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in september, crazy xiao yangge, an internet celebrity with over 100 million fans, and his company were questioned for having no after-sales service and false advertising because of selling a type of "hong kong mooncake".

"crazy little brother yang" is a short video ip created by twin brothers zhang qingyang and zhang kaiyang. the number of fans of the "crazy little brother yang" account is increasing rapidly, and the number of fans exceeded 100 million by the end of 2022. however, little brother yang, who debuted with content, has not been selling goods for a long time, and his mcn agency was officially established in 2021.

in three years, from a "net celebrity anchor" with 100 million fans to the chairman of a group with a production value of 10 billion yuan, "crazy brother yang" has caught up with the dividends of the times through live streaming and achieved a growth myth. now, the meicheng mooncakes that he is promoting with the halo of hong kong brand, the blessing of black truffle flavor and the endorsement of michelin masters are bringing him an unprecedented crisis.

the "three sheep (hefei) holding group co., ltd." building in hefei, anhui. photo/visual china

the mooncakes of this brand were found to be produced in guangzhou and foshan, and their origin, quality and price were questioned one after another. consumers rushed to the live broadcast room to complain, but three sheep has not responded positively so far.

on september 17, the hefei high-tech zone market supervision and administration bureau issued an announcement stating that the "hong kong meicheng mooncakes" sold by three sheep network technology co., ltd. through live streaming attracted attention. a case has been filed against three sheep network technology co., ltd. two days later, the hefei municipal market supervision and administration bureau officially issued a situation report, stating that in response to the recent online reports involving three sheep network technology co., ltd., the hefei municipal market supervision and administration bureau has established a joint investigation team with the commerce bureau, public security bureau and other departments.

as internet traffic has peaked, the growth rate of live e-commerce has long slowed down, and the cost-effectiveness of simply monetizing traffic has become increasingly low. top anchors must provide consumers with "brands" that are "high-end and cheap." therefore, they "roll" into the supply chain to seek greater profits, but this is not easy.

the mystery of mooncake identity

at present, when searching for meicheng mooncakes on the short video platform, the video of the yang brothers and hong kong star eric tsang promoting the product ranks first.

in the video, xiao yangge told the consumers in front of the camera very confidently that this is a high-end mooncake brand from hong kong, prepared by a michelin master, and it has a black truffle and custard flavor. when xiao yangge mentioned that the brand sells for 700 yuan offline in hong kong, and three boxes in the live broadcast room are sold for 169 yuan, zeng zhiwei was surprised.

meicheng mooncakes with black truffle and custard flavor. photo/visual china

with the help of xiao yangge, the brand's sales performance is quite gratifying. according to data from the third-party data platform chanmama, in terms of sales, the sales of the meicheng brand on the live broadcast platform in the past month were about 50 million to 75 million yuan, of which 10 million to 25 million yuan came from the brand's own sales. in terms of influencers bringing goods, the top three sales are all anchor accounts under the three sheep, namely zui ge, zeng zhiwei, and three sheep network. among them, zui ge and zeng zhiwei brought 5 million to 7.5 million yuan of goods, and three sheep brought 1 million to 2.5 million yuan of goods.

however, when consumers received the mooncakes, they found something was not right. although the mooncakes were printed with the words "hong kong" and some were even printed in traditional chinese characters, the brand operator was guangzhou meicheng food co., ltd. and the manufacturer was guangzhou meicheng food technology co., ltd., both of which are located in huadu district, guangzhou. some consumers also reported that they could not find a store in hong kong offline, and some hong kong netizens also left messages saying that they had never heard of this "famous hong kong brand."

when consulting the store's customer service, the customer service responded that it was registered in hong kong and had a trademark registration certificate, and the brand genes and r&d team were all from hong kong. in order to better expand market demand, meicheng has established marketing centers and production bases in guangzhou and foshan, strengthened supply chain management, and enhanced brand competitiveness, and provided a screenshot of the hong kong registered trademark certificate. public information shows that the "hong kong meicheng mooncake" trademark registration submission date is september 22, 2023, and the actual registration date is february 21, 2024. the corresponding products include moon cakes, biscuits, pastries, etc.

suddenly, this mooncake and the three sheep became the target of public criticism. the major accounts of the three sheep and meicheng mooncakes successively removed the mooncakes around the mid-autumn festival. after being questioned, the guangzhou huadu district market supervision and administration bureau issued a report on the situation of meicheng mooncakes, saying that after verification, it was found that guangzhou meicheng food technology co., ltd. had not found any outstanding food safety risks, and the mooncake products had passed the special sampling inspection.

zhang shaozhu, general manager of guangzhou meicheng food technology co., ltd., said in an interview with china newsweek that the company is currently operating well and has not been affected. however, the negative impact of the top anchor selling meicheng mooncakes is still continuing.

