Buying an expensive handbag for a girlfriend can prove a dangerous exercise, as one man has recently learned. When a girl found out that the Prada purse her boyfriend claims to have purchased for her from overseas was actually a counterfeit, she was so angry that she used the bag to beat him on the street to the astonishment of onlookers, reports Beijing Youth Daily.
She was not the only one outraged about fake handbags. Recently, customers who bought luxury goods from Jumei, an online cosmetics seller, were also shocked to learn that some of the products they had purchased on the site turned out to be counterfeits.
Let’s backtrack a little. Even though Jumei is mainly known for selling cosmetics, the company has quickly evolved into a marketplace for third-party vendors (see WiC239). One merchant has been offloading luxury items like watches, handbags and shoes at steep discounts (sometimes as low as 80% off their ticket price). The vendor claims that the goods were off-season products imported from Europe, and hence the big price difference.
But as the saying goes, if it’s too good to be true, it probably is. In late July, Tencent Technology, a news portal, published an expose revealing that the afore-mentioned third-party vendors has been passing off counterfeit products as genuine. Brands whose goods were copied and sold on the platform include Armani, Hermès, Dior and Burberry, with products that range from make-up to handbags. The reality: they were high-quality knock-offs made in China.
After the report surfaced, Jumei quickly shut down the offending store and removed all of its products from sale. The company added that it is still investigating how the seller was able to provide complete product authentication and customs certificates for the dodgy products.
“We sincerely apologise to all customers who bought from the supplier and will provide non-conditional product return services,” the company said in a statement.
Jumei is not the only offender. State-owned broadcaster CCTV also discovered that online retailer Dangdang as well as JD.com (all three firms are listed in New York) were also selling luxury knock-offs to consumers.
Industry observers say the news is hardly surprising. “The sale of fake goods is a common problem faced by all e-commerce sites that allow third parties to sell on their platforms,” says Doug Young, author of Young’s China Biz Blog.
Yangcheng Evening News estimates that over 85% of the luxury goods sold online are counterfeits. It also reckons that it is an open secret that most e-commerce operators turn a blind eye even if they suspect that the goods might be fake. The reason is that luxury goods – especially deeply discounted ones – drive enormous traffic for e-commerce firms. As Beijing Daily puts it, “For e-commerce firms, traffic is money. Luxury goods at bargain prices are the biggest boost for their popularity.”
But it all comes with a price. “E-commerce firms that knowingly sell fake goods are like a bunch of zombies walking without a soul,” the Economic Observer thundered. “They don’t even know that they are digging their own graves.”
Indeed, consumers are upset. Many say companies like Jumei are being irresponsible by putting all the blame on the third-party seller: “Come on! The companies have to know that even authentication cards and custom forms can be faked! And besides, they can do random spot checks and send the samples to the luxury brands to make sure they are genuine. It’s not that complicated,” one disgruntled shopper wrote on weibo.
Still, investors appear undeterred by the negative press about counterfeit luxury goods in the country. Secoo, an e-commerce firm for luxury goods, recently revealed that it has secured $100 million in funding from investors to help finance expansion, reports Chengdu Business News. The company offers luxury products like handbags and watches but also allows users to offload their second-hand branded products too. To avoid Jumei’s experience, the company says it has its own authentication team that will make sure all the products sold on its site are genuine…
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.