"Little Brother Yang" has a big fall, revealing the three sins of live streaming sales

Xiao Yangge's case was eventually punished, but quality problems in live streaming still emerge one after another. This article analyzes the multiple factors that lead to this phenomenon and puts forward profound thoughts on the future direction of the live streaming sales industry. In the craze of live streaming sales, how to balance commercial interests and consumer rights has become an urgent problem to be solved.

It was once all the rage on the Internet, but now its reputation has collapsed.

Last September, the top anchor "Brother Xiao Yang" and the Three Sheep Group he founded experienced a major setback due to product quality issues.

The incident started during the Mid-Autumn Festival when the "Meicheng Mooncakes" sold by Brother Yang in the live broadcast room were advertised as "Hong Kong Meicheng" and "high-end brand".

Xiao Yangge’s live broadcast room, source: Shangguan News

However, this "Hong Kong mooncake" is actually a mainland brand produced by manufacturers in Guangzhou and Foshan. Later, an "Australian grain-fed beef roll" sold by "Xiao Yangge" on a live broadcast was also suspected of using seasoned meat.

On the evening of September 26, the relevant departments also fined the Three Sheep Company a total of 68.9491 million yuan, ordered it to suspend operations, and imposed a deadline for rectification. After the penalty results were announced, the Three Sheep Company also made a sincere apology for the product quality issues and refunded three times the amount of the products involved. The live broadcast rooms under the Three Sheep Company also suffered a large-scale suspension of broadcasting.

The quality of products produced by top anchors has deteriorated significantly, which has become common in the live streaming e-commerce circle in recent years.

As early as 2020, anchor Simba was exposed for selling fake bird's nests, and finally settled the matter with a refund. Just in early September, the ham sausage sold by Oriental Selection was also accused of containing foreign matter.

Why has live streaming been unable to get out of the dilemma of product quality? Do "Little Yang Ge" and Three Sheep have a chance to restore their reputation and traffic? What systemic problems of live streaming have been exposed by the quality problems repeatedly exposed by top anchors?

01 Strict product selection or host selection?

"Brothers, the price has been lowered." This is Brother Yang's signature tactic in the live broadcast room.

As one of the few anchors on Douyin with over 100 million fans, Xiao Yangge's top position is naturally inseparable from his high traffic. However, some people analyzed that such a refund strategy may cause the three sheep to bleed heavily. The tens of millions of fines may not be the bulk of the loss.

According to Brother Yang, in the past three years, the number of orders for Meicheng mooncakes has been close to 1 million. Based on the calculation that "three boxes are priced at 169 yuan", if consumers who purchased Meicheng mooncakes were offered a three-for-one compensation for fake products, the compensation amount alone could be as high as 500 million yuan.

Among the three elements of live streaming, people, goods and venues are integrated, and the quality problems of goods cannot be explained away by mistakes in product selection. In order to maintain product quality, Dongfang Zhenxuan can operate its own product supply chain. After the fake bird's nest incident, Simba also switched from a brand cooperation model to his own supply chain. Of course, Xiao Yangge is also following suit. Sanzhiyang imitated Xinxuan and also created its own brand Xiao Yang Zhenxuan, and its product categories also cover the anchor matrix of Sanzhiyang Company.

Currently, there are more than 10,000 SKUs in the supply chain of Three Sheep Company. Three Sheep Company has also stated that it has a detailed process for supply chain management model and audit mechanism. Selected suppliers need to submit operating qualifications, business licenses, and scoring procedures. The company has dedicated product selection personnel who will connect with supplier companies and conduct on-site visits to investigate the ingredients of the products.

However, despite the so-called rigorous product selection process, many products still had quality problems. A supply chain company revealed to the media that, in fact, the docking process between Three Sheep and suppliers was not complicated. After the samples were delivered, they only required the price and the corresponding product popularity, and the professionalism of the review department was not high.

Some people in the live broadcast circle also said that in fact, in the current live broadcast e-commerce, most practitioners do not have the corresponding product selection experience. For example, in the Three Sheep team, the anchors have a lot of control over product selection, and middle-level managers generally only cater to the anchors in terms of purchasing and selecting products, choose product routes that maximize profits, and focus on profits, so their actions will definitely be distorted.

02 Overseas famous brands or e-commerce white labels?

The focus of Brother Yang’s promotion this time is that the so-called Meicheng mooncakes are actually a copycat of Maxim’s mooncakes, claiming to be from Hong Kong but actually produced in a mainland factory.

But to be fair, most Hong Kong food brands have factories in the mainland, so this reason cannot be used to deny whether the brand is from Hong Kong. The key here is that if Xiao Yangge is not selling a Hong Kong brand, the brand premium he sells should not be established, so it is defined as fraud. Live e-commerce, the so-called copycat brands, or products with channel brands, are uniformly called white labels in the industry.

Pinduoduo's development is essentially supported by white-label products. In 2023, Pinduoduo's revenue reached 247.639 billion yuan, of which 60% came from white-label products.

On other e-commerce platforms, for example, JD.com launched “JD Jingzao” and milk labeled with the Oriental Selection brand are actually white-label products produced by cooperation with third parties and labeled with channel platforms.

