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The city of Linyi has become a center of the livestreaming sales sector, providing facilities and services to cuts costs and boost sales. As businesses eye the Linyi model, no one is sure whether its success can be replicated

By NewsChina Updated Nov.1

An advertisement features livestreaming training lessons and logistics in the city of Linyi, an e-wholesale town in Shandong Province

By 8pm on a typical evening, the row of studios in a livestreaming center in Linyi, Shandong Province have signs on their doors which say: “Livestreaming, please do not disturb.” It is the busiest time of day. The exhortations to buy ring out. “Sweeties, look at this pair of shoes. Selling for only 19.9 yuan today. Be quick,” or “Guys, this hoodie is all cotton. On sale today.” 
  
Now famed as an e-wholesale town, Linyi has 10 livestreaming centers from where thousands of livestreamers sell just about anything. According to local media, these livestreamers collectively have more than 300 million followers and receive about 1.5 million orders every day.  

This rising prosperity has attracted officials and businesspeople from other cities to learn from Linyi, hoping livestreaming centers can offer a way to revitalize their Covid-hit local economies. But no one is sure whether the Linyi model can be transferred to other places where the conditions may not be as conducive to success. 

Linyi Model
According to Nie Wenchang, president of a digital technology company in Shandong which opened a livestreaming center in Linyi, the city leads the online sales sector because of its geographical advantages. In the south of Shandong, Linyi is midway between Beijing and Shanghai, and since the 1980s, the third-tier city has marketed itself as a place to do business. 

Since the trade in small commodities started four decades ago, the city’s street stalls have morphed into China’s biggest market cluster, with 134 wholesale markets containing 65,000 stalls and shops. The markets employ around 300,000 people and goods are shipped across the country.  

Yet in 2018, sales declined as wholesale markets popped up in other cities and counties. Stall rental increased while the number of customers decreased, particularly as e-commerce put a dent in Linyi’s wholesale business.  

Nie had already shifted his business online in 2007 when he opened a shop on Taobao, China’s biggest e-commerce platform owned by Alibaba Group. Later, he started helping other sellers operate online shops. In 2014, Nie’s company shifted to running an e-commerce industrial zone focused on helping vendors increase sales and reduce logistics costs.  

During this process, Nie’s team observed that livestreaming had a big influence on e-commerce, so they built 20 livestreaming studios. As Taobao increased the standards for sellers, some turned to popular livestreaming short-video platforms such as Douyin (China’s version of TikTok) and Kuaishou, also known as Kwai.  

Wang Xinyan livestreams on Kuaishou. Having sold clothes for more than a decade, she started livestreaming sales in 2018. Although she had few followers when she started, later her sales volume from livestreaming doubled her offline sales. When she reached 50,000 followers, Wang and her husband rented a 700-square meter studio to concentrate on online sales. She said that many of her peers did the same around that time.  

In 2018 Kuaishou and Douyin decided to prioritize e-commerce, supporting users to open online shops on the platforms. “The cost of attracting customers to popular e-commerce platforms like Taobao was very high, so I suggested that the local commerce department should make a change, and they finally cooperated with Kuaishou,” Nie told NewsChina.  

According Caas Data, a Chinese video app analyst, at the end of 2019 Linyi was the ninth-ranked city measured by the number of livestreamers on Kuaishou, the only third-tier city to break into the top 10.  

This prompted more Linyi businesses to shift from offline shops and WeChat to Kuaishou. This meant more demand for services related to livestreaming. “When we started, we hoped we could help offline businesses transition and upgrade, so they could offer another sales channel,” Jia Hangzhou, a head of another livestreaming center in Linyi, told NewsChina.  

As pioneers, Nie and Jia had no clear ideas about how to build and operate a livestreaming center. Mostly they repurposed existing commercial properties.  

Wang Xinyan moved to Jia’s livestreaming center soon after it opened in early 2019. “The rent was similar to other places, but they are more experienced in e-commerce and livestreaming operations,” she told NewsChina.  

Broadcast studios line a hallway of a livestreaming center operated by Nie Wenchang, president of a digital technology company in Shandong Province

Clicks and Rules
The center is the key attraction for livestreamers. Popular Kuaishou seller “SuperDan” told NewsChina that online sellers want to primarily increase the number of followers and prevent being blocked by the platform due to rule violations. His account was blocked twice by Kuaishou before he moved to the livestreaming center.  

“In the past, we sellers had no intersection with the [livestreaming] platform and so we had to learn the rules by ourselves,” he said. “But now the center is a bridge between us and the platform. They explain the platform’s rules clearly and teach us how to better abide by them. Having a clear idea of the platform’s orientation, we keep on the right path and we can progress together with the platform.”  

Nie said that his team offered their first training session at the end of 2018 when his center was still under construction, but it still attracted over 100 people, half of whom were from out of Linyi. In 2019, his team helped train over 50,000 livestreamers, with some trainers provided by livestreaming platforms. In 2020, Nie’s team ran livestreaming accounts themselves so they could learn how to conduct training.  

“Most of the trainees already had livestreaming accounts with followers numbering from 10,000 to 100,000. After their start-up period, they’re eager to learn how to develop. They want to learn how to increase their followers, how to provide products people want, even how to re-orientate their shops,” Chen Chong, a data analyst at Jia’s livestreaming center, told NewsChina. 

For trainees with no experience in livestreaming sales, Chen said that 90 percent would be able to do it after finishing the course, but only 20 percent would end up entering the industry since many do not have a suitable product to sell.  