"meicheng is relatively mature in oem, and selling through the three sheep channel can be regarded as a channel brand, but it is still far from a real brand." cui lili, executive director of the e-commerce research institute of shanghai university of finance and economics, said that fans will place orders only if they trust the top anchors' product selection and after-sales capabilities. however, when ambiguous information appears, it may cause problems.

zhao zhenying, a researcher at the national engineering laboratory for e-commerce transaction technology, believes that xiao yangge and his team claimed in the live broadcast that meicheng mooncakes are a "hong kong brand" and emphasized their high-end positioning, but their actual place of origin is guangdong and they are not sold in hong kong, which may constitute false advertising.

however, he also stressed that there is an ambiguous issue: how to define a regional brand? should we look at the place where the brand is registered, the place where the product is produced, or the location of the formula and process provider? there is indeed room for controversy. the handling of the issue ultimately depends on how the market supervision department defines the so-called "hong kong brand."

a food industry practitioner told china news weekly that mooncakes are generally made using the oem model, because mooncakes are only sold one month a year, and are basically made by oem factories. meicheng produces mooncakes through its own factory, which is obviously a shift from white label to brand. the biggest problem is that this brand "has a hong kong brand", but the hong kong meicheng food group has authorized the trademark to guangzhou meicheng food co., ltd. for use. the sales area is not clear, so someone promotes it as a hong kong brand.

if this situation is not clearly defined and strictly regulated, it will be widely abused.

zhu danpeng, a chinese food industry analyst, mentioned that similar situations to meicheng are not uncommon. it first emerged in the 1990s, and then had new development space after the rise of the internet and e-commerce platforms. in the live e-commerce platform, these brands have found a living space. register a brand in hong kong or overseas, and place the processing plant in the mainland, and suddenly it becomes a hong kong brand. "legally speaking, it is legal and compliant. but for consumers, it is actually an offense." according to the company's situation, it basically conforms to the above development logic. "guangzhou meicheng" was established in 2014, and "hong kong meicheng" was established in 2019. a large number of "meicheng" related brand trademarks were also registered in hong kong in 2019. after completing the trademark registration in hong kong, "guangzhou meicheng" has also registered a number of trademarks and art copyright registrations related to "meicheng" in china since 2019. at the same time, 2019 was called the "first year of e-commerce live streaming" by industry insiders, and live streaming with goods has gradually become popular.

brother xiao yang mentioned in the live broadcast that he had cooperated with meicheng mooncakes as early as a year ago. in fact, it is not just the three sheep. several top live broadcast sales accounts such as jiao ge pengyou and dongfang zhenxuan are also implicated by this mooncake. on september 16, luo yonghao took the lead in solving the problem. jiao ge pengyou announced that it would accelerate the "refund one and compensate three" processing for those who purchased meicheng mooncakes sold by its matrix account. on september 18, dongfang zhenxuan responded to netizens' doubts and stated that in 2022, dongfang zhenxuan did cooperate with meicheng mooncake oem factory. the factory produced the "dongfang optimized" lava mooncakes of that year in accordance with the requirements of dongfang zhenxuan, and the quality was guaranteed, but the two parties did not cooperate in 2023 and 2024.

bai xiaoqiang, a lawyer at beijing jingshi law firm, told china newsweek that based on the current information, meicheng mooncakes may indeed be suspected of false advertising in its promotion. its promotion emphasizes its identity as a "hong kong brand", but in fact it has no stores in hong kong, and its products are mainly produced and sold in the mainland. in addition, some of the ingredients and promotional effects of the mooncakes may also be exaggerated. if these promotional contents are inconsistent with the actual situation, then it can be considered false advertising.

already "rolled" into the supply chain

although there are no obvious quality and production problems in the meicheng mooncake incident, it has eventually triggered a lot of doubts. this reflects the importance consumers attach to food safety in the current consumption environment. consumers have higher and higher requirements for product quality and information transparency, but due to information asymmetry, consumers often find it difficult to judge the true situation of the product, so they rely more on brand reputation and word of mouth to make purchasing decisions. once a brand has a trust crisis, it will quickly spread to the entire market.

the homepage of the live broadcast room of "three sheep network". photo/visual china

the top anchors frequently overturned on food issues, the most representative of which is simba. as early as november 2020, simba's team was questioned for being involved in the "fake bird's nest" incident. some netizens reported that a bird's nest sold by simba's team during live broadcast was "like sugar water", and subsequent testing showed that the bird's nest did not meet the standards. simba issued an apology letter in response, saying that he was "misled" by the brand and that there was indeed exaggerated publicity. he made a "refund one and compensate three" decision and needed to refund more than 61.98 million yuan.

