By Xinyao Liu, Online Brand Protection Consultant
The Rise of Social Selling and Brand Abuse in China
The concept of social media selling isn’t a new one. Social selling allows brands to find prospects on social media and build a relationship with a network of potential consumers of their products. It’s why platforms like Facebook, Instagram, and LinkedIn are so critical to brand building in today’s digital landscape. Those U.S.-based platforms can only reach so far, however. In China, access to the digital world is highly restricted and censored to block many of the platforms that are commonplace in the west: Google, YouTube, Facebook, Instagram, Twitter, Snapchat, LinkedIn, and WhatsApp are just a selection of the popular sites that are blocked by firewalls. It has given rise to an explosion of home-grown social media sites that now boast millions of users and drive an expansive social media selling economy there. This phenomenon has enabled brands to reach audiences in the country like never before, but with the opportunity also comes risks and challenges.
Market Conditions Yield Unique Brand Ambassadors
Similar to many developed nations, China’s economy was hit hard by the COVID-19 pandemic and eCommerce sites reaped the benefits with new users flocking online to shop, especially for fashion and cosmetics. There are more than 1 billion Chinese social platform users and 98% of interaction happens on mobile devices. What’s more is that commerce functionality is built directly into these sites, making them fertile ground for the emergence of Key Opinion Leaders or KOLs.
Key Opinion Leaders are social media influencers with large numbers of followers on Chinese social media sites often under the age of 30, closely followed by Gen Z and millennial shoppers. These consumers trust their peers more than they trust other forms of marketing and because social media sites in China have stricter user verification requirements than social media platforms in the west, there is a greater sense of trust and authenticity between brands and audiences on platforms like WeChat, Weibo, Douyin, Xiaohongshu, Bilibili, Tabao, and QQ.
KOLs have become so embedded into the social media culture in China that they are now essential to a retail brand’s success and a crucial source of expertise and product knowledge for consumers. Key Opinion Leaders rely on their reputations and therefore generally stand behind the products that they represent, however, that doesn’t stop persistent brand threats like fake goods from infiltrating the networks.
Livestreaming, Marketplaces and Brand Abuse
The most common way that KOLs can reach audiences is live streaming or what has been dubbed “Livestreaming Commerce”. KOLs appear in live-streamed broadcasts to test and demo products. (See screenshots of live streaming sessions on Douyin). Chinese cosmetics company Perfect Diary demonstrated a particularly successful activation of this tactic when during the pandemic, they turned makeup artists from offline stores into KOLs through WeChat and generated more than 140,000 live streaming views, making their way into Alibaba’s Taobao top product list. TaoBao is a popular online marketplace and is also known for having a widespread issue with counterfeit goods.
KOLs often offer exclusive discounts and gifts that consumers wouldn’t otherwise receive, making them even more potent sellers. It also makes them a target for bad actors peddling counterfeit goods. The sales volume from live streaming commerce in China has grown an average of 175% from 2018 through 2021 and that is estimated to grow further through 2023. And the sale of counterfeit goods has become common across all categories, from electronics to cosmetics to supplements and food.
There are multiple ways that counterfeit goods end up in the hands of consumers. The first is that while KOL’s are representing products via live streams, orders are then filled by distributors that sell those products in bulk on social media platforms. Often those goods are sourced through what’s known as the gray market which is rife with fakes. So, while the KOL or host of a Livestream thinks that they are selling legitimate products, the consumer receives a fake.
A second more rampant avenue is via eCommerce marketplaces where illegitimate sellers pose as legitimate brand distributors. And while China has begun to crack down on this, it’s still rampant and very costly.
In 2020 the office of the U.S. Trade Representative reported 34 physical markets and 38 online markets that “engage in or facilitate substantial trademark counterfeiting and copyright piracy”. And the counterfeit and piracy trade costs brands upwards of $1.7 trillion per year and is expected to increase to $2.8 trillion and cost 5.4 million jobs by the end of 2022.
The Counterfeit Challenge
Fraud of this scale is almost impossible for brands to monitor, and the live nature of these brand/consumer interactions make spotting them even more challenging to spot and difficult to remove. With customer trust and millions in sales on the line, traditional brand protection methods are no longer sufficient and advanced solutions are needed to face this increasingly sophisticated abuse. Brand protection under these conditions requires the capability to detect digital images like logos and product images online and the ability to review triage and prioritize enforcement efforts which are only achievable with advanced technology and machine learning capabilities like those provided by LexisNexis Brand Protection powered by Appdetex.
Don’t just protect your brand, make it resilient.
Want to learn about more brand abuse trends like social selling? Download our guide, “Trends in Brand Abuse 2022.”