Product Search and Sourcing in Live-Commerce: Evidence from a Quasi-Experiment

Abstract

<table><tbody><tr><td><p>Live-commerce has emerged as a major shopping channel in recent years. Those livestream platforms usually integrate external shopping channels (i.e., external e-commerce platforms) into their livestream sessions, allowing influencers and customers to access a broader selection of products. Leveraging the policy shock of banning external shopping channels on TikTok China in 2020, we investigate how reducing the market thickness of product sourcing pool impacts influencers, consumers, and the platform. Surprisingly, we find that reducing product sourcing pools significantly improves live-commerce performance, especially benefitting the mid- and low-tier influencers. To identify the mechanism behind these results, we conduct an in-depth analysis of various live-commerce-related marketing mix variables, such as product promotion, broadcast duration, product pricing and product choices. We find that the improved live-commerce performance is driven by the fact that the influencers are able to select better products from a smaller (vs. larger) product sourcing market. This surprising result occurs because limiting influencers to search and source products from a single platform has an unintended consequence, that is, the influencers are now able to learn the distribution of product quality within the sourcing channel more accurately. As a result, they can select higher-quality products for their livestream sessions. We rule out several alternative explanations and conduct various robustness checks. Our research highlights the significance of platform governance and regulations in shaping the live-commerce ecosystem and enhancing consumer welfare.</p></td></tr></tbody></table>