Smartisan founder Luo Yonghao apologises for fake Pierre Cardin wool jumpers sold on his live stream

Tech entrepreneur promises to pay customers back after wool jumpers sold through one of his live streams were found to be fake
Luo says his company checked suppliers’ qualifications before the sale, but suspects them of forging documents and deliberately committing fraud

E-commerce

Minghe Huin Beijing

Published: 5:15pm, 16 Dec 2020

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Chinese tech founder and live-streamer Luo Yonghao has apologised for selling Pierre Cardin branded wool jumpers in a live stream in November, after the jumpers were found to be fake.

Luo, the indebted founder of smartphone brand Smartisan who has become a celebrity live-streamer, said in a video statement on Douyin – the Chinese version of short video app TikTok – on Tuesday that the jumpers were sold via a live stream he hosted on November 28. Several customers contacted his company with suspicions that the jumpers, which were sold for 79.90 yuan (US$12.20) each, were fake goods that were not made of genuine wool.

His company sent five returned jumpers for testing at two different facilities: one report has shown that the jumpers are not made of wool, while the results from the other facility are still pending but Luo said that this was “no longer important”.

In the video statement, Luo said that his company had checked the suppliers’ certificates, brand authorisation and legal distribution documents before agreeing to cooperate with them. But his team now suspects that the suppliers forged documents and produced counterfeit goods, deliberately committing fraud, he said.

“Despite following all the proper procedures, there were still problems with the product, which makes us feel extremely sorry and guilty,” he said in the statement, adding that his team would immediately report the suppliers to authorities.

How did China’s once-broke entrepreneur sell US$15 million worth of goods on Douyin?

According to the agreement, suppliers are obliged to bear the cost of compensation if they are caught supplying counterfeit or defective products.

“But as customers bought these products out of trust for us, and lawsuits of this nature tend to take longer … we will first contact the customers affected and compensate them three times the amount,” Luo said.

China’s live-streaming sector, which has been booming amid the coronavirus pandemic, is projected to be worth 310 billion yuan by 2024, according to consultancy firm Frost & Sullivan.

But the growing popularity of live-streaming e-commerce campaigns due to more people staying home has also come with a surge of complaints about fake or damaged goods, missing deliveries, or lack of after-sales service.

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During the recent Singles’ Day shopping festival, the China Consumer Association received over 334,000 complaints related to live-streaming e-commerce, many of them related to fake traffic and orders, it said in a report last month.

Another high-profile live-streamer, Xinba, was caught last month selling fake edible birds’ nests – a Chinese delicacy – on short video app Kuaishou. Like Luo, Xinba quickly responded with a promise to recall the fake products and compensate buyers three times the amount they paid.

In response to the growing complaints, authorities have also moved to tighten regulations. All live-streamers and their gift-giving fans are now required to register with their real names, while the National Radio and Television Administration rolled out new rules last month, holding e-commerce platforms responsible for verifying the qualifications of retailers launching live-streaming sales on their sites.

And in October, China’s State Administration of Market Regulation published a draft regulation and that would hold social media apps such as Douyin, WeChat and Kuaishou to the same regulatory oversight as e-commerce platforms, as live-streaming e-commerce on these apps grows increasingly popular in the country.