in response to this incident, the guangzhou municipal market supervision administration reported that simba company was ordered to stop illegal activities and fined 900,000 yuan, and guangzhou rongyu trading co., ltd., the bird's nest provider, was fined 2 million yuan. simba's personal live broadcast platform account was also suspended for 60 days by kuaishou.

zhao zhenying pointed out that big anchors, due to their huge influence and fan base, often attract widespread attention once problems arise, so they are more likely to stumble on sensitive issues such as food. at the same time, supply chain issues are one of the important constraints on the development of live streaming organizations. ensuring the stability and transparency of the supply chain is crucial to avoiding similar problems.

simba, who "stumbled", was actually one of the first anchors to transform from a live streaming internet celebrity company to a professionally operated live streaming organization. a person close to the xinxuan group told china newsweek that after the "bird's nest incident", xinxuan invested a lot of manpower and material resources to consolidate quality control.

"the person in charge of product selection for each category needs to be an industry expert. they know the key points of quality control for each category and can conduct a comprehensive review of merchants and products." zhang fang, a practitioner of live broadcasting organizations, said that people are important gatekeepers, but the challenge is to standardize the supply chain as much as possible. the testing cost is too high, and it is indeed difficult to ensure that the quality of each product is qualified. in addition, when it comes to the delivery stage, warehouse inspection and full anti-counterfeiting logistics are also required.

crazy xiao yangge entered the live streaming sales relatively late, but developed rapidly, achieving sales of 6 billion yuan in 2022, rapidly growing to 16 billion yuan in 2023, and maintaining rapid growth in 2024. with the rapid development of live streaming sales, xiao yangge also began to encounter problems frequently, and these problems all reflected the lack of supply chain construction.

as early as the end of 2022, professional counterfeiter wang hai posted on weibo that the jinzheng wall-breaking machine and meat grinder sold by "crazy xiao yangge" had false power. the meat grinder sold in the live broadcast room had a power of 300w and an actual power of 120w, and the wall-breaking machine had a power of 300w and an actual power of 105w. wang hai also pointed out that deceived consumers can ask for a refund of three times the amount of compensation, and the total amount of refund and compensation can be as high as 100 million yuan. in the last two months of 2022 alone, wang hai's live broadcast room for counterfeiting xiao yangge had ten times. however, there was no further solution afterwards.

an industry insider once analyzed that the problem of false power labeling is not uncommon in the industry. the wall-breaking machine with a built-in rated power of 105w motor pretending to have a 300w mixing power involves cost issues. the cost difference between 100w and 300w motors is quite large. the bigger problem is that "multiple agents and multiple factories producing products have caused the brand's supply chain to be not a unified game. the brand can only conduct quality control through temporary sampling at most, and its ability is very limited." he further pointed out that it is obvious that jinzheng is not confident in the quality of its products, otherwise it would not have removed the products from the shelves in the first place. more importantly, xiao yangge's product selection team does not have such quality control capabilities.

in addition to small household appliances, the food industry is also an area where xiao yangge's team frequently "turns over". at this year's 3.15 gala, three companies that used inferior trough meat to produce meicai kourou were exposed, and "crazy xiao yangge" once promoted the products of one of the companies. the three sheep company issued a public apology and stated that it had started the advance payment refund work, but did not mention triple compensation. some netizens reported that this time it was not "refund one and compensate three", but just refunded the original price of meicai kourou that netizens bought.

just a few days before the mooncake incident, professional counterfeiter wang hai released a video saying that the "xian duo yu" original cut beef rolls promoted by "crazy brother yang" had false advertising problems, and the supplier had been fined 500,000 yuan. according to statistics, 42,000 consumers were deceived, and according to the rule of "refund one and compensate ten", this means that the compensation amount will reach 42 million yuan.

in response to the doubts, the three sheep company's attitude is: either deny or not respond. at most, it will just return the products, and the supplier will bear the legal responsibility for product quality.

gao le, a food practitioner who has worked with many top anchors, said that the general process of food category review first looks at the qualifications of the company and the product, then looks at the sales data and reviews of the e-commerce platform, and finally screens through sample tasting and ingredient lists. in addition, there is often a provision in the contract that if the quality of the product causes adverse effects to the anchor, the merchant must compensate. this also explains the performance of three sheep in many food problem incidents before, which was at most a refund, and there was no three times compensation for fakes.

however, this mooncake incident does not seem to be so easy to resolve. recently, relevant departments in hefei city have filed a case against three sheep. there is no doubt that the filing of the case will have a multi-dimensional impact on three sheep, including damage to its brand image, decline in sales performance, and shaken industry status.

the rules of the game are changing

the anchor tried to get consumers to place orders by promoting “low prices” and “big brands”, but he couldn’t even convey basic information clearly. what does this mean?

