns to help farmers to sell overstocked produce through its e-commerce channels. Government officials from impoverished districts were also invited to promote their local produce and tourism attractions. In 2019, over 1m streamers from impoverished neighborhoods boosted their revenue by selling RMB 193m worth of goods via Kuaishou.

In a bid to shake off the perceived low-class brand image, Kuaishou is sponsoring TV shows that are popular with young people and residents of the more affluent big cities. It is also inviting top celebrities, including superstar singer Jay Chou and actress Zhang Yuqi, to open accounts to attract more sophisticated users.

The company will invest RMB 3bn to set up a livestreaming commercial base in Chengdu. About RMB 10bn has been earmarked for a new data center in Inner Mongolia. 

"We’ll take advantage of technology, products and platform to attract MCNs, celebrities and brands to build an ecosystem that will benefit all our users,” said Kuaishou Senior VP Yu Haibo. 

Edited by Suzanne Soh, Wang Xiao'e

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