Real or virtual: Can digital hosts win over consumers?

Learning objectives and key issues

The case will support a wide range of learning objectives focused on gaining an understanding of the following:

• Understand the background of the application of digital human hosts in livestream e-commerce and its advantages.

The problem

In China, the booming livestream e-commerce has become one of the core scenarios for consumer entertainment and shopping. More and more consumers are accustomed to using their mobile phones to browse livestream e-commerce platforms on a daily basis, obtaining product information, participating in promotions and completing purchases through real-time interaction. The main reason why this shopping method can quickly attract consumers is that the mode of livestream e-commerce is through the host's real-time display of goods, interactive Q&A and limited-time offers, which greatly enhances the consumers’ participation and then trigger their impulsive consumption. This strategy remedies for the absence of emotional connection and instant interaction in traditional e-commerce while simultaneously providing consumers with a better level of engagement and trust (Gersovitz et al., 2023; Louise, 2024; Ruether, 2022).

The development of livestream e-commerce in China

Since 2016, consumers’ dependence on online shopping, along with their strong desire for interesting and interactive consumer experiences, has resulted in the fast emergence of livestream e-commerce as an emergent and new e-commerce model. Livestream allows consumers to not only intuitively learn the features of the product and how to use it but also communicate with the host to address their questions, which increase their trust (Gersovitz et al., 2023; Wongkitrungrueng and Assarut, 2020). Simultaneously, merchants use new marketing strategies like limited-time offers to increase customers’ desire to purchase. The mode of livestream e-commerce is that hosts display and introduce products in livestream on social media platforms, short video platforms, or e-commerce platforms, making full use of the hosts’ personal charisma and professional recommendations, while interacting with the viewers and guiding them to make purchasing decisions, also known as livestream with selling goods (Cheng, 2023; Ruether, 2022; Thomas, 2022). Viewers may improve their purchasing experience by communicating with hosts and other viewers via comments, likes, and shares (Meng et al., 2021; Yuan et al., 2025).

Statista, a Chinese statistics organization, estimated that there would be about 770 million livestream users in China by August 2024, illustrating the enormous potential and impact of livestream e-commerce in the consumer market (SDG, 2024; Thomala, 2024). Since 2016, e-commerce giants such as Taobao Live and Jingdong (“JD”) have risen to prominence, and livestream platforms such as Kuaishou (“Kwai” or “Snack Video”), Douyin (“TikTok”), and Xiaohongshu (“Rednote”) have entered the competition, further enriching the industry ecology of livestream e-commerce (Louise, 2024; Thomas, 2022).

According to a McKinsey report, the conversion rate of purchases within livestream is close to 30%, which is 10 times higher than traditional e-commerce (Arora et al., 2021). As offline retail industry took a hit with the 2020 Covid outbreak, livestream e-commerce emerged as an important channel for brands to stay connected with consumers. Many companies begun to accelerate their transformation through livestream, not only expanding their sales channels, but also improving their consumer reach (Gersovitz et al., 2023; Kim et al., 2023; Sands et al., 2022). So far, livestream e-commerce has covered a broad variety of categories, including everyday consumer items, luxury goods, agricultural products, and industrial commodities. Live e-commerce has become a major avenue for Chinese companies and merchants to extend their markets, get visibility, and enhance sales (Louise, 2024; Zhu, 2024).

PureSkin: Transformation on livestream e-commerce platforms

PureSkin is a Chinese domestic high-end skincare brand that has been dedicated to combining natural plant essences with modern technology since its establishment in 2019, aiming to provide consumers with gentle yet effective skincare products. With its professional R&D team and rigorous quality control, PureSkin quickly gained consumer favor and established a presence in the highly competitive skincare market. From the outset, PureSkin focused on e-commerce as its core strategy, opting not to set up physical stores but instead concentrating on expanding its online channels.

Since 2020, PureSkin has turned to the development of livestream e-commerce as an important way for the brand to interact with consumers in depth, and has begun to cooperate with mainstream e-commerce platforms, such as Taobao, Douyin, and Xiaohongshu, to carry out livestream e-commerce business. Through extensive content creation, PureSkin has established a deep emotional connection with consumers. The brand has established its own team of professional hosts to create real-time product demonstrations and interactive experiences for consumers. In the livestream room, the hosts successfully stimulate consumers’ interest in purchasing by demonstrating the effect of product usage, sharing skincare knowledge, and launching promotions such as limited-time offers. In livestream e-commerce, consumers are not only able to intuitively understand product details, but also communicate directly with the hosts, which increases their trust in the brand and confidence in purchasing even more (Kim et al., 2023; Wongkitrungrueng and Assarut, 2020). Alex, a managing director of PureSkin, stated:

The model of livestream with products is a perfect fit for PureSkin’s brand development strategy, mainly because we can use livestream as a format to be able to more accurately understand what consumers really want from their skincare and then launch more targeted products to meet the market’s expectations. We are also willing to bring more affordability and value to consumers by offering samples or moderate price adjustments.

