A streamer is sharing accessory items with subscribers through the Kuaishou app.

BEIJING, July 13 (TMTPOST) – You Huajin, the owner of a 1,600 square meter accessory wholesale market hall in Guangzhou in southern China, had 17 years of experience in the business and served store owners across China and southeast Asia. He was planning to increase the number of his own chain stores in late 2019.

But the coronavirus outbreak changed everything.

You and his family were celebrating the weeks-long Chinese New Year festival back in his hometown in Sichuan province in southwest China when Wuhan, the epicenter of the outbreak, was locked down on January 23.

Subsequently other cities across China also imposed varying travel restrictions. Fearing possible road blockage due to the epidemic, he drove to Guangzhou with his family members in their private car, long before the original return date.

With RMB8 million (about US$1.11 million) worth of goods in his warehouse and the payment of salaries to over 100 employees and the rent for the wholesale marketplace and 14 physical stores looming large, he felt overwhelmed.

March and April are usually the peak season for the sale of accessories. He had high inventories for the season. However, many of his clients were closed temporarily or even went bankrupt in the wake of the outbreak. His market hall went from a hive of activity to a deserted place.

“With no other options available, I and my wife joined live-streaming e-commerce through Kuaishou’s app,” said You. They had two accounts with the app but did not have any experience in live broadcasting.

In the first two days, You invited about 80 friends and acquaintances to the live-streaming chat room. After two days, the number of daily visitors climbed to 300.

In retrospect, You felt that he joined live streaming at the right time. With almost everybody in China being homebound and big streamers without the availability of goods, a person with goods like him had an advantage.

   You Huajin is in his display hall in Guangzhou. 

He found that if he and his wife catered to individual customers directly, the traffic was limited. He turned his account into a “business invitation” account by positioning himself as a “Factory Director” to attract entrepreneurs to reach wholesale transactions with him.

They worked 8 to 9 hours a day on the 8th floor of the Taikang Accessory Building in Guangzhou, sparing no efforts to sell accessories like earrings, necklaces and hats. They logged out of their Kuaishou accounts only after their eyes turned red and voices got hoarse. Their biggest edge over other streamers was the backdrop of their chat room: RMB100,000 worth of goods were on shelves for display.

After two and a half months, they sold a few million yuan worth of goods and all buyers were customers acquired without paying a broker who peddle accounts. At one of their two Kuaishou accounts, they achieved RMB100,000 in sale revenues in a single day.

He paid his employees salaries on time and some of accessary suppliers. He turned his business on the verge of bankruptcy around.

By early June, the account of the “Factory Director” had attracted 56,000 followers and recruited over 1,000 client streamers, who purchased RMB500 to RMB5,000 worth of goods. Some came to the marketplace to shoot for live streaming while others just worked it at their own home. Meanwhile, the other account accumulated 72,000 subscribers, who bought aggregate RMB700,000 to 800,000 worth of goods on average in a month.

In mid-May, You made forays into Douyin, another popular short video and live-streaming app in China, also known as TikTok outside of China. He replicated his experience at Kuaishou at Douyin. This time he adopted a wholesale approach by opening eight accounts at one time. In over 20 days, he acquired over 100,000 subscribers.

At those Douyin accounts, no short videos were shared. Instead, attractive and inexpensive accessary items were shared live by his employees.

Shut Down Physical Stores

In 2019, his company opened four new stores in Guangzhou, with upfront costs of over RMB1 million, including RMB250,000 in the rent and nearly RMB400,000 in renovations.

You compared capital investments in opening a physical store with opening an online account. “An offline store typically requires tens of thousands RMB in investments. Compared with that, a few thousands RMB spent on buying subscribers is minimal,” You said.

“Opening one account at Douyin or Kuaishou is like opening a store. Training a streamer is like training a store manager,” he added.  

Compared with the 30% gross profit margin of the previous wholesale business, the gross margin of sales through live streaming is 50%, he told TMTPost.

In April, he had planned to close seven stores with historical lackluster financial performances and kept remaining seven stores for reopening after the end of the pandemic.

His visit to a factory changed his original thoughts. Upon seeing the once packed workshops have only 1/3 of workers, he realized that the pandemic had impacted the real economy.

“It may take half a year to one year for the economy to fully recover. I cannot afford the carrying costs that long,” said You. He decided to close all his 14 stores.

It usually took a long time to recover investments into a brick-and-mortar store. “Not only the long investment recovery process, but also uncertainty associated with business prospects. In comparison, a few thousand RMB a day as the cost of buying subscribers is more cost-effective. Besides, I can see if it works or not very quickly,” he added.

As of early June, six saleswomen, aged from 20 to 35, in his market hall became streamers. On June 8, TMTPost witnessed one streamer presenting a necklace. She was formerly the manager of the oldest store of You’s stores.

For over one hour of live streaming, there were only two to five visitors and rarely any interaction between them, but she did not pause for a moment.

“It is a new account. After she experiences the difficulties in getting subscribers, she will appreciate subscribers in the future,” You said.

In order to lure subscribers to a new account at Douyin, two streamers worked alternately, with 4 hours each non-stop a day. In addition to live presentation, they also took photos, uploaded photos and links to the goods. They worked over 10 hours a day.

Streamers do not need to have inventories. It is free to use the market hall as the backdrop for live streaming. Streamers get goods at wholesale prices from You and set retail prices on their own. They pay You only after they complete the sale.

In order to facilitate the shipment, You set up a delivery department. His company helps streamers to send out goods. In the past, buyers looked for logistics companies to deliver goods.

In May, sales revenue derived from accounts at Kuaishou and Douyin apps accounted for 95% of his company’s total revenues. In June, the percentage fell to 85%.

You converted a hall for hats display into 13 live streaming rooms. By early July, all the live streaming rooms were put in use. He predicted the transactions from offline and online channels would account for 50% each after the pandemic is over.