Managing Sales via Livestream Commerce
Livestream commerce has become an important sales channel with billions of revenue potential. However, practice has shown that livestream sales present unique challenges that may hurt brands' profits if not addressed properly. In particular, brands often need to negotiate sales prices and commission rates with key opinion leaders (KOLs) who promote products in livestream sales. On the one hand, KOLs can increase consumer reach, enhance consumer valuation of the product, and improve profitability of the sale. On the other hand, KOLs - who typically promise low sales prices in their shows - are subject to reputation damage risks if their followers find cheaper prices of the same product elsewhere. As a result, KOLs often bargain for deep discounts, which lead to price reduction in negotiation and reduce brands' profit margins. In this paper, we focus on this tradeoff and examine how brands can effectively cope with the hidden costs associated with price negotiation in livestream sales. We show that due to reputation concerns behind KOLs' negotiation efforts, featuring a top KOL with a large fanbase and strong influence over consumers in livestream sales may not guarantee better profitability compared to traditional sales. Moreover, to mitigate the KOL's reputation damage concern in a livestream sale, price reduction may not be the brand's optimal negotiation strategy. In particular, when product availability in the livestream sale is low, offering a higher commission rate to the KOL may be a more effective strategy than price reduction.
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Meeting URL: https://eur-nl.zoom.us/j/96886971957