"Revenues from livestreams can reach tens of billions of dong per session, but it is difficult to earn profits from them", the
41-year-old entrepreneur says (VND1 billion = $39,285).
Hiring social media influencers for livestreams has become a popular trend on TikTok, but as brands compete to offer increasingly bigger
discounts, they are also seeing profits turning into losses.
Lam says brands need to pay an influencer VND20-50 million for 30 minutes of livestreaming plus a commission of at least 15% on successful orders.
They also need to pay social media platforms a fee of 5-6% of their sales.
Apart from these expenses, brands also need to give big discounts to attract viewers.
"The marketing cost to have a product appear on a livestream is too high, up to 50% of the retail price," Lam says.
But the large number of orders also comes with a high cancellation rate of around 15% as customers buy due to fear of missing out and repent at leisure, he explains.
"Livestreaming is not a reliable sales method."
Repenting customers are bad news for sellers.
TikTok Shop, which has been relying on livestreaming to boost user numbers, has the highest ratio of unsatisfied customers among major e-commerce platforms in Vietnam.
Last year over 13% of its customers gave products zero to 3 points out of 5, while this ratio was less than 3% for other e-commerce platforms such as Tiki and Sendo, according to data provider Metric.
Le Thanh Van, founder of fashion brand GUMAC, says he has been using livestreaming less and less over the years after seeing its negative side.
Part of the reason is that the company needs to pay various expenses to put a product on a platform, and then needs to keep a large inventory to process the huge number of orders it usually gets after each livestream session, he says.
Discounts need to be substantial and so prices can go to an unusually low levels.
"Livestreaming has become a race to the bottom."
It can be a short-term marketing boost but not a long-term strategy, he adds.
"If Vietnamese businesses are stuck in the livestreaming race, they will flood the country with cheap goods and unfair competition."
A race among platforms
While companies race to lower prices, social media platforms compete to hire the top influencers and sign exclusive deals with them.
"Some platforms cut incentives of influencers who livestream on any other platform except their own," Donnie Chu, founder and chairman of digital media company DC Media Global, says.
E-commerce platforms also throw money into livestream sessions in the hope of making them go viral.
Earlier this month TikTok Shop funded $2 million worth of product discounts in a mega-sale livestream.
In the long run this creates a habit in customers of not buying if there is no discount, Chu points out.
"When platforms can no longer give discounts, there will be no more customers."
Noticing the trend Chinese shoppers are taking the opportunity to send their cheap products to Vietnam through e-commerce platforms.
"Some products are now sold by foreign sellers at lower prices and with faster deliveries, which creates a higher risk of Vietnamese vendors being kicked out," Chu says.
Some Chinese e-commerce platforms even invest in warehouses in Vietnam or near the border to reduce shipping time and costs.
JD.com, for example, built two warehouses of over 100,000 square meters each in Vietnam in 2022.
On TikTok Shop, some vendors are hiring Vietnamese-speaking Chinese to host livestreams to sell made-in-China products.
Pham Ngoc Duy Liem, cofounder of streaming service provider GoStream, says that eventually the "middleman" in e-commerce – vendors who buy products from Chinese platforms and sell them in Vietnam – will no longer exist as influencers are making deals directly with Chinese manufacturers and vendors.
Livestream idolization
Though livestreaming is undoubtedly a strong marketing tool, businesses are being cautious in using it especially if other distribution channels are hurt by it.
Hoa Linh Pharma in April last year sold a shampoo at VND11,000 on a livestream, a seventh of the minimum price it allows other distribution channels to sell at.
Nearly 114,000 comments were recorded after the livestream, most of them negative, expressing how customers and retailers were outraged by its unfair pricing policy.
The company eventually had to issue an apology to its retailers.
A long-term brand cannot keep throwing steep discounts into a new distribution channel as it might interfere with other long-established channels, Pham Thao Linh, head of e-commerce at L’Oreal Vietnam’s consumer product division, explains.
TikTok Shop prioritizes content based on trends and therefore a brand will rarely be able to stay on top in sales on this platform for long, which is why companies need the stability that other distribution channels offer, she says.
L’Oreal therefore sets a minimum price for distribution channels, and will not partner with sellers who want to go below that floor, she says.
"We won’t sell our soul by offering prices lower and lower."
Van of GUMAC has also learned to moderate the use of livestreaming to not more than a third of the company’s revenues.
As livestreaming rises fast but also drops quickly, he limits each of his staff streamers to four hours of work a day and rotates them in other jobs after two years.
"Livestreaming ultimately is just a distribution channel that should not be idolized. What keep customers coming back are product quality and service, not gimmicks."
Story by May Trinh, Viet Duc
Graphics by Dang Hieu, Thanh Ha
