Why ecommerce livestreaming will survive Beijing’s crackdowns

Another top livestreamer Huáng Wéi 黄维, who goes by “Viya,” had a similarly turbulent year. Widely regarded as China’s online sales queen, she was found to have underpaid taxes totaling 703 million yuan ($111 million) and was fined $210 million for tax evasion in late December.

Since the pandemic outbreak in 2020, China’s ecommerce livestreaming industry — where influencers sell selected products at discounted prices on video platforms — has become a mainstay of Chinese consumers’ lives. But the government’s latest scourge against celebrity influencers, fan groups, and those with “excessively high incomes” has thrown the once lucrative ecosystem into uncharted waters.

Cash streams for livestreams

Wáng Dān 王丹, a 32-year-old from Changsha in southern China, took the leap into the world of ecommerce livestreaming in late 2019 after four years working in traditional media as a television producer. Unlike most established “celebrities,” who usually employ teams of five or six, she had to do everything by herself. “Even though I only broadcast three to four hours on average a day, I had to spend almost all my waking hours researching the product, contacting merchants, and negotiating what products to promote on my channel,” Wang said. She told SupChina she spends upwards of 14, sometimes 18 hours, a day on her livestreaming job.

Ecommerce livestreamers make the bulk of their income from commissions, which normally range from 10% to 30%, but can sometimes go as high as to 40%, Wang told SupChina. Skincare and makeup charge the highest rates while food charges the lowest, she said.

Influencers with higher profiles often charge an additional “appearance fee” during their livestreaming sessions, a fixed fee regardless of how many products are sold. According to Southern Weekly, a well-established Chinese newspaper, appearance fees for single products on Alibaba’s livestreaming platform Taobao Live range from a couple thousand yuan to 30,000 yuan ($400 – $4,700), depending on the influencers’ fan base. Luō Yǒnghào 罗永浩, a Chinese entrepreneur-turned-influencer, charged a record 600,000 yuan ($95,000) fee for each product advertised during his first livestream session, Southern Weekly reported.

According to Alibaba’s research arm and consultancy KPMG, China’s ecommerce livestreaming market has generated over 2 trillion yuan ($315 billion) in 2021, a 90% increase from the previous year. The industry is expected to maintain a 50% growth rate for the next five years, the report says.

For top Chinese livestreaming influencers, a single session could bring in up to a couple hundred million yuan ($40 million) in sales revenues. Last November, Lǐ Jiāqí 李佳琦, one of the most popular influencers in the livestreaming space, sold more than $1.8 billion worth of products during a 12-hour session on Alibaba’s Singles Day. Based on Li’s sales performance in 2019 alone, the 30-year-old was making around $20 million a year, according to Chinese media.

In 2020, the top 20 social media influencers in China, including Viya and Li, brought in over 106 billion yuan ($16.7 billion) in sales revenue, according to the state media Global Times. Li and Viya accounted for over half the total. By the end of 2020, Viya was anointed “China’s Most Influential Businesswoman in 2020” by Fortune China, with an estimated net worth of 9 billion yuan ($1.4 billion).

Everyone is cheating the taxman

It came as a shock to many when Hangzhou tax authorities announced last December that Viya “had underreported commission fees and masked other payments.” The fine of $210 million exceeded the $129 million penalty imposed on Fan Bingbing, one of China’s wealthiest actresses, for similar offenses.

A livestreamer who asked not to be identified told SupChina that tax evasion was a “common practice” in their industry. Livestreamers often set their official commission on Taobao and other platforms at a meager 3% or 5%, while the actual commission, roughly 30%, is passed under-the-table. “Most people in the industry have been practicing this because this [tax-evasion method] can make you much more money,” the person said. “Everyone is doing this, so why don’t I?”

According to a report by the state media Xinhua, thousands of livestreamers rushed to pay more in taxes after the $210 million tax evasion penalty on Viya. Tax authorities have announced in recent weeks that the influencer economy is still under-regulated and accurate income stream information is difficult to collect. They accused “online platforms and brokerage companies” of failing to disclose and systematize their financials and specifically singled out “agencies that help livestreamers evade taxes.”

“What we are seeing now is a process of industry standardization,” said Huáng Héqīng黄河清, co-founder of Lonely Reader, Beijing-based consultancy specializing in communications and arts. “In the past two years, as the pandemic and the U.S.-China trade war depressed jobs, a large number of people took the leap into the livestreaming industry. After all, there weren’t any better opportunities to make a living,” said Huang. As a result, local and national regulators had previously supported the industry to boost employment, he said.

Now the situation has changed. “It used to be a problem left to the regulator’s discretion, where going after tax fraud [for livestreamers] was optional — now the grey areas are gone, and taxes have to be collected,” said Huang

Despite the tightening of regulations, the livestreaming community and its observers still expect the industry to continue being a cornerstone of China’s internet economy.

“Even if everyone knows they may have to start paying taxes, there is no better alternative for livestreamers when it comes to the job market” Huang said. “It’s an extremely competitive business.”

Livestreaming is China’s most popular dream job

According to a research report in 2021 released by Wú Tóng Guǒ 梧桐果, a campus recruitment platform, livestreaming is now the most wanted job for college graduates in China — more than 60% of Chinese youth were reported to aspire towards a career as livestreamers or online influencers.

In the first half of 2020 alone, China saw over 10 million livestreaming shopping sessions across the Internet, according to data released by China’s Ministry of Commerce. Market research consultancy iResearch and the China Internet Network Information Center estimated that over 1.2 million active livestreamers were in the livestreaming industry in 2020, while more than 380 million Chinese netizens are shopping through livestreaming sales events.

With over 120,000 followers on Little Red Book, a popular Chinese ecommerce platform, Wang Dan also believes livestreamers will find a way to survive within the new status quo. “Because [the business] is too lucrative, as long as overall traffic is high, livestreamers’ incomes will never drop,” said Wang with certainty.

“I’m still willing to handle all the hard work if I can maintain a stable income of 100,000 yuan ($15,800) every month,” said Wang, who’s determined to stay at her job. “After all, that’s just an average income level in this business.

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