These two companies could make inroads in the $11 billion U.S. livestream shopping market

Published Thu, May 6 20212:31 PM EDT

Whether it's selling shoes or handbags via livestream, Alibaba's TaoBao Live dominates the Chinese market. However, tech giants have a long way to go before finding similar success stateside, analysts say. Livestream shopping is a hybrid of at-home shopping and social media. Hosts, which can include influencers, showcase products on their streams, and shoppers can ask questions in real-time. Taobao Live, which launched in 2016 under e-commerce giant Alibaba, has become one of the key players in China's livestream shopping market. The service has generated about $61 billion in gross merchandise volume for the 12-month period ending on Dec. 31, 2020. Alibaba's Taobao also competes against Pinduoduo , Kuaishou and Douyin, the Chinese version of the TikTok app. However, livestream shopping has failed to catch on nearly as quickly in the U.S., where the market could be worth $11 billion, according to estimates from Coresight Research. That's up from $6 billion in 2020. Amazon and Facebook could be in a prime position to drive e-commerce livestreaming stateside, provided they make the necessary investments in their technology. "An explosive surge in demand for this to work in the U.S." The idea of e-commerce livestreaming is simple. Users tune into a stream, often hosted by a key opinion leader, on their phones. That person will demonstrate a number of products. At the same time, consumers can add items and check out within the app. Hosts can answer viewers' questions, a key part of the engagement factor. Some call it QVC or HSN on steroids. In the best offerings, such as Taobao Live, it's a frictionless experience all within the app. In the U.S., consumers contend with payment companies, social media and advertisers, but what's missing is a seamless experience that incorporates these players. American companies are still trying, and for good reason. The livestreaming market could reach $25 billion by 2023, according to estimates from Coresight. In China, livestreaming is estimated to have brought in $125 billion in sales in 2020, up from $63 billion in 2019, according to Coresight. The U.S. market is expected to grow. "Livestream shopping events in the U.S. are expected to generate $25 billion by 2023," according to a Jan. 19 MKM note. The firm pointed to Amazon's and Facebook's tests on live sales platforms. "There's an explosive surge in demand for this to work in the U.S. and that's why so many tech companies and even smaller players are trying to develop this and work it out," said Mark Yuan , CEO of New York-based consulting group And Luxe . "In the next 12 to 18 months you'll see very strong players." Amazon The e-commerce giant launched Amazon Live in 2019, which features hosts discussing and demonstrating products sold there. However, the company has shared little around its success in e-commerce livestreaming and doesn't seem to have invested heavily in the space. "It's still very early and there's still so much we're going to learn from both creators and customers," Amazon Live director Munira Rahemtulla said in a company Q & A last July. "I've been awed by the creativity I've seen in these livestreams, and I anticipate we'll see so much more there," she said. "How that evolves will both inspire and inform how we continue inventing in this space for brands, influencers, and shoppers." Part of the reason Amazon Live has been slow to take off is because people go to the retailer for specific purchases, not for entertainment, said Mike George, CEO of Qurate Retail Inc. and chairman of the National Retail Federation. In the meantime, I believe the U.S is due for a couple or even several strong livestream-focused e-commerce marketplace/platforms to emerge and thrive. And Luxe. Mark Yuan Brands under Qurate Retail include home-shopping channels HSN and QVC. Amazon, already the third largest U.S. company by market cap, has the funds and resources to make livestreaming work in America. It's also been one of the big winners amid the coronavirus pandemic, due to the surge in e-commerce demand . The company's stock gained 76% in 2020, and is up just shy of 1% year to date . "I just always assume they've got so many other things that they're working on, that this is just one of many priorities," Coresight CEO Deborah Weinswig told CNBC. "I'm sure if Amazon wanted to be the lead for the streaming platform, they very easily could." Facebook Users click on the social media giant's app for entertainment, and they've proven they're willing to shop. Facebook said that 130 million users tap on shopping posts each month to learn more about products displayed, while 70% of "shopping enthusiasts" turn to the app for product discovery. The company has made shopping more prominent on Instagram with Instagram Shopping and IGTV . It's also testing shopping through Instagram Reels , its TikTok competitor. The problem is that while being social on the apps is intuitive, shopping and checking out aren't. Facebook is taking steps toward solving that problem, partnering with e-commerce company Shopify . Earlier this year, Shopify brought Shop Pay, its quick payments platform, to Facebook and Instagram Yuan of And Luxe sees Facebook and Instagram as having potential in the space, especially as brands, influencers and audiences all congregate on the apps. But that change won't be easy. That's because Facebook would have to toggle between being a social media company with revenue coming from advertising and being a marketplace with seamless e-commerce capabilities, Yuan said. "What's their DNA? What do their users identify Facebook/Instagram with?" he said. "Is it able to help brands & influencers to reach their highest potential and providing the fullest capabilities to convert sales?" "I say while they have one of the great chances to make it work, they still have a long way to go and it will take time," said Yuan. "In the meantime, I believe the U.S is due for a couple or even several strong livestream-focused e-commerce marketplace/platforms to emerge and thrive." TikTok and other players emerge For a technology that has taken over China in just a few years, experts are surprised it hasn't yet emerged in the United States. "I'm truly shocked the market here is still so small," Coresight's Weinswig said. "I mean, right now there's not even any horses in the race." That could mean that smaller players still have a decent shot at dominating the U.S. livestream shopping space. For example, TikTok began testing new social commerce features in 2019 by allowing some users to add links to their profiles and videos. Levi's was among the first retail brands to use TikTok's new "Shop Now" feature to direct users to merchandise. It has since hosted two livestream shopping events with Walmart . At one point, the retailer was in talks to acquire a stake in TikTok , but those discussions have been shelved. Qurate Retail Group, whose HSN and QVC shaped television shopping, could also reemerge as a key player in retail. The company has streamed on Facebook Live and YouTube TV, and has its own livestream page on its website. Weinswig said that even " buy now, pay later " companies, like Klarna — which is eyeing a public listing in Europe — could get into the space. Meanwhile, Brandon Kruse, founder of the retail tech platform CommentSold, previously told CNBC that U.S. growth rates of retail sales from live broadcasts are four to five years behind China It will take a massive push from American brands to be willing to invest in the technology needed and for customers to start shopping via stream. "It costs a lot of money at the end of the day to get meaningful traffic to your video experience. I think as folks experiment, they're taking a cautious approach," Qurate's George added. -- CNBC's Michael Bloom contributed to this report.

Signage for Alibaba Group Holding Ltd. covers the front facade of the New York Stock Exchange November 11, 2015.

Brendan McDermid | Reuters

Livestream shopping is a hybrid of at-home shopping and social media. Hosts, which can include influencers, showcase products on their streams, and shoppers can ask questions in real-time.

Taobao Live, which launched in 2016 under e-commerce giant Alibaba, has become one of the key players in China's livestream shopping market. The service has generated about $61 billion in gross merchandise volume for the 12-month period ending on Dec. 31, 2020.

Alibaba's Taobao also competes against Pinduoduo, Kuaishou and Douyin, the Chinese version of the TikTok app.

However, livestream shopping has failed to catch on nearly as quickly in the U.S., where the market could be worth $11 billion, according to estimates from Coresight Research. That's up from $6 billion in 2020.

Amazon and Facebook could be in a prime position to drive e-commerce livestreaming stateside, provided they make the necessary investments in their technology.