Summary of Key Points
Live-streaming e-commerce may seem prosperous (with retail sales exceeding one trillion in the first half of the year and a large number of companies rushing into the industry), but there are already underlying issues within the industry: plummeting incomes for streamers, traffic being dominated by “free-rider” users, merchants cutting corners for profit leading to a surge in return rates, and factories closing down due to broken cash flows... The once “golden age” is fading, driven by a combination of factors such as declining traffic quality, intense product competition, and financial pressure.
Detailed Analysis
1. Traffic is Controlled by Free-Rider Users, Making Efforts by Streamers Ineffective
Many viewers in live-streaming rooms are not there to buy products but to “earn coins”—on platforms like Douyin Express and Kuaishou Express, with nearly 1 billion active users each month, 60% of whom are collecting coins (especially the elderly, who will even queue up for eggs but are unlikely to make purchases). They spend two hours in the live stream, only commenting and clicking on products to earn rewards without actually placing orders.
The experience of streamer Zhang Yan is typical: previously, he earned 200 yuan per hour, but now even 50 yuan per hour is considered too little; adding two more hours of live streaming per day has led to a decrease in sales. Worse still, the overall platform traffic is declining, and the cost of acquiring traffic is increasing. In the early days, investing 15% of sales revenue was enough to acquire customers, but now it’s necessary to invest more than 25%. The return on investment (ROI) has dropped from over 20% to just a few percent. Streamers and merchants are both in a dilemma: without investing in traffic, they have no visitors; however, investing doesn’t attract genuine buyers.
2. Merchants Secretly Downgrade Products for Traffic and Profit
Merchants use a practical strategy: they first create “high-end versions” for streamers (e.g., fur coats that cost 1,000 yuan with good materials and proper fit) to build reputation and attract positive reviews, using this to gain platform traffic. Then, they reduce the quality of the second batch of products—using thinner materials and fewer manufacturing processes. The difference is barely noticeable to consumers, but the cost is significantly lower, allowing them to make more profit through sales volume.
Even more aggressive are copycats who reproduce popular products within 48 hours, using cheaper materials and selling them at half the price, claiming that the original versions are a form of “intellectual tax.” The original manufacturers either have to lower their prices and reduce quality or face a sharp drop in traffic. This results in a flood of returns: in women’s clothing live streams, 8 out of 10 products are returned, a 20% higher rate than in traditional e-commerce. Group purchase cancellation rates can reach 50%, with customers regretting their impulsive purchases after realizing the quality.
3. Cash Flow is the Lifeline, and Factories Collapse Easily
The long payment periods in live-streaming e-commerce (15-20 days after sales) and the credit sales model make the financial stability of merchants very fragile. For example, factory owner Zhang lent 200,000 yuan in goods to influencers and merchants, only to have them sell the goods at a low price and disappear, resulting in a loss of several million yuan. The long payment periods on platforms, combined with the new “e-commerce tax” regulations (taxes are automatically calculated regardless of whether the money is withdrawn), further increase financial pressure. Upstream suppliers are also tightening their payment terms, leading to the collapse of factories that used to rely on mutual credit. In contrast, small street vendors have a better advantage: they sell products immediately after the live stream, without holding inventory or taking on debt, and at least gain customer loyalty—this contrast is quite stark.
4. Intense Competition Leaves No Profit, and Everyone Is Struggling
The barriers to entering the live-streaming e-commerce industry are getting lower, with everything from luxury brands to street stalls participating. However, the market pie hasn’t grown; instead, more people are competing for a smaller share. Rising costs of acquiring traffic, widespread copying, and high return rates have pushed merchant profits to the brink. Merchants either cut corners to survive or close old stores and open new ones to avoid taxes (old stores have higher sales volumes and thus higher tax rates), but this instability makes it even harder to collect payments, creating a vicious cycle.
As Zhou Zhou says, “Few people are born as scammers, but in an environment where low prices are the norm, it’s very difficult to be honest.” A single misstep can be devastating.
Conclusion
The “golden age” of live-streaming e-commerce didn’t disappear due to someone’s actions; rather, it was the result of rapid industry expansion followed by a series of problems related to traffic quality, product integrity, and financial models. Behind the surface prosperity, countless streamers, merchants, and factories are suffering the consequences of these issues. To return to the “golden age,” these internal problems must be addressed first.