Livestream e-commerce is booming. Not just popular—it's exploded beyond its original circle. Not only are familiar long-time streamers like Viya and Li Jiaqi maintaining their heat, even Lao Luo, the first-generation internet celebrity, has started livestream selling, and now many CEOs are also jumping on the bandwagon, not to mention entertainment stars. As a result, many students in the audience have asked me how I view livestreaming. First, regarding CEO livestreams, I suggest many CEOs not become obsessed with doing livestreams themselves. After all, you're not as professional as streamers, and you're not as expensive as them. But I do believe livestreaming will be a very important trend, though the problems with this trend are also obvious. Today, I'll boldly attempt to deconstruct livestream e-commerce with you, breaking down why it's so popular, what its business logic is, how each participant makes money, and what its strengths, weaknesses, and even ceiling are. -01- Deconstruct: Why is livestream e-commerce hot? The answer is there's a dividend. What does that mean? The so-called dividend refers to a temporary imbalance between supply and demand. Currently, a large number of users are attracted to short-video and livestream platforms like Douyin and Kuaishou. While watching livestreams, they also purchase products recommended by streamers. But at this point, compared to the huge number of livestream viewers, the sellers (or suppliers) on livestream platforms are actually still very few. This creates a situation where someone can casually sell something and make a lot of money. That's the dividend. -02- Deconstruct: How to hold onto the dividend? The answer is dig a moat. In any industry, all dividends will eventually be leveled by competition. What does that mean? Once people see that livestreaming makes money, countless others will flood in. Then competition intensifies, the dividend levels out, and many livestreamers can no longer "casually sell something and make a lot of money." To keep making money, you must dig a moat. In previous articles, we've mentioned the concept of moats many times, divided into intangible assets, cost advantages, network effects, and switching costs. Let's take the network effects moat as an example. At a certain livestream seller, once the number of users reaches a critical point, a network effects moat forms. Why? When a streamer has a large number of fans watching, it attracts more brand partners, leading to bigger discounts. More discounts mean fans can buy for less, which attracts even more followers. Once this scale reaches the critical point for network effects, a moat is formed, the dividend is secured, and you can continue to make money. At the same time, it means that many streamers who haven't reached this critical point, due to increasingly fierce competition, will likely end up earning only a "hard-earned fee." Just like when Taobao first started, many people opened shops there and felt it was extremely profitable—what they sold didn't matter at all. But you must understand: at that time, you were earning a dividend, a dividend, a dividend. Sellers and suppliers weren't numerous enough, and the demand for buying things on Taobao was huge and couldn't be fully satisfied. But later, after that dividend period passed, a large number of sellers on Taobao stopped making money. It's said that 95% of sellers could barely survive. Why? Because the dividend disappeared. Now, in the livestream e-commerce field, this trend is becoming increasingly obvious. Countless sellers are flooding in. It's foreseeable that soon, within at most six months, most livestream sellers will stop making big money. Meanwhile, top streamers who have already accumulated a large fan base, because they have a moat, can continue to make money, or even earn more. -03- Deconstruct: What exactly is the business logic of livestream e-commerce? The answer is three parties benefit. Jaw-dropping product prices benefit users; the promotional effect in front of a large audience benefits brands; and ultimately, the promotional slot fees and commissions provided by brands benefit the streamer. In 2019, because a brand gave Li Jiaqi a price 20 yuan higher than other channels, Li Jiaqi announced in his livestream, "I will permanently blacklist this brand," even saying, "Even if Taobao gives me pop-up ad resources, I won't cooperate." Understanding the logic of livestream e-commerce, you'll know why Li Jiaqi did this. Streamers must give users the cheapest, jaw-dropping prices across the entire internet; only then can they attract more attention. And during the livestream, brands gain advertising exposure through the streamer's product introductions. Of course, streamers also earn a slot fee plus commission for recommending a product. So, the logic of livestream e-commerce is a proven, very effective logic. -04- Deconstruct: What is the strength of livestream e-commerce? The answer is it can deliver very rich, complex information to users. What does that mean?
A piece of clothing—you need to try it on;
A mattress—you need to lie on it;
A box of crayfish—you need to taste it.