During the 2022 epidemic, consumers relied heavily on online shopping, livestream e-commerce quickly became an important channel for consumers to obtain information and shop with as its instant interaction, intuitive display and personalized recommendations (Gersovitz et al., 2023; Louise, 2024). The rapid development of livestream e-commerce has also become an inevitable choice for skincare brands seeking marketing strategies in the face of fierce competition. Livestream e-commerce has quickly become the main battleground for brands, and with the competition for hosts resources and the rising cost of hosts, small and medium-sized brands are facing great challenges in competing for high-quality hosts (Wang et al., 2021).

During the previous year, PureSkin was frequently caught in the predicament of an insufficient number of hosts, particularly during periods of intense promotional activity, making it difficult not only to ensure that all slots were covered, but also impossible to achieve 24-h uninterrupted operation of livestream content. This constraint, along with rising consumer demand for variety and creativity in live content, as well as escalating needs for content formats in the livestream market, has made it impossible for the current operating model to respond to market developments. Dora, a director of the livestream department, stated:

With brands competing for host resources for traffic and sales during big promotions, the impact of host slot clashes is particularly significant for us, and we must explore other alternatives as soon as possible to cope with the current issues.

However, the role of the host as an important bridge between brands and consumers has become increasingly important. Along with the intensified competition in the industry, the challenges faced by hosts are also increasing. Not only do they need to cope with the physical and psychological pressure of tight schedules and long hours of livestream work, but they also have to face changes in the rules of livestream platforms, all of which make the work of hosts more complex and stressful. PureSkin’s host team is beginning to face more and more challenges.

There was hardly any break during the sale; the schedule was crazy tight. Especially on those back-to-back days when I had to be live for over four hours straight after 10 p.m., and by the time I got home, it was already early morning. It was exhausting, says human host Lily, who’s repeatedly shared how powerless she feels with the intense workload.

Searching for innovation: The digital human host path

At the end of 2022, PureSkin faced year-on-year escalating operating costs, pressure from a shortage of host resources, and increased commission percentages from livestream platforms. Meanwhile, China’s livestream market demand continued to be strong and competition was becoming increasingly fierce. Against this backdrop, digital human technology is gradually moving from an emerging trend to mainstream application, which not only reduces the reliance on human hosts, but also is seen by more and more brands as an effective solution to the industry’s dilemmas through accurate branding and round-the-clock livestream capabilities (Cheng, 2023; Allal-Chérif et al. al., 2024; Gao et al., 2024; Yuan et al., 2025).

During an industry seminar, the PureSkin team gained insights into the potential applications of AI agent technology in livestream e-commerce. Some brands have successfully addressed the shortage of human hosts by utilizing digital hosts while simultaneously establishing innovative and technology-driven brand identities. For instance, the successful cases of virtual influencers implemented by renowned cosmetic brands Florasis and Perfect Diary sparked PureSkin’s keen interest in exploring digital hosts (Florian, 2021; Lu, 2023; Williams, 2023; Yi, 2021; Zhang and Gupta, 2021).

The PureSkin team realized that a digital human host could not only fill the gap of a live human host, but also run 24/7 to meet the growing livestream needs of brands. By catering to younger consumers’ preference for a digital and tech-savvy shopping experience, digital human hosts could also help brands to increase their market appeal, a fact in which Alex, a managing director, expresses strong confidence:

The digital human host is a new possibility that we are exploring. Not only can it run 24/7 to make up for the lack of human hosts, but it also allows brands to get closer to what young consumers expect for digital and technological experiences. This is not only a solution to a resource challenge, but also an important attempt to realise an innovative strategy.

To achieve this objective, PureSkin began exploring solutions for digital hosts within the market, engaging with multiple vendors to evaluate the feasibility of AI agent technologies. Concurrently, the team conducted extensive internal discussions, delving into critical aspects such as the design of the digital human host’s image, its alignment with the brand’s values, and its interactive capabilities.

The brand department was cautious about the development of the digital human, concerned about whether the image of the digital human would align with PureSkin’s established brand philosophy, said Xu, a Brand Manager:

Digital humans are really attractive, but we’ve always emphasised the idea of natural, authentic skincare. If the image design feels too virtual or overly high-tech, it might conflict with the brand’s core values.

In addition, the team members responsible for supporting the digital human hosts were concerned about whether the digital human hosts could convey temperature and emotion in the same way as the human hosts did when interacting with consumers and build the trust between PureSkin and consumers (Gao et al., 2024; Hu and Ma, 2023; Li and Huang, 2024; Yang et al., 2022). 2024). Dora, a director of the livestream department, puts it this way:

The essence of business is for profit, and if bringing in a digital human host doesn’t bring in sales, it doesn’t make any sense.

