TikTok China (Douyin) live shopping has revolutionized the way brands and businesses connect with consumers, creating a dynamic and interactive shopping experience. How does this lively selling format help brands increase sales? And how can we predict the revenue of a live shopping session? In this blog, we will delve into the key factors that influence the revenue of Live Shopping and explore how brands can leverage this model to maximize their revenue potential.
There are several methods to calculate the revenue of live shopping. One common calculation method is to use the formula:
Live Shopping Revenue = Exposure Count * Conversion Rate * Price * Gross Margin * Repurchase Frequency
However, it is crucial to note that this revenue refers to the gross profit generated from live shopping, rather than the net profit.
The key factor that affects repurchase decisions is product competitiveness, and price and gross margin are set before a live shopping session. Therefore, the formula can be simplified as:
Live Shopping Score = Exposure Count * Conversion Rate * Product competitiveness
Exposure count represents the flow of traffic, indicating how many users have viewed the live shopping session. TikTok China has over 809 million users, which offers phenomenal traffic opportunities for live shopping. More traffic means more people buying your products, just like foot traffic in a physical store. To increase exposure count, brands can promote the live shopping session before the day, notify consumers of the streaming schedule, and design posters to attract traffic. The traffic also depends on the content of your live shopping. If your live shopping session is fascinating, the platform itself will naturally push your live room to more users.
Conversion rate refers to the percentage of viewers who make purchases after watching the live stream. Product competitiveness and the talent of the anchor are two factors that determine the conversion rate. Nevertheless, you can still improve the conversion rate by adding interactive elements. TikTok China platform offers a rich set of interactive features such as sweepstakes, red packets and Q & A. This can also enhance the enjoyment and stickiness of the shopping experience. Another common method is to set up exclusive discounts for live shopping rooms, this can attract more consumers and increase the conversion rate.
Repurchase frequency reflects the number of times viewers repurchase the products, which is crucial for sustaining long-term profitability for businesses. To increase repurchase frequency, brands or businesses can offer specific repurchase discounts. Moreover, brands could collect comments from live shopping sessions to improve their products and stimulate consumers to repurchase the new version.
It is worth emphasizing that despite the emergence of live shopping as a novel online retail format, its business model and revenue model are similar to traditional offline retail. Imagine walking into a physical store as a store owner, where the goal is to attract more customers, showcase carefully selected products, and facilitate transactions with the assistance of sales associates. Whether online or offline, the key to achieving profitability lies in attracting consumers to go into your shop or live-streaming room, improving conversion rates, and appealing to consumers to repurchase.
There is a very graphic analogy for the live shopping revenue model, we can describe live shopping as a massive ball, then traffic serves as the external force to move the ball, products act as the fulcrum, and content acts as the lever. Attracting traffic to the live stream is crucial, but the real leverage lies in the appeal of the products being showcased. If the products fail to meet consumers' needs and expectations, all the traffic in the world won't lead to significant revenue.
The position of the fulcrum (product appeal) determines the force applied to the lever (investment in content promotion). A highly competitive product will naturally attract more viewers and generate higher revenue with relatively lower content investment. On the other hand, if the products lack appeal, brands may need to invest more in creating engaging content to drive conversions.
Therefore, product appeal is one of the most critical elements in live shopping! Businesses must focus on curating a diverse and attractive product selection to meet the diverse needs of their audience. Offering unique, high-quality, and innovative products can significantly enhance the conversion rate and encourage repeat purchases.
TikTok China live commerce, as an innovative business model, has attracted a substantial number of users through its unique entertainment value and shopping experience. By leveraging TikTok China live shopping, brands, and businesses can directly engage with users, showcase product features, and stimulate purchasing desire.
In conclusion, the core of the revenue model in TikTok China live shopping lies in the integration of traffic, conversion rate, and product competitiveness. By attracting users, driving conversions, and delivering high-quality products, businesses will probably achieve much higher profitability through live shopping. In the ever-evolving market landscape, continuously optimizing the factors that constitute revenue models and enhancing user experience will be crucial for the ongoing development of the brand.
If you wish to know more about the live-streaming e-commerce analysis and tactics in China, please contact RougeLink for more information.
RougeLink offers e-commerce solutions, with integrated capabilities encompassing all aspects of the e-commerce value chain covering e-store operations, digital marketing, customer services, and logistics.
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