...... These are experiences, complex information. It's hard to explain clearly with text and images. Books and 3C electronic products, on the other hand, have relatively simple information because they're standard products; text and images suffice. That's why Amazon started e-commerce by selling books, and JD.com started with 3C products. But with technological development, we can now sell products through video and livestreaming. The advantage of video is that it can display complex information to users. From text to images to video to livestreaming, the information content per unit increases, and the number of difficult consumption decisions that can be broken through increases. So, the strength of livestream e-commerce is its ability to display complex information. -05- Deconstruct: What is the weakness of livestream e-commerce? The answer is Gross National Time. This is not only a weakness of livestream e-commerce; I even consider it its ceiling. What is Gross National Time? This is a concept proposed by Luo Zhenyu, meaning that a user's time is limited—not a second more—and if users spend time on one thing, they can't do another. Netflix CEO Reed Hastings also said: Netflix's competitors are not just a TV station; game companies, film companies, publishing companies, Twitter, Facebook—all companies that occupy users' time are actually Netflix's competitors. Livestream e-commerce also occupies a rigid block of users' time. Many livestreams are from 20:00 to 22:00 in the evening. At that time, what are you doing? Working overtime? Of course, many people are studying, binge-watching shows, watching variety shows, spending time with family and kids, dining out at KTV, or playing games. So, livestreaming is actually competing with all industries that grab people's attention during that time slot. This is the ceiling for livestream e-commerce. With such an obvious ceiling, competition in livestream e-commerce will soon enter a stock competition, which is what we discussed in point 2: the brief dividend will quickly be flattened by full competition. Top streamers will always worry about new streamers diverting their users, while mid-tier and even small streamers may lose users because they have weak bargaining power with brands and can't offer the lowest prices. When the dividend disappears, the money that the era threw at you can no longer be earned. At this point, if you haven't used the money earned from the dividend to build a moat, you'll likely lose it all through your own incompetence. -06- Deconstruct: What to do about the large number of returns after impulse purchases in livestream e-commerce? What else can you do? Accept the returns. You might say, "Why should I? The quality is fine. I can't pay for users' impulses." Indeed, but I still suggest you accept the returns. Why do users return in large numbers? Isn't it because we didn't choose products well, leading to user dissatisfaction? Since it's our problem, of course we should say "returns are accepted." Only then are you truly thinking for your users, and only then will users trust you unconditionally and not leave you. So, to reduce losses and increase profits, your product selection ability becomes particularly important. BiYao Mall CEO Bi Sheng once said something that left a deep impression on me: "Almost all e-commerce companies eventually die from product selection." I strongly agree with this statement. Livestream e-commerce is also a form of e-commerce. When it's small, with fewer categories, the problem isn't big. But as the scale grows and products increase, the weakness of streamers' insufficient product selection ability is exposed. After all, no one can know everything about all products. Without such professionalism, it's inevitable to make some mistakes in product selection. So what to do? Promise refunds. This will indeed cause significant losses and heartache, but it's also a Damocles sword that streamers voluntarily hang over their heads to control quality. Tell all users: "Buy with confidence; if there's a problem, I'll cover it." What is the essence of this Damocles sword? The essence is that if the front end can't completely solve the problem, solve it through the back end. Since product selection can't be perfect, after-sales service must be sincere. -07- Deconstruct: Whose interests does the streamer fight for? In the final deconstruction, let's break down whether a streamer fights for the interests of users or merchants. The answer is the interests of users. Why? Some might say, "Whoever pays is the boss. Streamers' money comes from merchants, so to keep earning in the future, streamers should represent merchants' interests." No. It's true that streamers' money is paid by merchants. But why are merchants willing to pay? Isn't it because the streamer has many viewers, making the promotional effect good? Why do streamers have many users? Because streamers represent users to fight for interests, providing better products at lower prices. So, streamers should position themselves as user agents, never as brand agents. Final words: In 7 steps, we've deconstructed livestream e-commerce. After deconstructing, one might feel, "Oh, so that's all livestream e-commerce is—pretty simple." It's about standing from the user's perspective, being a user agent, and genuinely caring for users.
Then users will trust you, and the number of users you attract will grow;
The more users watching your livestream, the more brands come to you, and the stronger your bargaining power;
The stronger your bargaining power, the bigger the discounts; the bigger the discounts, the more users you attract. This forms a reinforcing loop. Isn't it like Amazon's flywheel effect: use lower prices to drive scale, use scale to lower cost structure, and use lower cost structure to lower prices further. Is it that simple? Yes, it's that simple. Wow, that sounds too obvious, doesn't it? Everyone knows that higher sales volume means lower prices, and more users mean more bargaining room. Yes. Everyone knows that. But the difficulty is that some people don't think this way; they don't act as user agents. They want to cash in on the dividend, harvest, and leave. Amazon pushed this flywheel for a full 20 years before becoming profitable. The livestream e-commerce flywheel certainly can't compare to Amazon's scale; it might not take 20 years—maybe just six months. But even six months, many people can't wait. After all, as Buffett said, "No one wants to get rich slowly." Source: Liu Run (ID: runliu-pub), Author: Liu Run Tips will be paid 400-2000 yuan once the tip is adopted.