Gains and Losses of Key Opinion Leaders’ Product Promotion in Livestream E-commerce

In livestream e-commerce, many brand-owners use the key opinion leaders (KOLs) for product promotion and sales, especially in the direct-selling channel. Is such a practice really beneficial to the brand-owner? In practice, we even observe that KOLs sell and then return products for a strong network externality. Therefore, to formulate the brand-owner's tradeoffs of using KOLs, we compare the brand-owner's profits with and without a KOL (i.e., brand-owner uses a KOL for product promotion vs. brand-owner invests in product promotion by itself) in a dual-channel system comprised of the brand-owner's direct-selling channel and its traditional retail channel. We find the brand-owner's gains/losses of using the KOL highly depend on the commission rate, retain rate and the network externality intensity. Interestingly, we reveal that the enhanced KOL effect might not be necessarily beneficial to the brand-owner and can even hurt it significantly. As the channel rival, the retailer may benefit from the brand-owner's using the KOL (because its procurement cost may be lowered) and the market expansion (because the use of KOL may spill over to the retail channel).