China Consumer

Prices too good to be true?

New e-commerce site launches with fanfare and criticism

Zhao-Wei-w

Zhao Wei: says hello to Wanlimu as its new brand endorser

In 2017 Alibaba’s Taobao was found to have at least 240,000 vendors that were selling fake goods. Its rival Pinduoduo was also forced to remove more than 10 million items from its site. More recently, a US consumer watchdog group estimated that 80% of the world’s counterfeit goods come from China.

Small wonder that trust in the provenance of consumer goods in China is often low. So when a new e-commerce site offers high-end beauty products at a fraction of the retail price, consumers have grounds for being cautious.

Last week, shoppers were shocked to find skincare brand SK-II’s bestselling Facial Treatment Essence discounted to Rmb799 ($113.11) on Wanlimu, the luxury e-tailer founded by consumer credit company Qudian (see WiC385).

For comparison, the same 230ml bottle costs Rmb1,540 at retail counters and on Tmall, Alibaba’s e-commerce platform.

Wanlimu had even added incentives on top of the discount – meaning that bargain hunters could purchase the brand for just Rmb480, or a third of the original price.

Wanlimu claims that the products on the site are genuine and that its buyers procure them from duty free shops around the world to make sure that the prices they find are the cheapest available.

The e-commerce site also sells luxury handbags (think Gucci and Louis Vuitton), sourced from retailers in Europe. It even offers money-back guarantees – up to 10 times of the purchase price – if the shopper finds the product to be fake.

To drum up interest, Wanlimu has made a marketing splash by hiring five A-list celebrities, including Zhao Wei and Huang Xiaoming, to endorse the platform and appear on its livestreams. Endorsements like these could have cost Qudian at least Rmb100 million. Taking a page out of Pinduoduo’s playbook, it has also promised Rmb10 billion in subsidies to lure new shoppers.

The aggressive marketing tactics have been met with scepticism about how the platform is going to fund its sales drive. “Unlike Pinduoduo, whose backers Tencent and Sequoia Capital have cash to burn, Wanlimu’s only backer is Qudian, a company that saw its market value drop from Rmb10 billion to just Rmb400 million [since its IPO in 2017],” Lanjing Caijing remarked.

Founded by entrepreneur Luo Min in 2014, Qudian got its start as a consumer credit firm, raising $900 million on the New York Stock Exchange back in 2017. However, its shares had tumbled from an IPO price of $24.9 to just $1.52 this week as the Chinese government cracked down on micro-lending (see WiC400). It also dabbled in car-purchase financing and e-learning but neither of those ventures were successful. Last May, Alibaba’s Ant Financial, one of its earliest backers, dumped its entire stake in the Xiamen-based company.

On the face of it, sales of luxury goods is a promising sector. Chinese shoppers spent more than $121 billion on luxury items including watches and jewellery in 2017, accounting for 32% of the worldwide total. Increasingly these products are being bought and sold through e-commerce channels too. Tmall and JD.com have been courting the luxury brands as customers, for instance.

Qudian is now betting that Wanlimu can do something similar. “It is not hard to tell that Wanlimu is Luo Min’s last-ditch effort to resuscitate the consumer lending platform. Using the celebrities and subsidies as incentives, consumers are once again lured into its financial system, injecting some life into Qudian,” reckoned Lanjing Caijing.

Still, finding a sustainable spot in China’s e-commerce industry is going to be a challenge.“Compared with Tmall and JD.com, which have been around for a long time, Wanlimu is not very professional nor does it seem like it can stand the test of time. More importantly, it has to determine how to gain a competitive advantage in supply chain management. Despite the high-profile celebrity endorsements, it will be difficult for it to overcome these problems,” predicted research consultancy Sootoo.

Almost inevitably, there have already been grumblings that some of the products on Wanlimu’s site aren’t the real deal too. Customers have even been complaining that the skincare specials sold in the promotional push last week “smell different”, reported Securities Times. On consumer forums, there were also plenty of complaints being lodged about the authenticity of its products and the slow pace of their delivery.

Wanlimu has a long way to go before it can claim to have won over China’s online shoppers…


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