In the context of consumption downgrade in recent years, consumers have become more sensitive to prices and are unwilling to pay for brand premiums. As a result, white-label products with price advantages have a larger market space.

From the perspective of merchants, it is very cost-effective to focus on white-label products. After all, the costs of creating a new brand are self-evident. Platforms and anchors are also more willing to embrace white-label products. During the 618 shopping festival last year, major platforms turned their attention to small and medium-sized merchants. Small and medium-sized merchants mean a richer supply of categories, which means the entry of white-label products with more price advantages. Whether it is the category, the price, or the profit behind it, white-label products can bring advantages to the platform and even the anchor.

Among them, Simba's Xinxuan has launched more than 20 self-operated white-label brands, such as the beauty and skin care brand "Benzhi", the daily chemical brand "Miaojiesi", the food brand "Jianfeng Shike", the hygiene brand "Mianma", etc., among which more than 10 brands have accumulated sales of over 100 million yuan. Oriental Selection's revenue in fiscal year 2023 was 3.9 billion yuan, and sales of self-operated products reached 2.6 billion yuan.

In essence, there is no difference between white-label products and branded products. White-label products are not "fake and inferior", but refer to unbranded products produced by small and medium-sized manufacturers. However, the logic of creating white-label products also determines that their production costs are usually low, and their quality is difficult to control, which makes them prone to problems such as false advertising and product quality. Xiao Yangge's Meicheng mooncakes are obviously a representative example.

White-label products have long been a hidden danger in the live broadcasts of Internet celebrities. Once quality control is neglected, product quality problems may occur, which can easily cause the host to fail. Some media analyzed that Xiao Yangge’s "mooncake incident" may seem like an outbreak of a problem, but in fact it is also a concentrated display of the hidden dangers of white-label products in the live broadcast circle.

Faced with netizens' criticism of the anchor and the company that brought the products, Three Sheep only admitted to "false advertising". There are even rumors that Three Sheep asked its female anchor to pretend to be the brand owner and apologize. As a top anchor, can the brand only be held responsible for the product quality failure? Should they only bear the responsibility of oversight?

03 Marketer or Advertiser?

At present, relevant domestic departments define live-streaming anchors who sell goods as advertisers. Fundamentally, there is a serious mismatch between the legal responsibilities of live-streaming anchors and their extremely high profits.

It is customary for top anchors like Brother Yang to charge brands a slot fee, with the quote ranging from tens of thousands to hundreds of thousands. This is the advertising fee they receive as advertisers, but the problem is that the slot fee is only the tip of the iceberg of their income, and the bulk of their money still comes from product commissions.

Some self-media believe that since they can get product commissions, the anchor should have another most important identity, that is, the seller. The commission rate of the e-commerce industry is different for different categories of products. For example, 50% for cosmetics is conservative. For many products without 3C certification and some non-standard products, the commission rate is even more frightening.

However, once there is a problem with the product, it has nothing to do with the big anchor. After all, he did not produce the product, and the brand can be held responsible for the responsibility and fine.

The anchors always say that they are doing it for the benefit of their families and that they don’t make money from selling goods. However, for a product, the anchors have to take commissions and slot fees, and the platform also needs to take a share. The products also have their own production costs, so quality issues naturally become a problem.

Of course, in recent years, there have been cases of anchors actively paying compensation, such as Simba's bird's nest in sugar water, and it is very likely that Xiao Yangge will do the same this time. However, this is not just an individual case, but also an industry self-discipline. It is all done consciously by the big anchors, and there is no law that requires them to do so.

Compared with offline retail, live streaming has eliminated some intermediaries. It is said that the bulk of offline store revenue goes to landlords and sub-landlords. Small anchors and unemployed amateur anchors can also promote employment by earning some money to support their families. But ideals are often good ideas, but reality is cruel. In such a disorderly market, what eventually evolved was the exit of small anchors and the land grabbing by oligarchs. Because only with the emergence of large oligarchs can platforms and companies collect huge investment fees more centrally and efficiently, transfer offline rents to online, and become landlords and sub-landlords in the live streaming circle.

To make matters worse, the oligarchs maintain a huge team, including product selection, live broadcasting, customer service, public relations and other affairs organizations. The links have not become fewer, but more. The big Internet celebrities have become top-tier, so they naturally want to lie down and enjoy the dividends. The stakeholders, shareholders, platform resource providers and management parties who promoted the Internet celebrities also want to get a piece of the pie.

But the biggest problem is that they take advantage of the chaotic and disorderly development and the vacuum of supervision to grab land. In the end, consumers are the ones who pay the bill, and suppliers are also prone to the effect of bad money driving out good money.

In short, the main problem behind the three sheep is that the wild growth of live streaming e-commerce has led to the big anchors enjoying the dividends of the times but failing to take the responsibility of selling their own products. Big anchors cannot be defined only as advertisers, they are essentially a sales company and should also bear the responsibilities of a sales company.

Fortunately, many big anchors, teams and companies have begun to pay great attention to supply chain management, and I believe that supervision will follow.

References

1. Three Sheep was fined 68.94 million yuan. Who is still placing orders in the super anchor's live broadcast room? Zinc Finance

2. "Three Sheep" was fined, the super anchor "retreat", interesting business explanation

3. Three Sheep is in controversy. How can we save the influencers from selling goods? Economic Observer