In contrast, marketing department had higher expectations for digital human hosts. They recognized digital human hosts as a strategic tool for engaging younger consumers and raising brand recognition (Cheng, 2023; Seymour et al., 2023). However, they also said that the marketing success of digital human hosts must be supplemented by content selection, and that relying only on technology may fail to match viewers’ expectations of live content richness and interest. Kao, a marketing director, said:

Younger generations love anything fresh and techy, so a digital human host could make PureSkin feel more modern and innovative, helping us tap into the Gen Z market. Plus, since the digital host is available 24/7, we can reach more consumers at all kinds of different times.

The digital department expressed strong confidence in the development of digital human hosts while maintaining caution regarding the challenges involved. They emphasized that the development process requires sophisticated virtual modeling, AI-driven interaction, and real-time rendering technologies (Goodrich and Schultz, 2007). Zhang, a head of the digital department, noted:

We need to make sure the digital host can answer viewers' questions in real-time during livestreams and showcase product-related content. That places high demands on our technology and system stability, potentially leading to a significant increase in development and maintenance costs.

Despite differing opinions, the PureSkin team reached a consensus: the design of the digital human host must align closely with the brand’s visual style, reflecting its core values while meeting consumer expectations. The digital human host is not merely a technical tool but an extension of the brand itself, directly influencing the consumer’s brand experience (Alabed et al., 2022; Chen et al., 2024; Seymour et al., 2023). After 3 weeks of internal discussions, PureSkin decided to focus on the design aspect and collaborate with an external art design team to develop the optimal solution for the digital human host.

Digital humans design: From likeness to spirit

In discussions with the art design team, PureSkin emphasized that the image design of the digital human host should not only embody a sense of technology and fashion but also reflect the brand’s core philosophy of “integrating nature and technology.” The supplier also suggested that through meticulous design, digital human hosts could achieve a high degree of anthropomorphism while exhibiting more human-like characteristics during interactions. Senior designer Anne proposed leveraging technology to imbue digital humans with a sense of “spirituality,” which she argued is a defining quality of digital beings (Laurien, 2022; Li and Sung, 2021).

It’s true that there is a wide variety of digital humans on the market today, and many of the technologies are pretty advanced. But the problem is that the spirituality of these digital humans often does not come through and they look more like lifeless puppets, missing an inner sense of life.

Meanwhile, PureSkin also suggested that the image design of digital human hosts had to focus on details, such as clothing, hairstyle, expression, and movement, which not only helped digital humans better interact with viewers, but also conveyed the core values of the brand (Alabed et al., 2022; Chen et al., 2024). Xu,a brand manager, said:

“The digital human hosts can’t appear too cold or lifeless; it needs a natural, approachable aesthetic with a touch of technology so that it both fits the PureSkin brand philosophy and appeals to younger consumers.”

In addition, the facial expressions and interactive gestures of digital human hosts needed to be realistic enough to better establish an emotional connection with consumers. For instance, through subtle eye changes and gentle smiles, digital human hosts were able to make consumers feel relatable (Goodrich and Schultz, 2007; Li and Huang, 2024; Li and Sung, 2021). Kao, a marketing director, suggested drawing inspiration from a few cases:

You can look at successful examples like AYAYI, LING, and Liu Yexi (Laurien, 2022; Williams, 2023). They feel like supermodels brought to life. Sure, you can tell they’re virtual at first glance, but they still have this convincing sense of realism, especially with their lifelike skin textures and the human-like energy in their eyes and facial expressions. (Laurien, 2022; Williams, 2023)

The art design team meticulously documented PureSkin’s requirements and expectations for the digital human host and proposed an initial proposal within 2 weeks. However, the preliminary proposal raised new concerns for PureSkin due to its budget and development timeline significantly exceeding expectations. As a result, PureSkin decided to adopt a more cautious approach, opting for a gradual rollout of the digital human host development plan. They prioritized testing market acceptance and gathering consumer feedback to inform and adjust their decision-making process.

Discover consumer insights through focus group study

For PureSkin, digital human hosts demonstrated significant potential in enhancing operational efficiency and reducing costs. However, the full adoption of this emerging technology in livestream e-commerce remains a topic of debate (Hu and Ma, 2023; Liu et al., 2025; Sands et al., 2022; Wan and Jiang, 2023). To ensure that the design and positioning of digital human hosts align with consumer preferences, the General Manager of PureSkin tasked the market development department with organizing a focus group discussion. This session explored various aspects, including the boundaries between real and virtual experiences, acceptance, appeal, interactivity, trustworthiness, and purchase intentions (Breen, 2006; Kim et al., 2024; Sorosrungruang et al., 2024). Participants included brand loyalists, consumers with livestream shopping experience, groups interested in artificial technology, and consumers who were skeptical about digital human hosts. By gathering insights from the focus group, PureSkin aimed to better understand consumer expectations and concerns, enabling them to tailor future designs and promotional strategies to meet consumer needs more effectively.

