Home Shopping vs Live Shopping, A Battle between David and Goliath?
Buying things online has become part of our daily routine. These days, most people buy things they need from websites or apps. Online shopping platforms such as Coupang and Market Kurly have gathered attention with their new distribution methods that allow customers to receive orders the day after they place them.
According to Statistical Office data, the turnover of online shopping in Korea in 2022 was about 206 trillion won, and it continues to grow significantly every year. Mobile commerce makes up more than 70% of the total turnover. Between 2020 and 2022, mobile commerce showed considerable development, impulsed by the rapid growth of live commerce that flourished during the pandemic lockdowns.
Market Annual Turnover of Online Shopping in Korea(E-Commerce)
Unit: Trillion Won
Live shopping first appeared in Korea in 2017 and peaked in 2020 as big tech and shopping platforms rushed to launch live shopping features. Although live shopping currently only represents 7 to 10 trillion won of the large e-commerce market, TV home shopping is slowly shifting to live shopping, making it very promising.
The Decline of TV Home Shopping and the Emergence of Live Shopping
Though the word 'Live Shopping' or ‘Live Commerce’ is in itself new, the experience of purchasing goods while watching a live broadcast is not new at all. TV home shopping has already been showing and selling products live for decades.
Because of that, some people say there is no big difference between home shopping and live shopping. In some ways, they might be right, but there are some noticeable differences between the two. Before mentioning the differences between home shopping and live shopping, let’s understand what is happening in the home shopping market.
TV home shopping reached its peak in 2014, but as the multi-screen era arrived, the number of TV viewers decreased significantly, resulting in a drop in sales. The home shopping market of originally 9 trillion won during its peak, has now become a small market of less than 5 trillion won. On the other hand, the live shopping market is estimated to grow to 10 trillion won by 2023 incorporating a lot of market shares from the home shopping market along the way.
Korean TV Home Shopping Market Trend
Unit: Trillion Won
*2013~2016 Source: Korea Online Shopping Association
Source: Summation of announcements by TV home shopping operators
*The TV home shopping and Mobile shopping percentages represent the sales contribution to the total amount.
Home shopping companies utilized this situation as an opportunity to exploit the live shopping market. The three largest home shopping companies in Korea, Hyundai Home Shopping, Lotte Home Shopping, and CJ Home Shopping, are currently operating home shopping channels as well as live shopping ones.
Home Shopping vs Live Shopping, What is Different?
Then, what is the difference between home shopping and live shopping? The first difference can be seen in how sellers and customers communicate. TV home shopping relies on unilateral information delivery methods. On the other hand, live shopping uses interactive media that creates easily accessible communication channels between viewers and broadcasters, such as live chat. The viewer's request can reach the broadcaster instantly, making the purchase drive much higher.
The second difference is the brand approach. One of the main reasons for the TV home shopping decline is the exorbitant commissions. The power of TV is still undeniable. The influence of social media such as YouTube, Instagram, and Facebook is large, but if you look at the cases of celebrities whose recognition greatly increases when they appear in TV dramas or entertainment shows, you can see that the dominance of TV is still high.
Traditional home shopping companies have paid a lot of money to access the influence of TV for a long time. However, in this new multi-screen era as the TV viewers decrease, the cost of securing those viewers becomes too high to maintain. It has become an ineffective platform compared to the high advertising costs.
In addition, the pressure of single-digit channel competition and the 50% commission paid to IPTV is also passed on to brand companies that supply products to home shopping. However, in order for brand companies to sell products through home shopping, they must supply products at a low unit price, so the burden on brands when conducting home shopping is increasing. There is even a known story that if sales do not come out above the 100 million won, the revenue will surely turn out negative in the first broadcast.
Related Article: "49.6% of sales are transmission fees"... That Fills Pockets with Money Earned by Home Shopping - https://biz.newdaily.co.kr/site/data/html/2020/07/15/2020071500191.html
In this situation, live shopping appears. According to a survey by the Fair Trade Commission, TV home shopping's commission is 28.7%, which is higher compared to department stores and large supermarkets. Live shopping is less burdensome because the fee falls within the 10% range, which is an additional broadcasting transmission fee on top of the existing online shopping mall fee.
Related Article:
Distributor Fees, TV Home Shopping Have the Highest... Department Stores and Hypermarkets Follow
https://biz.chosun.com/policy/policy_sub/2021/12/09/OH6YO5ENAJFP3GUHJMPE2S5KHY/
When using live shopping, the commission fee of nearly 30% is reduced to the 10% range. If the saved 20% can be used for other social marketing, all of it can be converted into sales, which reduces the burden on the brand and increases the opportunity to expand online sales.
The third is how it operates. In the existing TV home shopping, broadcasts were produced under the leadership of the home shopping company as long as the product was supplied. Brand companies can have input, but it is common for them to intervene passively. However, in live shopping, the broadcast channel is often operated directly by the brand, so they are responsible for recruiting or operating the broadcast production company themselves. In this process, the perspective will also be broadened when it comes to more active involvement in broadcast production and mobilizing means and methods to increase sales.
Of course, each live shopping platform has slightly different operating methods and fees, so it cannot be generalized, but the general trend is that medium-sized companies prefer live shopping. This is because the sales pressure for a one-episode broadcast is not as great as that of home shopping, and the cost of broadcast production is also less burdensome. Being able to start lightly is a big advantage for brands.
Will Live Shopping Become a Substitute for Home Shopping?
The power of TV and home shopping will not disappear overnight. That is why big brands still continue to use home shopping. Big brands invest a large budget not only in home shopping but also in online and offline marketing to sell more products. To these giants, live shopping will be considered one of many marketing channels.
On the other hand, live shopping represents an opportunity for small and medium-sized businesses. Video media requires a lot of resource investment in manpower, and technology, and it might be difficult to access in a situation where there is no direct profit. Many companies are using YouTube channels as a way to promote their business or generate indirect sales, but they are experiencing that retention is not as high as expected.
Live shopping, though a video medium, directly contributes to sales in real-time, making the cost burden lower. What is more, live shopping can be a great marketing tool, so its commissions and other production costs could all be labeled under marketing expenses. It means that when deciding how to use marketing expenses, utilizing live shopping is a way to reduce risk. In addition, recently, brands have been operating live shopping channels on their own to make direct sales, as well as using them as a communication channel with customers.
If we treat live shopping as simply another version of home shopping, it might lose its charm. However, if we think of it as another marketing tool and direct communication channel, then we can see its great potential. Another advantage of live shopping is that, unlike home shopping, it does not require advanced cameras or a professional team. If you only have a smartphone, you can start a live shopping broadcast right away. If your brand is confident in having a visually appealing and unique product, give live shopping a try!
Junseok Seo PD
- Current Position:: Live Shopping Production PD for Lalastation - Previous Experience: Mobile Content Production PD for Makeus PD - Previous Experience: Reporter for Techsuda & PD - Previous Experience: Marketing Team Leader for 39 Degrees C
