Yesterday we reported that Chinese social commerce firm Yunji (NASDAQ:YJ) was surging on no real news. All that changed after the closing bell, when Yunji delivered an attention-grabbing press release. After posting 90% gains on Tuesday, YJ stock is continuing its trek higher. What do you need to know?
Yesterday, much of the story was around how Yunji was riding a wave of investor interest in social commerce higher. Essentially, the company builds on the traditional e-commerce model, relying on social media to engage with consumers. Thanks to its increased customer engagement, it can drive sales and build visibility for brands.
Now though, investors have a bit more news to work with. So what is the big story behind the rally in YJ stock? Well, the company shared that it had formed a cooperative agreement with Douyin, a livestreaming and social media platform that is part of ByteDance. For those unfamiliar, ByteDance is also the Chinese parent company of popular TikTok.
Right now, Yunji plans to use its online shopping content through Douyin to connect with new consumers and promote its products. Plus, through specific Douyin livestreaming events, it can focus on selling higher-end products like those from its private labels. Although it has experience using social media platforms like WeChat to connect with consumers, this more formal partnership could give it a boost.
There is another thing to note. Although Yunji itself has some concerns about its operations, namely around the risks that come through selling via social media, it has tested this livestreaming model before. Importantly, it hosted a livestreaming sales event through Douyin in September. During that first trial, Yunji brought in 87.5 million yuan in gross merchandise value. It also reached 10.7 million viewers. This promises big things as Yunji ramps up its relationship with Douyin.
Why Livestreaming Matters for YJ Stock
Kids and their dang technology, right? It may seem odd investors are chasing YJ stock to the moon because it plans on livestreaming products. However, there is some proof this model works. This is true even beyond the early success Yunji had through Douyin.
In fact, Chinese e-commerce giant Alibaba (NYSE:BABA) has long embraced livestreaming as a way to engage customers and boost sales. During its 2020 Singles Day holiday event, Alibaba hosted livestreams for an entire day to promote products. As we wrote at the time, combining entertainment and e-commerce is a unique way to deliver what customers want. And during a time when the novel coronavirus is limiting in-person shopping, it is a great way to reach new buyers. Heck, a livestream even helped sell a $43 million townhouse.
As consumers continue to clamor for more personal shopping experiences, and e-commerce continues to dominate, there is reason to believe livestreams hold real potential. Do your due diligence and make sure you understand the risks Yunji faces. Then, consider the future of YJ stock.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.