The results showed that consumers were generally looking forward to the sense of technology and new experiences brought by digital human hosts. Many participants indicated that the innovative image presented by digital human hosts brought freshness and futuristic feeling to livestream, especially if they were interactive and well-designed, which could significantly enhance their appeal (Chen et al., 2024; Li and Huang, 2024; Li and Sung, 2021).

For instance, one consumer mentioned, “The digital human host looks interesting, especially with that high-tech feel that makes the livestream seem edgy.” However, consumers also emphasised the importance of interactivity, “What I care about is whether they can interact naturally like real people, such as answering my questions naturally or with a sincere tone. If they are as mechanical as robots, I might just give up watching.”

However, consumer feedback also reflects some underlying concerns. The first concern was the discomfort of blurring the boundary between the real and the virtual. Some consumers mentioned that while digital human hosts were too close to the real person, there were still differences in details, which may cause “uncanny valley” effect, making viewers feel uncomfortable (Arsenyan and Mirowska, 2021; Kim et al., 2024; Mori, 1970; Seymour et al., 2021; Stein and Ohler, 2017).

As one participant stated, “Her eyes look so real, but after a while, it feels like she’s staring right at you, and honestly, it’s kind of creepy.”

Second, the lack of emotional connection and trust was also mentioned. Consumers believed that human hosts are more able to build a sense of trust with their viewers through genuine interactions and the sharing of real-world experiences, whereas digital human hosts may fall short in this area (Gao et al., 2024; Hu and Ma, 2023; Liu et al., 2025; Wan and Jiang, 2023).

Participants mentioned, “There is a sense of intimacy and trust in chatting with real human hosts, but digital human hosts may not be able to achieve this feeling.” Or even, “Digital human hosts just recapitulate the ingredients and functions of the product without seeing the effect, which made me not confident to buy.”

Furthermore, the authenticity and practicality of the product remain core considerations for consumers when making purchasing decisions (Fishbein and Ajzen, 1975; Sheth et al., 1991; Yang et al., 2022). For products such as skincare items, consumers expressed a preference for real feedback from human users rather than relying on promotions by digital human hosts.

For instance, one participant remarked, “A digital human host cannot demonstrate the actual effects of skincare products, which makes it hard for me to trust.” Another consumer noted, “What matters most to me is the product’s real effectiveness. It doesn’t make a difference to me whether it’s a human or a digital host.”

Overall, consumers exhibit both expectations and concerns regarding digital human hosts. PureSkin must prioritize balancing technological sophistication with human-like qualities during the design process. Instead of focusing on hyper-realistic details, efforts should be directed toward optimizing expressions, voice, and interactive content to create a natural and trustworthy experience for consumers (Seymour et al., 2021; Sorosrungruang et al., 2024).

Effectiveness of digital human hosts in consumer interaction

At the beginning of 2024, PureSkin completed the initial testing of digital human hosts and began gradually integrating them into livestreaming activities. While digital human hosts, with their cutting-edge appearance, proved effective in attracting greater audience attention in specific scenarios such as new product promotions, event warm-ups, and brand image communication, consumers still exhibited a higher level of trust in human hosts for products that emphasize usage effects and realism, such as highly functional skincare products. Consequently, PureSkin decided to adopt a hybrid strategy of alternating between digital and human hosts to maximize the advantages of both types of hosts.

According to the subsequent operational data analysis conducted by PureSkin, livestreams featuring human hosts generally demonstrated a 23%–29% higher conversion rate compared to those featuring digital human hosts, particularly in scenarios requiring explanations of product usage effects. Consumer purchasing decisions during livestream shopping were influenced by emotional resonance and interactions with human hosts in 65% of cases. While digital human hosts were effective at drawing traffic, increasing viewership by an average of 15%–20%, their performance in actual purchase conversions remained inferior to that of human hosts.

In the context of skincare product demonstrations, consumers showed a strong preference for the authentic feedback and personal experiences provided by human hosts. Moreover, while digital human hosts were perceived as aligned with the brand’s tone and identity, their lifelike expressions and movements occasionally elicited feelings of creepiness, and they struggled to establish emotional resonance during interactions. Although 62% of consumers acknowledged that digital human hosts enhanced the brand’s technological and futuristic appeal, 86% emphasized that trust in the product itself—encompassing quality and promotional offers—was the decisive factor in their purchase decisions. And the real feedback and experience that human hosts brought to the table was seen as central to building trust.

Discussion questions