Zhang Dandan, a livestreaming seller from the Inner Mongolia Autonomous Region, attributed the difficulty to the small scale of individual sellers. As they cannot afford to buy large amounts of stock, they cannot get large discounts.  

That is why Zhang finally signed up to a livestreaming center in Linyi, which provides warehouse space and helps reduce prices by organizing bulk buys.  

Chen gave the example of a snack product which sells for 29.9 yuan (US$4.3) online, the wholesale price of which the center can force down to 10 yuan (US$1.4). Even though the center resells the product to livestreamers at a slightly higher price, it is still lower than they can get on their own.  

The center allows livestreamers to expand their product lines at low cost. Chen’s center provides a shared livestreaming studio where more than 3,000 types of jewelry and accessories, such as rings, earrings and necklaces, are on display. The center spent 1 million yuan (US$144,600) on buying the stock, definitely not affordable for most livestreamers, who can use the jewelry studio without having to pay for stock up front.  

The center slashes the costs of logistics in the same way. Guo Feng, Jia’s partner, told NewsChina that because of the volume of orders, they have lowered the delivery cost to between 1.6 yuan (US$0.2) per kilogram to 2.5 yuan (US$0.4) per kilogram, much lower than that for individuals. 

Jia understands what services they are providing. “A livestreaming center is a functional platform that provides a one-stop service. It can solve any problem at any link of the livestreaming sales process,” he told NewsChina.  

Learning from Linyi
Linyi’s livestreaming centers attracted attention as industries, especially offline ones, were heavily impacted by the Covid-19 pandemic. Many regions hoped that they could copy Linyi’s model and restore local commerce.  

In April, Alibaba launched what it called the Chunlei 2020 (Spring Thunder 2020) program. Alibaba said it would establish 100 livestreaming centers in each province within three years. According to lanjinger.com, a financial news website, by mid-July, Kuaishou had built 20 livestreaming centers across the country. Earlier this year, the government of Guangzhou, South China’s Guangdong Province, said it would become a “capital of livestreaming commerce,” with plans to build a cluster of livestreaming centers. Following Guangzhou, other cities with rich e-commerce experience announced similar plans, including Hangzhou, where Alibaba is headquartered, and Yiwu, a global center for small commodity export trade, both in Zhejiang Province.  

According to Nie and Guo, those who flock to visit them are mostly officials and property developers from smaller cities who want people from Linyi to help them build a livestreaming center. The city or businessperson will provide the space for a center, often an empty building which would need remodeling, free of charge. Even if the center is built from scratch, profits can still be made. An insider in the livestreaming sales industry who asked for anonymity told NewsChina that impacted by e-commerce, rents for office buildings are falling, but if a building is slated for livestreaming sales, the rent will rebound.  

“Investors aren’t attracted by traditional commerce anymore, but they’ll definitely buy into livestreaming sales,” he said.  

For local officials, it is more about the effects of the livestreaming centers. They care about how many livestreamers the center can train, how many jobs it can offer, and how much it can help boost the sales of local specialties. 

Not everyone is sure the Linyi model can be successfully replicated. Jia and Chen believe it can, especially as they plan to build a center in 16 more cities in Shandong. Livestreaming centers in other provinces are already under construction.  

Livestreamers in other regions can start by selling local specialties or other products provided by Linyi, they said. Once the livestreaming sellers grow their sales to a certain scale, the supply chain and logistics system will follow.  

Nie is not as optimistic. He is cautious about cooperating with small cities and counties. “Not every city can financially support a livestreaming center like the ones in Linyi. I think it is not really achievable for a town or even a county, so we won’t consider cooperating with a county-level region,” he said.  

Even for a city, Nie looks at a lot of indicators, such as the local user registration on video and livestreaming apps, the number of local daily live users and the local e-commerce potential. He refused to cooperate with two cities in Central China as they did not have enough registered users on Kuaishou and Douyin. According to Nie, the sellers in the two cities are more accustomed to offline sales and without a large base of online followers, they are not suitable for the cheap bulk-buying model of livestream sales.  

“The hardest thing is for a seller to educate customers,” he said.  

Nie’s team is only involved in four projects in other cities. Despite the growth of the livestreaming industry, Nie predicted that many of the livestreaming centers would close within a year, either because they are in a place that is not suited to e-commerce or because of lack of experience.  

He Haoxun, content commercialization director of Kuaishou agrees. “Service is the key for livestreaming centers,” he said. “If you just provide land, you won’t be competitive.” He said that there were similar problems several years ago when many cities rushed to build e-commerce industrial zones.  

According to a 2018 survey report by the Qianzhan Industry Institute, by 2018, China had more than 100 e-commerce industrial zones, but because of the absence of an established industrial chain, insufficient support facilities and not enough experienced operators, many of those zones only make money from rent, while others failed to promote the local area as governments had anticipated.  

In 2015, Zhang Zhouping, a senior analyst at the China E-commerce Research Center was quoted by the China Business Herald as saying that at least half of the e-commerce industrial zones have experienced difficulties. According to Zhang, some of the zones are just a way to obtain land by dangling the prospect of an e-commerce zone. 

If livestreaming centers are to be successful, they will have to move quickly to prevent the type of problems e-commerce industrial zones have encountered. Du Qingming, the industrial development director of the Market Administration Commission of Lanshan District in Linyi, told NewsChina that Linyi government is working on a regulation to standardize the management of livestreaming centers.  

“Those not suitable for the livestreaming industry or who have no experience operating a livestreaming center will be swept away in a year,” Nie said. “Only the really good ones will survive.” 

Broadcasters work at a livestreaming center in the city of Ruili, Yunnan Province, October 22, 2019

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