The Economics in Live Stream Business
The outbreak of the coronavirus named COVID-19, or SARS-CoV-2, threatened the Chinese economy, spreading globally. Up to May 26, 2020, 188 countries/regions have been infected (JHU, 2020). Due to its high infectivity, many countries have urged citizens to adopt social distancing and reduce group activities. Although this method is proved effective, this pandemic had caused the economic recession and reduced society’s productivity (CDC, 2020). However, the live stream industry in China had provided a possible solution to fight against recession. In this paper, the writer will explore the economics in live stream business and discuss whether it can reboot the American economy after the pandemic.
Live streaming refers to online streaming media simultaneously record and broadcast in real-time. It had become increasingly popular in both China and the United States. According to a report, there are more than 15 million daily active users on Twitch, and the amount of monthly broadcaster on Twitch is between 2.2 and 3.2 million (Influencer Marketing, 2020).
The merchandise in China noticed the business potential of live streaming. They chose to invest in existing live streaming platforms, such as Douyin (Chinese version of Tik Tok) and Kuaishou (Chinese version of Kwai). Some companies choose to develop their platforms instead. For example, Taobao Live, Alibaba’s live streaming unit, committed RMB 20 billion (around $2.85 billion) during the 2019 Single Day Shopping Event. It is equal to almost 7.5 percent of the group’s overall sales (Vogue, 2020).
Moreover, those eCommerce platforms are trying to feature western stars to build an international brand. Kim Kardashian is a successful example. She sold 150,000 units of KKW perfumes during a streaming session on Alibaba’s Tmall on November 6, 2019 (Vogue, 2020). The hidden profit of live streaming is truly tremendous.
However, these transactions are finished before the outbreak of COVID-19, will live streaming be useful to help households, especially small households, to survive during and after this pandemic?
The answer is definite. Generally, Chinese Lunar New Year is accompanied by vast numbers of transactions. People would buy gifts for families, friends, and collogues. Also, people would indulge in relaxation as a reward for working all year, which would boost consumer services. However, the Chinese Lunar New Year is followed by the outbreak of COVID-19 in 2020. Chinses government implemented national lockdown, and many logistics companies had shut down. Li, a flower farmer, could do nothing but watching his products fading away on the farm. Surprisingly, Ao Fenzhen, a friend of Li, as well as a COO of flower distribution company at JD.com, contacted Li. JD was the second biggest eCommerce company in China, while the Taobao mentioned before, is the biggest. Ao confessed that JD would offer the delivery service to local farmers, while Li was supposed to live streaming to help JD reach more consumers (Hao, 2020). As Li described, his business had “skyrocketed” after the live streaming. Also, Ao had reached more consumers successfully. It is a win-win game.
Now that JD had adopted live streaming to survive during the pandemic, its competitor, Alibaba, would not take any action. Wei Wei, a fruit farmer, wears a facial mask in her live streaming on Taobao every day. In her words, the live streaming helped farmers to sell tens of thousands of fruits, which had turned their situations around (Hao, 2020). Moreover, Wei Wei taught other farmers to Live themselves. In fact, although China’s government had built up numerous infrastructures, including network lines in the past years, there are still many farmers who don’t know how to use networks. With the help of live streaming and eCommerce, their income had increased hugely. Li even said, “Once you start live-streaming, you really can’t stop. Because now you have fans.” (Hao, 2020)
So, why the Chinese live-streaming business can be a reference to the United States? Although China claims itself a socialism country, it is different from that of Cuba or North Korea. After the Chinese Economic Reform, China is shifting to a more market-oriented economic system (CIA.gov, 2019). Compared with China, the United States also has the feature characteristic of both the command economic system and market economic system. It is more open than China, and its market is freer than the Chinese market (Ross, 2019). Therefore, households may suffer from less resistance and obtained more from the transaction.
Second, China was the first country which reported COVID-19 and controlled COVID-19. Although the Chinese government disinclines to admit this identity, the experience of fighting against COVID-19 is still useful as a reference. As we can imagine, the reduction of economic activities would result in a decrease in Gross Domestic Production (GDP). Meanwhile, households and industries need to reduce the outcome to fix the gap in cash flow. One direct result is the increase of unemployment. As reported, 20.5 million jobs were lost in the United States, which is unprecedented in the United States after 1948 (Reinicke, 2020). In this case, citizens’ demand for normal goods might decrease and result in a huge surplus. Nonetheless, referring to Chinese households’ experience, live streaming can help them get access to more customers. Also, companies can learn from Kardashian to advertise and stimulate consumption. In this way, the surplus would be reduced, and the glitches of households might be fixed.
Nonetheless, there are some deficiencies in the live streaming business in the United States. On the one hand, not all products can be delivered without deterioration. To illustrate, agricultural products will perish quickly in the shipment process. Sellers in China can afford the shipment fee as low as RMB 7, which is equal to $, while if the sellers choose express shipment in the United States, the cost of delivery might be higher than production. On the other hand, some Chinese live-streaming platforms are embedded in eCommerce platforms, such as Taobao and JD.
However, live streaming platforms are comparatively isolated in the United States. Even the biggest eCommerce platform, Amazon, doesn’t have its embedded live streaming yet. It would doubtlessly increase the cost and risk of customers to pay for an item online.
To conclude, Chinese households and industries had benefited from live streaming in the pandemic. It would help the sellers to reach out to consumers and solve the problem of the inability to transact face to face during the pandemic. Compared with China, the United States also have excellent live stream platforms and eCommerce platforms. These factors would promise a bright future of live streaming business in the United States. If live-streaming can be adopted widely, consumption would be boosted, and the surplus would be reduced efficiently. However, due to the difference between the two countries, the examples of Chinese live streaming business can only be a reference. The specific policies need to be revised by the national government, and the implementation needs to be modified by households.
References:
Johns Hopkins University, May 26, 2020. Retrieved from: https://coronavirus.jhu.edu/map.html
Centers for Disease Control and Prevention Social Distancing. May 26, 2020. Retrieved from: https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/social-distancing.html
Influencer Marketing, 25 Useful Twitch Statistic for Influencer Marketing Managers. May 2, 2020. Retrieved from: https://influencermarketinghub.com/twitch-statistics/
Vogue Business Team, China’s Live Streaming Boom, March 5, 2020. Retrieved from: https://www.voguebusiness.com/consumers/live-streaming-china-shopping-kim-kardashian
Hao, K., Live-Streaming Helped China’s Farmers Survive the Pandemic. It’s Here to Stay. MIT Technology Review. Retrieved from: https://www.technologyreview.com/2020/05/06/1001186/china-rural-live-streaming-during-cornavirus-pandemic/
Central Intelligence Agency, The World Factbook. CIA.gov., March 28, 2019. Retrieved from: https://www.cia.gov/library/publications/resources/the-world-factbook/geos/ch.html
Ross, S., Is the United States a Market Economy or a Mixed Economy? Investopedia, July 9, 2019. Retrieved from: https://www.investopedia.com/ask/answers/031815/united-states-considered-market-economy-or-mixed-economy.asp
Reinicke, C., Unemployment Surged to 14.7% in April as the US Lost a Record 20.5 Million Jobs. Business Insider. Retrieved from: https://www.businessinsider.com/april-jobs-report-unemployment-rate-payrolls-record-us-economy-coronavirus-2020-5
