Newly-founded Chinese e-cigarette startup SnowPlus accused of faking consumer transaction data on online channels
The Chinese e-cigarette industry’s meteoric rise is seeing not only new winners but accusations of sales reporting fraud amidst cut-throat competition Many new vape brands established this year, currently primarily selling on e-commerce platforms such as Tmall and JD.com, are under pressure to prove to venture capital funders as well as the general product their products’ success through the volume of online sales and user reviews, which are often open to fraud and manipulation.
In the past few weeks, several Chinese news outlets have reported that SnowPlus, a newly-established e-cigarette brand spending aggressively on marketing and PR in China and abroad, has been falsifying its online sales numbers as well as brick and mortar sales.
On its official Tmall store, SnowPlus sells a set of one e-cigarette and two pods for approximately RMB 300 and a gift combo of four sets at a price of RMB 999 at a significant markdown. Between September 12th to October 7th, the store showed that it sold approximately 3,000 gift combo sets with a little over 600 reviews – all five-star reviews without substantive feedback content or pictures.
Per Tmall’s own data, the period from 12th September saw a sudden uptick in sales and an immediate collapse to 0 sales after October 7th. The platform also detected unusual activity between September 27th to the 30th, where 75 user accounts purchased three sets a day.
Tmall is known to moderate false reviews left from manipulated sales and reset internal sales data. According to a previous report from AI Caijing, a Chinese tech outlet, SnowPlus ha been resorted to falsifying sales data from brick and mortar shops, purportedly to appease investors regarding their investment in the flailing startup.
According to China’s e-commerce laws, businesses are prohibited from faking transaction data or buyers to mislead or fool consumers. Industry insiders are certain that SnowPlus will soon have to face the music, it’s the question of whether it’s the Chinese government or its investors that will turn on it first that remains to be seen.
Showing profitability and positive market reception to its product is likely the reason behind SnowPlus’ unethical business strategies, Chinese business & tech news outlet Rancaijing concluded in its recent report.
“E-cigarettes are now a red-hot industry for investment,” the report said. “The speed at which startups can capture market share and sales is being judged as the key metric right now. If industry data shows a company is slowing down, investors are ready to abandon ship immediately and move onto the next hot opportunity.”