SHANGHAI — At a department store here this month, a cosmetics sales clerk touted the virtues of a product designed for sensitive skin. Moments later, customers were flocking to buy.

All this happened not in person, but online in a live video on TikTok. ByteDance, the Chinese startup behind the viral video sharing app, sees it as a tool for challenging Alibaba Group Holding’s dominance in China’s e-commerce market.

“Live commerce” — mini-infomercials for the smartphone age — is projected to become a 961 billion yuan ($135 billion) industry this year, according to Chinese data provider iResearch. That is double the year-earlier figure, and nearly one-tenth of…

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