Click to read the original article for details According to official Douyin data, in January 2019, Douyin had over 250 million daily active users (DAU), and by July, over 320 million; in January 2020, DAU exceeded 400 million, surpassing 600 million in August; and by June 2022, it reached 680 million. According to Kuaishou's financial reports, the average monthly active users (MAU) for 2017, 2018, 2019, the first three quarters of 2019, and the first three quarters of 2020 were 136 million, 241 million, 330 million, 312 million, and 482 million respectively; by March 2022, MAU reached 598 million, with DAU at 346 million. According to the 49th "Statistical Report on China's Internet Development" released by CNNIC, as of December 2021, 930 million people in China watched short videos, 840 million shopped online, and 700 million watched live streams, accounting for 68.2% of netizens. Among them, the number of e-commerce live-streaming users was 460 million, accounting for 44.9% of netizens, an increase of 75.79 million from December 2020, representing a year-on-year growth of 19.5%. From the above data, the traffic ceiling for live-streaming e-commerce is clearly visible. Based on current growth rates, it is estimated that by 2025, the DAU of live-streaming e-commerce will be around 800 million. 01 Category-Based Estimation of Scale The category-based method estimates the overall market size by calculating the proportion of core categories in live-streaming e-commerce platforms. So, which categories are currently core in live-streaming e-commerce? First, from the perspective of information flow, logistics, and cash flow involved in e-commerce transactions, live-streaming e-commerce, as a new e-commerce model, changes the way information is disseminated, reduces transaction costs for merchants and consumers, and improves transaction efficiency. After comparing the information flow characteristics of live-streaming e-commerce with traditional e-commerce models, the "Zhuangshuai Retail E-commerce Channel" believes that live-streaming e-commerce changes the "information flow" of products and merchants in three aspects: 1. Higher information density: Merchants and streamers can display products in real-time with three-dimensional scenes, allowing consumers to understand products more intuitively. 2. Stronger interactivity: The real-time nature of live streaming allows merchants and streamers to interact with consumers and answer questions at any time, building trust and facilitating transactions faster. 3. More diverse information: In addition to professional product introductions and recommendations, merchants and streamers can make the information conveyed during live streams more interesting and cultural. After live-streaming e-commerce changes the "information flow" to make information dissemination more efficient and cost-effective, categories such as apparel, jewelry, food and beverages, and beauty, which can generate more topics and require professional non-standardized products, benefit. Second, according to Sandalwood data, clothing accounted for the highest share of 39% and 29% on Douyin Mall and Kuaishou Store, respectively. Additionally, according to Chanmama data from February to May 2022, apparel and underwear, and beauty and personal care were the two largest categories in Douyin e-commerce sales, accounting for 36.24% and 8.59% respectively. In summary, China Merchants Securities made assumptions based on the future online penetration rate of these two categories, the sales share of live-streaming e-commerce, and the online market share of these two categories in live-streaming e-commerce, to estimate the scale of live-streaming e-commerce in 2025. 1. Online penetration rate of categories: According to Euromonitor data, in 2021, online sales of apparel and beauty accounted for 35.4% and 38.7% respectively. Driven by live-streaming e-commerce, the online penetration rate of these two categories is expected to reach 40% and 42% by 2025. 2. Sales share of live-streaming e-commerce: In 2021, apparel and beauty/personal care accounted for 45% of the total GMV of live-streaming e-commerce across all categories. It is assumed that by 2025, these two categories will maintain their core status in live-streaming e-commerce. Meanwhile, as live-streaming platforms continue to promote content development, it is expected to drive growth in other categories' share. For example, East Buy's live-streaming room gained high popularity with its novel bilingual format, accelerating the penetration of books and audiovisual categories. According to Chanmama data, in June 2022, books and audiovisual accounted for 1.81% of Douyin's live-streaming category structure, up 0.44 percentage points from May. Therefore, sensitivity analysis is conducted based on different assumptions about the structural share of core categories in live-streaming e-commerce. The upper limit for apparel + beauty/personal care is assumed to be 45%, and the lower limit is set at 33%, referencing Tmall's 2021 platform category structure (Tmall also has apparel and beauty as advantageous categories, and the platform is relatively mature with a more diversified category structure). 