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Kuaishou IPO: live-streaming e-commerce holds promise for future profitability but remains clouded by regulatory uncertainty

  • Kuaishou’s live-streaming e-commerce business has set itself apart with celebrities and devoted fans willing to buy whatever they are selling
  • The business is helping make Kuaishou Hong Kong’s hottest IPO ever, but complaints about product quality have some concerned about future regulation

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Kuaishou has the hottest IPO in the history of the Hong Kong stock exchange, but despite the promise of its live-streaming e-commerce business model, there are concerns about regulatory oversight after consumer complaints. Photo: Getty Images
Tracy QuandJane Zhang

One selling point for Kuaishou, the Chinese video-sharing app that has turned into Hong Kong’s hottest initial public offering ever, is its eye-popping growth in “live-streaming e-commerce”, a newly popular form of shopping online in China.

But analysts have said the business model is at risk of increased regulation from Beijing, which could lead to slower growth and make it harder for Kuaishou and similar platforms to profit from the booming service, which often features online personalities or celebrities showcasing products in live broadcasts to woo viewers into placing orders.

In 2020, KPMG estimated China’s live-streaming e-commerce industry was worth about 1 trillion yuan (US$154.6 billion) – a value primarily shared among three players. Taobao Live – from China’s largest e-commerce platform owned by Alibaba Group Holding, the owner of the South China Morning Post – still accounts for about half of the market, according to Qianzhan Industry Research Institute. Kuaishou and its rival Douyin, the Chinese version of TikTok, share the bulk of the other half.

Kuaishou has stood out from the crowd owing to the platform’s “fan culture”, which has made it ideal for growing live-streaming e-commerce. Its gross merchandise value (GMV) from the business has ballooned to 204 billion yuan in the first nine months of 2020, surging from the 59.6 billion yuan it made in all of 2019, according to the company’s prospectus published with the Hong Kong stock exchange.

China’s live-streaming e-commerce market is expected to continue its rapid growth over the next year by GMV and penetration rate. Graphic: SCMP
China’s live-streaming e-commerce market is expected to continue its rapid growth over the next year by GMV and penetration rate. Graphic: SCMP
This has helped strong demand for the Beijing-based company’s stock, which was oversubscribed 1,200 times for its US$5.4 billion IPO head of public trading that begins on February 5. Compared with ByteDance’s Douyin, Kuaishou has an advantage with its users, who trust the idols on the platform and are more willing to buy goods from them. Even though its 300 million daily active users are half the number using Douyin, Kuaishou’s GMV for live-streaming sales could be even higher than that of its competitor. Douyin does not release its figures for the business, but a report from local tech media LatePost said the platform’s GMV was under 100 billion yuan in the first three quarters of 2020.
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