Consumer

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

There's no such thing as bad publicity.

Chinese e-commerce companies were put through the wringer last night when the state broadcaster CCTV aired its annual consumer affairs gala. Ele.me, a food-delivery site, works with unhygienic restaurants, while retailers such as Taobao are dotted with fake reviews, the program said.

The nation's e-commerce industry should write a collective check to CCTV, such is the value of the free publicity. Being named and shamed by the consumer advocate to an audience of hundreds of millions sounds bad, especially when it concerns areas as emotive as health and hygiene.

In reality, even a shellacking by the so-called 315 Gala could do little to dent the online commerce market, which last year grew 32 percent. Instead, what CCTV has done as a government proxy is to legitimize e-commerce as an irreversible part of China's move toward building an economy fueled by domestic consumption.

Until just a few years ago, online shopping was the domain of comparatively well-off people looking for comparatively cheap goods. Now, online shopping involves almost one-third of the nation's population.

China's Rising e-Shoppers
The number of people shopping online each month has tripled
Source: Bloomberg Intelligence, iResearch. Data track the number of unique users who shopped online that month
Note: Shopping volume falls in February after Lunar New Year

With that growth, and because the line between cheap and fake often was blurred, many came to the conclusion that e-commerce shops were virtual warehouses for brand ripoffs, as well as mundane items like TVs and toothpaste.

Now, according to CCTV, we find that the ills of the industry run deeper, as some food delivery companies work with unlicensed vendors to offer questionable products. With online food being relatively new, and among the fastest-growing areas, it's not surprising that it received special attention.

Growth Perspective
China's online growth is outpacing total sales, led by food and clothing
Source: China's National Bureau of Statistics; Data for 2015 full-year sales

Some context is needed. Fraud in online commerce, while not commendable, is hardly worth the crocodile tears of CCTV's latest expose. The industry only accounts for one-tenth of all retailing, and fraud is common at China's street stalls, electronics malls and supermarkets.

Online Appetite
Transactions through Alibaba's online platforms is approaching 1 trillion yuan per quarter
Source: Bloomberg, Alibaba. Data tracks quarterly gross merchandise value at China's largest online marketplaces

What the report does is put the small but fast-growing industry on the same stage as the likes of Apple, Land Rover, VW, China Mobile and Gap, all of which have been targets over the past few years. (Foreign brands got off lightly this year.) While such consumer spotlights trigger public hand-wringing, they seldom hurt the companies much: Apple's China sales are still growing, while Land Rover's ills are tied to a slowing economy.

So while the nation's e-commerce leaders may be forced to offer public apologies after being featured on the 315 Gala, privately they may be offering quiet thanks.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net