Analysis: Will consumer trust erode if eCommerce platforms cannot rid counterfeits?

Video and live streaming platform Kuaishou will stop selling smartphones from 13 brands after a vendor on the platform was reported to be selling knock-off products for sale.  According to Apple Daily, Kuaishou took swift action after a complaint was made about a streamer touting imitation “Doov 12 pro” phones on Kuaishou's app for only RMB 899 yuan (US$141) - only a fifth of the official price of RMB 4,999 (US$781).

It was also reported that more than 20,000 phones had been sold by the vendor. Nonetheless, buyers quickly realised that their phones were not what they expected after checking the product identification number with the Ministry of Industry and Information Technology of the Chinese government.

ZTE, one of the brands involved in the incident, said on Weibo that it felt deeply wronged in this case as fraudsters would put a sticker on its phones to imitate the original products. To “vent its anger" (and of course cleverly use it as a promotional opportunity), ZTE company gave out a genuine phone in a lucky draw.

Imitation products or even counterfeits are not uncommon on eCommerce sites in many markets. However, continuous counterfeit issues could undermine customers' faith in the platforms and marketplaces should appropriate steps not be taken. 

Kyriakos Zannikos, Digital Commerce Intelligence's founder and CEO told MARKETING-INTERACTIVE that such incidents will no dount incite short term fear. However, in the bigger scheme of things, this will probably help educate consumers to be more pragmatic and careful when buying more products from certain vendors.

"It will certainly push Kuaishou to firm up their consumer protection policies and validation checks for sellers," he added. Elaborating on eBay's business model, he said the company faced similar fraudulent situations which it tackled by providing payment insurance to buyers that sellers would not receive their payment until the buyer confirms all is good upon delivery.

Although consumers are entitled to be protected by the channels they choose to buy their products, the subtle differences between each buying channel can be difficult for consumers to remember. Zannikos explained that platforms such Kuaishou are known as “social commerce” channels where everyone can buy and sell (more or less) anything they'd like. “You don’t have to be a professional seller. Your stock is never visible or audited by any third party. That’s something that you’d expect buyers to consider when buying from that channel but that’s obviously not the case,” he said, adding:

Kuaishou did all it really could, and rightfully should in this case. In fact, I think it is great to see how fast the company responded to consumer feedback and enforced the closure of that fraudulent seller's account.

Although buyers need to spend time and effort to learn more about the products, unless there is a seamlessness in the buying process and education process, customers might turn to competitor channels. "This could seriously affect consumer purchase confidence, especially for mid- and high-end users located in first- and second-tier cities who pursue high quality products," Ashley Galina Dudarenok, founder of ChoZan and Alarice.

Currently, large e-commerce marketplaces have created dedicated storefronts for their clients to ensure authenticity of products. However, for smaller marketplaces, the inability to verify the authenticity of products is still common. As such, building trust becomes harder.

"At present, more and more platforms emphasis genuine products and are regulating product certification to guarantee product quality. For example, Pingduoduo creates its own factories to ensure the source and quality of products. Consumers shopping on the Pingduoduo platform can enjoy the genuine products and quality assurance provided by merchants. If consumers purchase counterfeit brand products, they can claim ten times compensation," Dudarenok added.

Joseph Chua, managing director of Aiken however added that for Kuaishou, there will still be an inherent trust with the platform.

“The courts and Chinese consumer protection law states that 假一賠三,if is proven to be fake, you need to pay 3 times more,” he said. However he did warn consumers to be wary as even live-streamers  such as Viya, Sinba, Luo Yonghao have been fined before.

“The onus is on the platforms, sellers, live-steamers and MCNs to ensure  that the products are authentic and that he sourcing is done legitimately and with proper due diligence,” he added.