GUANGZHOU,China -- Amid fierce competition for shoppers' clicks and cash, smartphone-based pyramid schemes are proliferating in China as companies vie to lure customers to virtual shopping malls. With unscrupulous business practices rampant across the country in and out of cyberspace, consumers fall prey because they are more likely to trust information provided by people they know.
Users are recruited on WeChat, the popular mobile messaging app run by Tencent Holdings. Companies and individuals who engage in the schemes are called weishang, and anyone making a purchase of a mere 100 yuan ($15.19) can join the community to become one. A weishang creates a WeChat group, a closed online platform where friends and family with common interests can gather and chat, which serves as a foundation of intimacy and mutual trust.
The weishang then sends the group a link to an e-commerce website selling products that members might like, such as tennis goods. If a member makes a purchase, the weishang receives a commission. Those who made purchases may themselves become weishang and recommend the goods to people outside the group in order to receive a commission. As the cycle repeats itself, the pyramid network expands further.
The number of weishang is on the rise. According to reports by local media, the figure doubled from 10 million, including individuals, in the first three months of 2015 to 20 million at the end of 2015.
Such questionable business practices are widespread in China, both online and in the real world, causing people to often say that only their families and friends can be trusted. In this environment, and with the growing competition among online retailers such as Alibaba Group Holding, pyramid schemes are likely to spread further.