One of China’s top live streaming hosts, Xinba and his team were punished by Guangzhou business authority with a￥900k fine (equivalent to $137k) for a dishonest product promotion during one of his live events.
Apart from being fined, Xinba and his associated shopping channels on the short video platform Kuaishou have also been banned from operations for 60 days. A fine is probably barely a scratch to Xinba, but being banned from the platform dealt real damage to Xinba’s business as live streamers rely on that platform to reach their customers.
(Source: Xinba's Weibo)
How did it start?
The whole incident started with an online counterfeit expert exposing on social media that the bird’s nest drink sold in one of Xinba’s live shopping sessions was actually just water and sugar. The exposure drove heated conversation on China’s social media and angered those customers who made the purchases. Later, Xinba’s team apologised for their mistake and promised to offer refunds and 3 times of compensation.
However, Xinba and his team are not the only ones being punished. The brand owner for the product in question has been fined for ￥2 million (equivalent to $306k) which is over twice as high as the fine for Xinba and his team. This act sends a clear message - selling products with a dishonest and misleading message is unlawful and comes with a great price to pay.
A fast-growing industry that was roaming free
Live streaming e-commerce in China has experienced explosive growth in 2020, being helped along by the pandemic. The industry is projected to be valued at over $147 million in 2020 according to Qianzhen Academy. There are more than 550 million users in China engaging with live streaming shopping activities on a daily basis.
Live streaming e-commerce in China is growing much faster than regulators can keep up. As a result, the business environment is filled with traps for both consumers & brands - this includes dishonest and over-exaggerated promotions, fake products & popularity, and stupidly high charges for your products to be featured in a live streaming session.
A survey conducted in June 2020 offers a glimpse of consumer perception towards live streaming e-commerce. The biggest concerns for consumers who purchase in live streaming are 1)the quality of the product, 2) consumer care, 3) fake popularity of the host & session and 4) false advertising.
New live streaming era = new order
The increasingly messy business environment of live streaming e-commerce eventually drew the attention of the Chinese policymakers. In November, China tightened up its regulations on live streaming platforms and hosts. The punishment towards Xinba and the brand owner prove the authority’s determination to discipline the sector to create a fair business environment.
Trust and honesty is the key stand out
Tech industry development always runs faster than the regulators, in every part of the world. The new policy has long been anticipated by the live streaming industry in China, I would say. Yes, this probably means fewer opportunities for explosive revenue earnings for platforms & hosts, but a regulated industry means an equal environment for all players, great or small.
In an industry where dishonest and false advertising was the norm, trust and honesty will eventually be the key to standing out. Punishment from new regulations will delay the development of those who behave unlawfully. In Xinba’s case, a large part of his earning channel has been cut out. Those who can build trust with honesty will be rewarded by Chinese consumers in the long run.