[In-Depth Look] The New Escape Route for the Distribution Industry: 'Live Commerce'

Professor Kim Ik-seong, Dongduk Women's University · Honorary President of the Korea Distribution Science Association

“Live commerce” is gaining attention as a new distribution channel. Live commerce is a term that combines video streaming and e-commerce. Influencers, who are popular broadcasters on social networking services (SNS) such as portals, Instagram, YouTube, and Facebook, communicate directly with consumers through broadcasts and sell products.

Recently, live broadcasts have served as an emergency escape route for offline retailers by providing immersive sales broadcasts at convenience stores, duty-free shops, department stores, and outlets. Large portal companies like Kakao and Naver have also entered this market by creating platforms. The longer the COVID-19 pandemic continues, the more important live commerce, a distribution channel that goes beyond untact (non-face-to-face) to ontact (contact-based), will become. A consumption world beyond untact to ontact is arriving.

Live commerce is becoming an attractive distribution channel not only for the MZ generation, who were born holding smartphones, but also for people in their 40s to 60s who have experienced the convenience of online shopping after COVID-19. Since consumers can enjoy the broadcaster’s witty talk and creative actions, live commerce feels like a friend to those tired of TV broadcasts. With a simple payment system and delivery to the desired location or doorstep, consumers only need to move their fingers. Now, customers can enjoy convenience beyond the experience of purchasing desired products through face-to-face transactions with sales clerks.

Customers feel happy just because a popular influencer, acting as a sales intermediary, recommended a product to their fans. As a result, live commerce broadcasts typically achieve a purchase conversion rate close to 20%. Moreover, platforms charge a commission of 5-10%, which is cheaper than home shopping TV or general large retailers. I am confident that live commerce will now be used as a convergent sales method across all distribution channels. It is clear that it will operate as a common denominator for all retailers’ omnichannels.

However, live commerce has many issues because it is a live broadcast. Except for some famous influencers who have hundreds of thousands of followers, most live broadcasts do not have many viewers. Before becoming famous, most broadcasters use large portal sites or affiliated retail platforms rather than one-person broadcasts under their own names. Consequently, the live broadcast may be perceived as just one of many brands on the portal site. Therefore, it is not easy to secure customer interest and brand loyalty.

There is also a lack of expertise to extract, analyze, and improve meaningful data such as sales volume and real-time viewing data after the broadcast. Since it is a one-person broadcast, the completeness of the broadcast composition is low, and the stability of video transmission is also poor. It is not easy to improve the quality or stability of the video with thoroughly prepared scripts, technical support, and other safety measures. Furthermore, marketing costs to promote live broadcasts and attract followers are burdensome for broadcasters. Support from the government, portals, or SNS media is necessary in this area.

It is recommended to introduce a brand registration system that assigns individual names to live broadcasters centered on the platform. This would make broadcasters ethically responsible for their broadcasts. At the same time, large portals or SNS platforms operating live broadcasts should clearly disclose consumer protection responsibilities, provide broadcasting guidelines to broadcasters, and offer related training. Broadcasters who violate these rules should be decisively removed to maintain and develop the soundness of the early live commerce market.

At the same time, it is necessary to take measures to protect broadcasters in advance by requiring necessary documents such as legal certificates, valid trademark certificates, and quality test certificates for broadcast products. Therefore, from the perspective of autonomously maintaining market order and protecting consumer rights, an autonomous regulatory organization and code of conduct overseeing the live broadcast market are needed. Rather than imposing legal regulations from the start, incentives and penalties that encourage voluntary purification efforts are required.