strategy for retailers. Never mind the fact that a single post can easily surpass the annual salary of a working professional, the investment in influencer marketing has skyrocketed. Emarketer projects that businesses will allocate more than US$7.14 billion on influencer marketing this year – representing a 15.9 per cent increase from the $6.16 billion spent last year. Influencers’ superpower goes beyond coaxing shoppers to splash the cash, as retailers are in turn now being captivated to become part of the influencers’ own brands. While influencer collaborations and merchandise are not a novel concept, the influence wielded by KOLs has become a force in itself. Even amid the pandemic, TikTok influencers were joining forces to establish a ‘Collab House’ where several different online personalities lived together and created content, combining their influence for lucrative deals and enhanced virality. Following years of sponsored content and collaborations, influencers are now seizing control of their full profit potential by venturing into entrepreneurship and launching their own brands, apparel lines, and standalone apps. A prime example is Jane Chuck (real name Jane Lau), one of Malaysia’s leading influencers, who has successfully leapt into entrepreneurship. Now serving as the founder of beauty and lifestyle brands Motherchuckers and Chuck’s, Lau also recently celebrated the grand opening of its inaugural physical store at the Gardens Mall in Kuala Lumpur. The shift from serving as brand ambassadors to assuming formal roles within a brand is becoming increasingly prevalent. Creators who initially began their journeys as Instagram models are now taking on significant positions such as creative directors within these brands. In a groundbreaking move, the Estee Lauder-owned beauty brand Too Faced has appointed 21-year-old TikTok star Sara Echeagaray to the newly established role of creative director in residence, who will oversee various aspects of the brand, including product development, social content creation, photoshoots, and brand campaigns during a year-long partnership. However, consumers are undeniably becoming more discerning with regard to the authenticity of influencers, with signs they are seeking more relatable figures. In light of this, how are businesses adapting to continue leveraging influencers in their operations? Influencer incubators Influencers are not born but nurtured. While a viral video might grant 15 seconds of fame, sustaining consistency and relevancy amongst fickle consumers requires agility and years of dedication. The desire for quick fame has spurred the growth of talent agencies and influencer boot camps, echoing the model of talent groups in South Korea that built the success of the K-pop phenomenon. Acting as intermediaries in brand deals, talent agencies identify and manage emerging influencers, enforcing formalities and contracts similar to traditional talent agreements due to the sheer scale of influence and brand involvement. The rise of influencer boot camps also gained prominence during the pandemic. From Chongqing to Ireland, educational institutions are pioneering training programs to educate students to become social media influencers, even offering it as a degree. Curriculums cover the art of honing product-selling skills, requesting gifts, mastering virality, and managing a PR crisis. Today, ‘Influencer Farms’ or ‘Social Selling Factories’ have become common, housing a number of self-proclaimed influencers and social sellers and arming them with products, ring lights, tripods, and phones. Managers are assigned to help shape every aspect of an influencer’s online persona – from wardrobe to personality. At the peak of livestream shopping, sellers could make US$30,000 to $45,000 a month – although the agency takes a portion of the earnings. The development of these consultancies should come as no surprise given the eyeballs and attention live-streamers receive: Milieu Insights discovered nearly five in 10 Southeast Asian consumers tune into a live-stream broadcast at least once a week and 63 per cent of them have made a purchase. Recognising the undeniable impact of live-streaming, brands are actively engaging with agencies to tap into these influential platforms. These partners bring to the table ready-made infrastructure with multiple live-streaming studios, expert hosts, recording equipment, and the skills to curate live-streaming content that aligns with the brand’s identity. Successful cases like Philips, the home electronics brand, experienced an impressive 80 per cent surge in organic followers and achieved an average monthly traffic increase of up to 30 times for their online store through live-streaming practices. Meanwhile, brands like L’Oreal have taken a different approach, investing in their own in-house live-streaming studios. A state-of-the-art facility featuring 14 filming sets at L’Oreal’s Jakarta office, is designed to facilitate livestreams on various platforms including TikTok, Shopee, Lazada, and Tokopedia. Before Indonesia’s social commerce ban in September 2023, the app experienced $1 billion in monthly sales since its launch, with a steady monthly growth rate of 30 per cent. This success underscores the robust expansion of livestream commerce – a trend that shows no sign of slowing down, echoing the thriving markets in other dynamic markets in Southeast Asia. The cost conundrum Some senior retail executives share concerns about the cost and profitability of using KOL and live-streaming channels to shift. People Inside Retail has talked to agree it is a great way to build brand awareness if you can find the right live-streaming partner – but the platform can be prohibitively expensive for some brands, usually resulting in stock being sold at a loss. One former CEO of a multinational apparel brand, who spoke to Inside Retail on condition of anonymity, adopted KOLs soon after the advent of the Covid era when a large proportion of the brand’s sales moved online due to regulated store closures. The company sold about 26,000 units of merchandise in China over that time and built a KOL and influencer squad of brand ambassadors in Southeast Asia, covering Indonesia, Singapore, Malaysia, and Thailand. Combined they have about 125 million social media followers, but the industry is a little more nascent in Southeast Asia than in China. “A key challenge for live-streaming, particularly in China is to be profitable. And I hear that from many other executives of brands I talk to, whether it’s consumer products or fashion footwear. Universally, the question is, can you make money from live-streaming, because you’ve got two pressures: One is the actual KOL is going to ask you for a