Feeling like they got skinned

Viya: the popular livestreamer was angered by L’Oreal’s pricing moves

Last August Tesla crossed swords with Chinese e-commerce platform Pinduoduo after it hosted a group-buying session offering the Tesla Model 3 for Rmb40,000 less than the retail price (a saving that equated to $6,621).

Pinduoduo had partnered with auto trading firm YiAuto for the campaign, offering five random customers the opportunity to grab a Model 3 at a major discount, on the condition that at least 10,000 people signed up with the platform as a result. The five Model 3s ended up being sold at about 15% off their listed price of Rmb251,800.

On finding out about the promotional deal, Tesla refused to honour the sales, telling the public that it hadn’t given Pinduoduo approval to sell its vehicles to customers. “If consumers have any disputes or damages to their rights due to the above group-buying activities, our company will not bear any responsibility,” Tesla added in a Sina Weibo post.

Last week, French cosmetics giant L’Oreal found itself in a situation where it was arguing something similar.

The fiasco started as ‘presales’ got underway for the annual shopping bonanza of Singles’ Day. Two of China’s most popular livestreamer-influencers Li Jiaqi and Viya were selling L’Oreal facial masks at what they claimed to be the “biggest discount of the year”. A pack of 50 of the skincare items was on offer for just Rmb429 and the masks went on to become the bestselling product for L’Oreal over the Singles’ Day period, accounting for Rmb500 million, or about half, of its sales during the November 11 event.

However, after a few days, consumers who had purchased the masks discovered that they could buy the same product on L’Oréal’s own livestreaming platform for just Rmb257, or nearly half the price they paid in the livestreams from Li Jiaqi and Viya. Angry customers immediately took to social media to complain, catapulting the matter to the top of Weibo’s rankings of trending topics. Heimao, a consumer rights platform, joined in, claiming that some 30,000 complaints had already been filed against the French brand for the pricing difference.

Realising that it needed to respond quickly, L’Oreal explained that the lower price on its own platform was only applicable for customers holding sales coupons issued on previous purchases of more than Rmb999. A number of VIP members of Taobao and some Tmall customers had also received the vouchers, it seems.

That wasn’t the end of the matter, however. Livestreaming duo Li and Viya then went on the offensive, stung by the suggestion that their reputations for always getting the best prices was at risk. First, they aired their grievances to their livestream followers. Then they both issued similar statements that they would suspend further cooperation with L’Oréal, criticising the incident as unfair to their customers. The duo demanded that the French cosmetics giant find a reasonable solution for the consumer complaints within 24 hours or else they would have to compensate shoppers out of their own pockets.

“This is unfair to consumers who waited for the livestream on the first day of the presale, trusted our livestreaming channel and bought the product through it,” Li lambasted on his personal weibo.

“Li Jiaqi and Viya need to play hardball. The reason they are successful is because if they make a promise to their followers that the prices they advertise are the lowest, then they need to deliver on that promise,” commented Entrepreneur, a news and commentary website. “Does it hurt to compensate the consumers out of your own pocket? Of course it hurts. But there is no other way. It is the only solution to safeguarding their credibility,” it added.

L’Oreal later issued an apology to the customers affected, admitting it had come up with “too complicated a promotion mechanism” and promised to find a constructive and satisfactory solution to address the complaints. However, it stopped short of accepting the blame and also did not issue an apology specifically aimed at the two influential livestreamers.

The spat shows two things. First, as social media expands its cultural dominance, influencers have amassed such clout that a lot of big brands are relying on them to market products. But on the other hand, big consumer brands also don’t want to be held hostage by influencers, whose popularity has gone from strength to strength.

Industry observers reckon that the situation L’Oreal faces is similar to that of Tesla last year. “Tesla can reduce its price, but it wouldn’t let Pinduoduo reduce the price on its behalf because this means Tesla loses its pricing power. L’Oréal, too, will apologise to the consumers but it can’t be soft with the livestreamers. That’s because it means it loses its ability to control its prices. How does it stay in the game without being able to maintain pricing power?” observed Entrepreneur.

Nevertheless, if Jahwa’s experience is anything to go by, it also doesn’t bode well for those beauty brands that try to break up with Li. The influencer terminated collaboration with the domestic skincare label after it was discovered that the prices on Jahwa’s livestreaming channel were being pitched even lower than those that Li had offered on his own livestream.

After the acrimonious split, Jahwa saw a 16% drop in its sales in the first quarter of this year, compared to triple-digit growth in all the previous quarters. “The numbers suggested that post-Li Jiaqi, Jahwa’s performance was brutal,” Blue Whale Media grimly concluded.

Still, it is also going to be difficult for the two livestreamers to completely severe their ties with L’Oreal, which is the largest beauty company in the world and a frequent advertiser on the pair’s livestream channels. According to Entertainment Unicorn, 67 of the 494 products Viya put up during the presale period came from one of L’Oreal’s brands. For Li the proportion was even larger: 65 out of the 439 products sold were from French company.

But L’Oreal’s bosses might also wonder whether the best days might be over for livestreamers. This week, Hangzhou’s tax authority levied hefty fines on famous livestreamer Xueli Cherie, and Lin Shanshan for Rmb65.5 million and Rmb27.7 million, respectively, for tax evasion. Industry observers reckon that the move signals greater scrutiny of e-commerce livestreaming – and marks the next phase in a broader crackdown on the internet industry and an attempt to rein in the power of celebrities.

© 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.