How is COVID-19 driving change on China’s e-commerce platforms?

Published on 25 Feb 2020 | 5 min read

Remember the days of SARS and the shopping boom in China that followed? Right now under COVID-19 (Coronavirus), as retail stores are forced to shut down and would-be window-shoppers are stranded at home, China’s consumer goods industry is having to adapt, beginning with customer’s turn towards more online shopping.

When dealing with the new e-commerce bonanza we need to be proactive and confront challenges. To protect brands online, it’s clear that we’re going to need much more than takedowns on e-Commerce platforms.

 

A virus-driven adaptation?

While China’s online shopping and its market shakedown impact keep impressing the world, traditional e-commerce platforms are seeing a cross-boundary disruptor as the ecology evolves. WeChat, or Weixin in the Chinese language, has come into sharp focus.

The pace of the game is not only faster, but it has had an extra burst of acceleration since the outbreak of COVID-2019. 

 

In case you have never used it...

WeChat is the number one social media in China, a country of 1.4 billion people where Facebook is banned. It won’t surprise you to know that the app has now become the primary form of communication across China, especially when many people are having to study or work at home at the moment.

WeChat is an instant messaging, social media and mobile payment app all rolled into one. Capitalising upon its 1.13 billion monthly user base (source: Tencent Report 2019 Q2), it is widely recognised as a ‘gamechanger’ that could have a profound impact on the e-commerce outlook.

Particularly when face-to-face interactions is not recommended right now.

 

How does it threaten brand owners?

At Rouse we advise multinational brands on how to enforce their IP rights in an omnichannel environment, and social media continues to be the key arena.

We recently serviced a well-known chain store. During the proceedings our Online Enforcement Team identified a WeChat Official Account ‘impersonating’ our client. The page had used our client’s avatar and trade name to attract potential franchising partners - a deliberate attempt to mislead readers. It was heavy with duplication, with designs and wording deceiving you into thinking it was an authorised account.

The biggest concern for the client was if we allow this impersonator, it would open them up to many others. In the official Weixin IP Protection Report 2019 they said they found more than 500,000 suspicious IP infringing leads to chase up in just 18 months.

However, unlike major e-commerce platforms where infringement removals are rule-bound, China’s social media is yet to have a mechanism for quick, procedural takedowns.

 

An commerce platform in disguise?

Firstly, what is an e-commerce platform?

The new e-Commerce Law (Article 9) gives a legal definition. To avoid legalease, we have paraphrased it :

“… an organisation providing online premises and services for dealers to facilitate trading.”

WeChat has always been staking out their position to be an instant messaging application. The majority of the contents are accessible only to private ‘friends’ rather than public ‘dealers’. There is no shopping cart to ‘facilitate trading’, either.

So, from a legal point of view, social media like WeChat isn’t an e-Commerce platform. You may call it a go-between, or grey area. However, this grey area means it creates space for infringers to exploit.

 

What to exploit?

There are reasons why social media is alluring to infringers compared with traditional e-Commerce platforms:

 

No 'Three Strikes'

Giant e-Commerce platforms like Alibaba and JD now have duties, rules and regulations against IP infringement, and more people are taught not to trade in counterfeits. For example, on Taobao, a shopkeeper who repeatedly offends others’ IP rights will receive an ultimatum from Alibaba. When it reaches three strikes you’re out of the game. 

 

Refund? What refund?

In reality, deals on social media happen in private. Despite the stacks of information like prices, product descriptions and images being shared and overshared, the transaction is officially still between ‘friends’.

Unlike an e-Commerce platform which provides comprehensive services on logistics, shipment, customer service and a clear refund policy, a seller via social media isn’t obliged to supply any aftersales support. Likewise, they don’t have to fend off the onslaught of any negative comments which may lead to a refund request.

After all, you are not buyer-vendor. You are officially, ‘just friends’. 

 

The unsearchable riches

If you’re careful, WeChat contents are unsearchable.

An instant messenger app usually has controls over privacy protection. It requires users to send an ‘Add New Friend’ request to a stranger and get their approval before they start chatting. We have heard a lot about how these insurmountable firewalls can provide protection to illicit dealers.

 

Introducing Daigou to the mix

‘Daigou’, or overseas shopping agents (another grey area of online commerce under discussion), is more popular on WeChat than anywhere else. It is inevitable that infringers will reap financial rewards when the two collide.

Infringers are making a strategic shift away from the highly regulated e-commerce platforms to the wide-open social media. And the shift can only speed up with the push from the current health emergency.

 

Conclusion

Social media like WeChat offer a handy, unconstrained, peer-to-peer, cost-next-to-nothing trading lifestyle that is from a legal standpoint not e-Commerce. At the same time, the impact of COVID-19 means that people are turning to their screens. A perfect storm in the making.

The good news is WeChat is taking steps to create a mechanism to enable effective enforcement. According to the Weixin IP Protection Report, they have taken down 12,000+ infringing accounts in the past two years. Additionally, it is not impossible to tackle the imposters with punitive actions.

For brand managers, social media like WeChat is the new arena needing to be monitored. It’s better to recognize the potential issues now and devise a plan to deal with it rather than having to play catch-up in the months to come.

 

For more information, please contact the authors: Phoebe Wu or Saul Gong. Special thanks to Rouse Online Enforcement Team for the contributions in research and publication.

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Rouse Editor
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Rouse Editor
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+44 20 7536 4100