Taobao announced the establishment of a live streaming e-commerce company, what is its intention? | Insight Research

On the afternoon of February 20th, Taobao made its first major move of the year: officially establishing a live e-commerce company to provide fully managed operation services for celebrities, KOLs, and MCN agencies interested in starting live broadcasts on Taobao.

According to Huatai Securities ● Insight Research, this service is mainly aimed at "novice players" entering Taobao, providing them with refined managed operation services to help them quickly get started and adapt to the live broadcast ecosystem of Taobao.

It is understood by Insight Research that the company is operated by the Taobao Live operation team, with the main goal of recruiting new anchors rather than focusing on profitability. They adopt a cooperation model with anchors based on a guaranteed minimum or profit sharing. This is similar to JD's previous recruitment of anchors with lowered thresholds, without requirements such as GMV and gross profit.

With Douyin having already enjoyed a wave of live e-commerce dividends, and with platforms like Video Number and Xiaohongshu continuously increasing their efforts, facing strong competitors, Taobao and JD, the two traditional e-commerce giants, have had to invest more resources to join this "new traffic" battle.

Live e-commerce remains a battleground for giants

As e-commerce traffic reaches a bottleneck, the consensus in the market over the past two years is that incremental growth comes from live e-commerce.

The 2023 annual review of Douyin e-commerce shows a year-on-year GMV growth of 277%; Kuaishou's e-commerce revenue has been growing faster than GMV since Q1 2023; Video Number's GMV in 2023 has tripled compared to 2022, with Pony Ma setting the tone at the annual meeting, "This year, what we can fully develop is Video Number live e-commerce"; Pinduoduo, which has always focused on low prices, has also added a live streaming entrance, elevating its focus on live e-commerce.

Despite a slowdown in growth during last year's Double Eleven event, live e-commerce remains the fastest-growing online transaction channel and a battleground fiercely contested by internet giants.

At the end of last year, JD was actively competing for Dong Yuhui and lowering the threshold for recruiting anchors to avoid being squeezed out of the live e-commerce game. They have expressed to Insight Research that live e-commerce will be a key focus for development in 2024. Video Number, which started later, with Tencent's huge user base, is estimated to have a live streaming GMV of over 300 billion yuan in 2023. Xiaohongshu, once criticized for its commercialization capabilities, has successfully raised funds from a group of young core middle-class users with high unit prices and unique niche products.

From "superior dominance" to "fierce competition"

As live e-commerce enters a more intense second half, Taobao is further intensifying its live e-commerce business. Taobao's establishment of a live streaming e-commerce company and the opening of full-service management aim to adapt to the gradual stabilization of the live streaming e-commerce industry. It is now following a path similar to comprehensive e-commerce, requiring the exploration of new opportunities through product quality and refined operations while maintaining attractiveness to existing users.

Taobao's platform and supply chain advantages can provide stars and internet celebrities with product selection, supply chain, and operational services that they are not adept at, which is also a barrier to entry for the live streaming industry.

Oriental Selection, which has not yet built its own supply chain, has been criticized by consumers for inconsistent quality control levels. From the "fake" Wuchang rice to the recent revelation of concealing the excessive use of sodium metabisulfite in self-operated Ecuadorian white shrimp, it has triggered a "trust crisis."

Furthermore, there are concerns in the industry about the official establishment of a live streaming e-commerce company and whether it will compete with other MCN agencies.

According to research by Taobao Insight, the purpose of the managed model is to help new anchors and organizations reduce initial operating costs, essentially assuming the early incubation risks for organizations. In other words, even if the anchor's initial live streaming conversion rate is not high, as long as there is the potential to create popular content, the platform can leverage its supply chain advantages to commercialize and monetize it.

During the six-month support period, anchors can withdraw at any time and automatically terminate the contract to return to the market after six months.

Currently, the live streaming industry is gradually moving past its peak period, from irrational growth to "superstars falling," and then to the intense competition among mid-to-tail anchors. In this wave, giants are supporting "new traffic" in the fierce competition. Clearly, the live streaming e-commerce industry will transition from "dominance of superstars" to "intense competition among many."

To secure a place in this competitive landscape, platforms must fully leverage their strengths, requiring deep consideration of how to maximize the platform's advantages.