Live Commerce Examined: TikTok Takes Over in Southeast Asia

Live commerce – purchasing from within a video played on a social app – is experiencing tremendous growth with TikTok, in particular, seeing a huge uptake. Firms like BCG believe “shoppertainment” could unlock a trillion dollars in market value for brands.

It is tempting to assume that the next generation of consumers will behave just like the last. But that’s also often a mistake, especially in an era when technology transforms customer experiences on an almost permanent rotation.

It’s a point not lost on Google, a company that through its vast data insights understands what John Batelle 20 years ago famously called “the database of intentions.”

Speaking at an industry trade show in 2022, Google’s Knowledge & Information Senior Vice Prabhakar Raghavan was clear-eyed in his assessment that the next generation of shoppers has already moved on.

According to Raghavan, “In our studies, something like almost 40 per cent of young people (18–24-year-olds) when they’re looking for a place for lunch, they don’t go to Google Maps or Search. They go to TikTok or Instagram.” 

Skip forward to 2024 and they are doing more than just searching, they are purchasing in increasingly large numbers, especially so in the Asia Pacific. And that consumption is driven by live commerce, purchasing from in-app videos.

TikTok, in particular, is cleaning up.

According to Campaign Asia, “TikTok live commerce, for example, was trending towards an incredible US$20bn Gross Merchandise Value (GMV) for 2023 in SEA, and it's growing at a staggering compound growth rate of 30 per cent a month.”

Campaign Asia notes the significance of this achievement, saying that with Southeast Asian eCommerce said to be worth about $100bn, TikTok Shop alone could account for almost 20 per cent by the end of its first year, driven largely by live commerce.

And BCG, in a joint study with TikTok in 2022, said “shoppertainment” could unlock a trillion dollars in new value for brands while overcoming the limitations of traditional online advertising such as decision-making inertia, complex customer journeys which are susceptible to distraction, and high levels of scepticism about branded content.

Momentum building

In 2023 a paper by McKinsey and Company said, “Live commerce has become mainstream in China and is showing signs of strong growth in other markets, including the United States and Europe.” They said the evidence is pointing towards live commerce being an important part of the next wave of eCommerce.

Live commerce builds on the idea of social commerce, which was more about using social media to engage with consumers, build long-term relationships, and ultimately brand. Live commerce lets brands deliver immersive shopping experiences via shoppable videos and enables direct real-time connections to consumers.

It originated in China, courtesy of Alibaba’s Taobao Live about 8 years ago, and now commands a massive share of that market – almost one out of every 5 retail eCommerce dollars spent – according to eMarketer.

Spreading influence

In China, more than 80 per cent of consumers have made at least one purchase from a live shopping experience, according to business statistics site, Statista. In India and Thailand, the figures are at 73 per cent respectively, while in Australia – still a nascent market for the trend, almost a third of shoppers have clicked buy.

According to holding company WPP, social commerce is basically turning into live commerce. “This is not just about media assets in your social feed; it’s about live broadcasting by studios produced 24/7. And human influencers are not always necessary – we have generative AI now.” 

They give the example of influencers in Indonesia who generate millions in revenue per annum for brands. The Indonesian government obviously agreed about the influence of TikTok; They banned the practice in September last year over fears of the impact on local merchants, although it still allows advertising.  

Where there’s a will

TikTok Shop, (and its Live Commerce functionality) re-emerged in mid-December after TikTok Shop and Tokopedia, Indonesia’s largest local hero in eCommerce, merged to create a new market leader. TikTok paid $US840m to buy most of Tokopedia, which was until then Goto’s ecommerce unit. In total it said it would outlay $1.5bn which would include further investments in the business, according to Reuters.  It should also be noted that TikTok had already committed to investing billions into Indonesia specifically, and the deal came with $340m of cash from GoTo, so the “sticker price” is not quite what it seems.

The merger creates the conditions that could facilitate this new entity dominating live commerce in the world’s fourth most populace nation moving forward.

In 18 months, TikTok went from plucky eCommerce newcomer, trying a new twist on an existing model, to controlling the largest local incumbent. 

According to Fionn Hyndman, founder of Stickler, a SaaS firm specialising in the area, “This could be seen as an allegory for how TikTok intends to expand in other markets, reinvigorating lacklustre local players (e.g. Tokopedia was losing share to international players Shopee and Lazada) with huge growth from their attention machine being funneled through frictionless live commerce.”   

Despite these kinds of road bumps, WPP says live commerce is “…growing exponentially. Mega days like 11.11 see products selling out in seconds and these days are becoming critical 'must-win' parts of business KPIs.”

According to WPP, “But take any Asian market, when you go outside tier one cities the influencers who are the most successful are the ones who appear to be local and authentic. It's also one of the reasons why TikTok has been so successful and can deliver better engagement metrics.”

TikTok has some natural advantages in the live commerce market, beyond just a billion monthly active users.

Stickler’s Hyndman added, “TikTok has 125m unique users in Indonesia alone and at the time of the government pause, they had 6m active sellers on the platform and a further 7m affiliates.  Some brands are talking about “influencers”, but these numbers are bigger than that term implies. This is a mass consumer movement where they sell as well as buy.”

Engagement

According to TikTok for Business, 81 per cent of APAC consumers are influenced by entertaining content when making purchase decisions. Earlier research by the company from 2022 suggested users were spending an average of 858 minutes on the app each month and that two out of three said TikTok users say that TikTok inspires them to shop even when they don’t mean to do so.

The study suggested that 40 per cent of TikTok Gen Z’s have bought at least one item or service while watching a social media livestream.

TikTok is a natural home for the kind of shortform snappy content beloved by digital natives, which is also easier for brands to produce – and it will get even easier still as generative AI becomes more prevalent. TikTok itself described live shopping as “allowing brands to seamlessly integrate products from their TikTok Shopping experience into a live session. This lets merchants connect with their audiences in real-time and helps users buy what they discover while watching a brand's stream. Live shopping gives users more opportunities to learn about, engage with, and shop from the brand.”

It has removed further friction from the process by partnering with services like Shopify, Square, and BigCommerce.

TikTok is building a strong lead in the live commerce sector. Global giants like Meta came and went quickly in live commerce, preferring to focus instead on short form videos like Insta’s reels. YouTube has been more active since mid-2023, for instance launching its first live commerce channel in South Korea effectively as a 90 day experiment. But that was after having earlier pulled the plug on Simsim, described as a “live social commerce app”, in March last year.

Regional competitors have also been active. Singapore based Lazada and Shopee, along with Japan’s Rakuten and Indonesia’s Tokopedia (TikTok’s new partner!) have offered live commerce for years. It has been a core part of their offering since Covid after they copied what was happening in China.  

The fundamental difference is that TikTok made it work.

Footnote: Legislation is quickly moving to a vote in the House that would ban TikTok in the United States, or force its sale. Buyers are lining up, and parent ByteDance is mounting its defences. Wherever this goes, it’s unlikely to slow the juggernaut that TikTok Live Commerce has become in Southeast Asia.