the problem with the mooncake incident came from the promotion in the live broadcast room. "they themselves may not know where the factory is, and they did not conduct a factory inspection." gao le pointed out that factory inspection is the way live broadcast organizations audit white-label products. generally, they will go to the factory to trace the source and check the product quality, but this situation is aimed at brands that almost no one has seen. the three sheep team obviously did not realize this problem, and the cost of factory inspection was too high. in addition, in order to get consumers to place orders, the words in the live broadcast room will be exaggerated.

zhu danpeng said that the live streaming industry does not pay much attention to many supply chains, and the supply chain supervision and control capabilities are generally uneven, and they only look at how much profit can be made from selling products.

what exactly does the quality control team of an organization like three sheep want from the food supply chain? the above-mentioned food practitioner told china newsweek that he had wanted to cooperate with the three sheep team before, but the requirement was to break the price. "i can't break the price," the practitioner said, because if the price is broken, the entire network's price system will be disrupted, and consumers will question the quality of the product because of the price.

in the past few years, the live streaming e-commerce industry has experienced explosive growth, but more and more mcn organizations have realized that it is increasingly difficult to make money from live streaming. take the listed company yaowang technology as an example. it started its live streaming e-commerce business in 2018 and has celebrity anchors such as jia nailiang, wang zulan, and calvin chen. in the first half of 2024, the net profit attributable to shareholders of the listed company was a loss of 160 million to 210 million yuan. yaowang technology's losses were mainly related to the increasing investment funds and the decline in live streaming commission income. more and more live streaming organizations are aware of the importance of "eliminating middlemen and making a profit from the price difference."

in addition, in order to reassure consumers, many top anchors have started their own brands and even invested in upstream and downstream industrial chains.

the most representative one in the food field is oriental selection. oriental selection started with self-operated products and has achieved a scale of tens of billions of yuan. the financial report shows that the total revenue of oriental selection's self-operated products and live e-commerce increased by 68.1% from 3.9 billion yuan in fiscal 2023 to 6.6 billion yuan in fiscal 2024. in two years, 488 skus (stock keeping units) of self-operated products were developed and launched, accounting for about 40% of the total gmv (gross merchandise volume) in fiscal 2024. last year, oriental selection launched an independent app through self-operated products and started live broadcast activities, selling its own brand products on multiple platforms, including taobao, wechat applet, pinduoduo, xiaohongshu, and its own applications.

however, in recent years, anchor brands have also frequently failed in the supply chain. oriental selected's own food has been repeatedly questioned for selling fakes and being overpriced. this year, two anti-counterfeiting experts, wang hai and liu jiang, have successively pointed the finger at oriental selected's own south american white shrimp.

last year, xiao yang wanted to further promote his own brand "xiao yang zhen xuan". to this day, xiao yang zhen xuan still has more than 4 million fans. taking xiao yang zhen xuan as an example, its products are mainly oem, and many food product suppliers were ordered to rectify last year, including the oem factories of the popular xiao yang zhen xuan eight black shaqi ma and xiao yang zhen xuan pickled cabbage rice noodles, all of which were rectified and fined.

in terms of supply chain system construction and quality control team, xiao yang still has a long way to go. in cui lili's view, for live broadcast organizations, "it is not easy to do it for a long time."

for a live broadcast organization, a professional and strict quality control team is very rare, especially when there are many brands that are "passing off fakes as genuine". therefore, this places extremely high demands on the quality control team, which must not only be able to distinguish the genuine from the genuine, but also be able to identify the fake.

as a live broadcast industry practitioner said, how a company covers the bottom is a reflection of whether it is formal or irresponsible. the mooncake incident also involved the live broadcast room of jiaogepengyou. according to the relevant person in charge of jiaogepengyou to china news weekly, the quality control process of jiaogepengyou includes the review of the qualifications and certificates of the proposed cooperation companies, products, services, etc., as well as the inspection of the product's consumer reputation on major e-commerce platforms, social media reviews, and the trial and tasting of product samples. however, there was no on-site investigation on whether meicheng mooncakes were sold in hong kong. therefore, after the discovery, the company immediately compensated the consumers, refunding one and compensating three.

top anchors frequently fail in quality control. in the view of the industry insiders interviewed, this essentially exposes the industry problems of live e-commerce - weak supply chain and quality control, fierce industry competition, weak growth and lagging supervision. compared with shelf e-commerce, live e-commerce has a series of drawbacks and shortcomings in supply chain, product selection, quality inspection and after-sales service, and there is a clear gap. in the past, live e-commerce could win by relying solely on low prices and the influence of big anchors. this rule of the game is becoming increasingly difficult to play. "live e-commerce should return to the common sense of quality-price ratio."

published in the 1158th issue of china newsweek magazine on september 30, 2024

magazine title: why do top anchors frequently fail?