3. Online market share of categories in live-streaming e-commerce: This refers to the proportion of online retail scale contributed by live-streaming e-commerce channels. For apparel and beauty/personal care, this figure was 9.4% and 17.3% in 2021. Referring to data from leading brands in these categories, it is expected that live-streaming e-commerce will drive the market share of apparel and beauty/personal care to 20% by 2025. When the category structure of live-streaming e-commerce maintains the 2021 level with apparel + beauty/personal care accounting for 45%, the market size of live-streaming e-commerce in 2025 will reach 3,046.5 billion yuan. When assuming that content development drives increased penetration of other non-core categories, reducing the share of core categories (apparel and beauty) to 33%, the market size will reach 4,154.3 billion yuan. In other words, if the level of content development on live-streaming e-commerce platforms changes, leading to changes in the penetration of non-core categories, the market size of live-streaming e-commerce in 2025 will fluctuate between approximately 3 and 4.2 trillion yuan. 02 Funnel-Based Estimation of Scale The funnel analysis method estimates scale based on the user behavior path from viewing content to placing an order, breaking down indicators at each stage. The core drivers of monetization for e-commerce platforms are traffic scale (user scale and time spent) and traffic conversion rate. Therefore, the monetization scale is also limited by the future traffic ceiling and the development of content quality represented by conversion rates. The estimation formula is: GMV = (DAU * time spent / average VV playback duration * e-commerce VV share) * click-through rate * click-to-purchase conversion rate * average order value Where GMV is Gross Merchandise Volume, DAU is Daily Active Users, and VV is Visit Views (number of visits by visitors). Regarding VV share: Content platforms like Douyin and Kuaishou are positioned with content and creators as core drivers. To avoid excessive e-commerce share affecting user experience, leading to user churn and lower conversion rates, content platforms will inevitably impose certain restrictions on traffic allocation for e-commerce content. Therefore, it is assumed that the e-commerce VV share will not exceed 10% by 2025. Regarding DAU: Referring to the continuous growth of active user scale on platforms, it is assumed that the DAU of a single platform will reach the ceiling of 800 million by 2025. Additionally, as platforms continuously optimize and enrich their content ecosystems, it is assumed that user time spent will increase from 101.7 minutes in December 2021 to 120 minutes. Regarding traffic allocation between live streaming and short videos: Given the limited share of e-commerce content, platforms will increase the share of live-streaming content, which has higher unit conversion efficiency, and reduce the share of short video content, which consumes more traffic and VV. Therefore, it is assumed that the traffic allocation between live streaming and short videos will be 5:5 by 2025. Regarding average order value: Referring to the average order value on Alibaba's e-commerce platforms, it is expected that the average order value for live-streaming e-commerce will increase to 100 yuan by 2025. Based on the GMV formula decomposition and the above assumptions, further improvement in the market size ceiling of live-streaming e-commerce will depend on the improvement of click-to-purchase conversion rates for live streaming and short videos. The core lies in whether live-streaming platforms can produce high-quality content that drives consumers to convert from viewing to shopping. Referring to the conversion rate of East Buy's live-streaming room, which is approximately 4.2%, higher than the average conversion rate of ordinary live-streaming rooms at around 2.1%. When the conversion rate maintains the 2021 average levels of 2.1% for live streaming and 1.4% for short videos, the GMV of a single live-streaming e-commerce platform in 2025 will reach 1,177.3 billion yuan. When the conversion rate increases to the predicted upper limits of 4.2% for live streaming and 2.3% for short videos, the GMV in 2025 will reach 2,289 billion yuan. 03 Trend Predictions for Live-Streaming E-Commerce According to China Merchants Securities' scale estimates based on category share and funnel models, the overall scale of live-streaming e-commerce in 2025 will reach 3 to 4.2 trillion yuan, with a single platform's scale ranging from 1.2 to 2.3 trillion yuan. Whether in terms of user scale or sales scale, the ceiling for live-streaming e-commerce is clearly visible. Based on existing mature e-commerce models and the characteristics of the three major live-streaming e-commerce platforms, the "Zhuangshuai Retail E-commerce Channel" believes that Douyin E-commerce and Kuaishou E-commerce may achieve breakthrough development in four aspects: 1. Intensify efforts to continuously penetrate local life categories such as food delivery, talent recruitment, rental and property sales, and ticketing (cinemas, scenic spots); 2. Strengthen users' purchasing habits and linkage in search-based e-commerce (Douyin Mall, possibly Kuaishou will launch a Kuaishou Mall, and Taobao Live relies on Tmall and Taobao), improving product supply and repurchase efficiency; 3. Enter the same-city retail (instant retail) field, connecting more offline department stores, brand physical stores, supermarkets, convenience stores, and shopping malls for cooperation; 4. Build a more complete e-commerce ecosystem, seeking growth and profits in B2B areas such as service provider systems, logistics and warehousing systems, financial systems, and technology systems (cloud computing). Source: Zhuangshuai Retail E-commerce Channel (ID: zhuangshuaiec), Author: Zhuang Shuai -END-