very big discount level because their followers know they bring huge discounts to the table. So if you’re not willing to offer 40 or 50 or 60 per cent off, they are not going to put your product up there.” Most KOLs need to believe in the product they are promoting, so might put the brand through quite stringent quality control tests, wear the gear and look at a lot of aspects of the product – design, range, size, etc. “Then on the back end is their business relationship with the brand: we have to give them a sizable commission. So when you take into account the fact that you’re not selling at full price, and then you’re giving away a very sizable commission to a KOL, then any brand is going to struggle with profitability on live-streaming.” That said, the impact on brand awareness was huge from 13 live-streams the brand executed in China. Some 1.5 million people clicked through to its Tmall website and took a look around. “That represented about 8 per cent of our annual unique visitors to the site at the time, so that’s huge. But how do you solve the profitability puzzle?” Has the influencer bubble burst? Some agencies and brands we spoke to suggest that the influencer bubble has peaked given consumers now are more likely to gravitate toward their peers and micro-influencers for their next purchases. But that assessment would seem to be based more on the way influencers are used and remunerated, suggesting early signs of an acceptance that the business model of discounted prices and high influencer fees has limited long-term potential for profitability moving merchandise. Contrary to this scepticism around the business model, brands are intensifying their embrace of influencers, shifting away from episodic partnerships and offering them salary-based roles. Recognising consumers’ weariness of traditional sponsored ads, this form of partnership fosters a genuine relationship between influencers and the brand, making the connection and endorsement more credible. One notable example of this trend is the hiring of influencers as creative directors – UK fast fashion label PrettyLittleThing, for example, has engaged influencer Molly Mae on a salary of £5 million a year, where she shares insights and expertise in exchange for sponsored content and endorsements. Make-up brand Nudestix has taken a similar approach, appointing American media personality and model Sofia Richie Grainge – dubbed the ‘IT Girl of the Year’ – as its creative director. The brand is also offering investment opportunities to beauty influencers through a Celebrity Stock Option Plan, which offers them equity in exchange for regular posts and specific deliverables. While this approach may result in fewer partnerships annually, brands say it brings substantial benefits and more meaningful collaborations. The key to the success of this approach lies in seamlessly integrating a product into an influencer’s lifestyle, showcasing it consistently and endorsing it authentically, moving beyond mere sponsored post highlights on their ‘vlogs’. Design your own influencer While some argue that the effectiveness of high-profile influencers is waning, the emergence of the metaverse has prompted the birth of virtual influencers, now enhanced by generative AI which is further amplifying their potential. These computer-generated entities are designed in human form, with the ability to alter their appearance, style, and surroundings – a unique quality that allows for complete customisation in alignment with a brand’s preferences and perpetual intellectual property. At the Ho Chi Minh City Shoppertainment Festival last year, virtual influencers were used during livestreams on a TikTok Shop and achieved hundreds of millions in sales across FMCG products. The allure of virtual influencers lies in their perceived perfection, as they “showcase flawlessness through their AI driven existence” in the words of one advocate. These virtual influencers go beyond mere gaming avatars, with some embodying a distinct virtual life story, and using technology to convey warmth and personality, establishing connections with followers, and then influencing their purchasing decisions as would a peer. Their realistic appearance challenges the boundary between human and CGI, with 24 per cent of people unaware that they are following a virtual influencer rather than a real human, according to research. Global brands including Japanese skincare label Shiseido are capitalising on the trend, employing virtual influencers to endorse products through live-streaming channels, resulting in significant increases in daily gross merchandise value (GMV). In the US – according to research commissioned by the Influencer Marketing Factory in 2022 – 58 per cent of more than 1000 consumers surveyed said they followed at least one virtual influencer, although only 35 per cent have purchased a product or service promoted by one. In Vietnam, FMCG brand and retailer Nutifood developed virtual influencers to market its higher-end infant milk formula products to parents who were online in the early hours of the morning engaging with social media channels while feeding or trying to settle their children. A company executive told Inside Retail it was not practical to have humans live-streaming at such an hour, so it set about using AI and nutritional experts to train virtual influencers about the products and helpful advice for young parents. Broadcasts routinely attract up to 20,000 viewers. “We expect that maybe the next generation will train them to be smart enough that they can even answer the questions from the consumers.” Despite rapidly growing adoption – and their apparent popularity and cut-through – virtual influencers remain in their early stages of development. Creating a live stream with a virtual influencer requires significant computing power for rendering. Capturing nuanced facial expressions and body movements remains a challenge. However, the landscape is evolving with companies like Chinese platform Baidu having launched Baidu Intelligent Yunxi Ling, a digital human live broadcast platform capable of recreating a digital human anchor in under 30 minutes using a real person’s video. For retailers, these are favourable developments. According to John Herrman, a technology writer who contributes to the New Yorker, studies indicate it is 91 per cent more cost-effective to use an artificial influencer compared to a human. So, despite the influential power of the next reality star or TikTok sensation, retailers will soon have the opportunity to adopt influencers into their strategy without the expense of their budget – and with fewer scandals too. This story first appeared in the February 2024 issue of Inside Retail Asia magazine.