Golden Fleecers

A system error that struck at midnight on January 20 proved a gold mine for several users of Pinduoduo (PDD), China’s third-largest e-commerce platform: The glitch allowed an unlimited number of 100 RMB “red packet” coupons to be sold at the bargain price 0.4 RMB each.

Some stockpiled several thousand coupons, and used them to pay phone bills, buy “virtual coins” on messaging app QQ, and purchase products on PDD, before the time the error was discovered by administrators the next morning. By noon, all unredeemed coupons were forfeit, and Shanghai police were soon investigating the matter as an “internet scam” (PDD has since stated that its losses amounted to no more than tens of millions of RMB, not 20 billion as initially reported).

Known in English as “e-connoisseurs,” people who exploit loopholes to repeatedly obtain discounts from businesses are called the “wool party” (羊毛党) in China, and their highly efficient, legally gray activities are a conundrum for authorities.

The term “pulling wool” (薅羊毛) originated from the comedy sketch “Yesterday, Today, and Tomorrow” from the 1999 CCTV Spring Festival Gala, in which Song Dandan played a shepherdess accused of appropriating her agricultural unit’s “socialist wool” to knit a sweater for her husband.

China’s earliest e-connoisseurs targeted promotional discounts and free gifts offered by O2O or e-commerce platforms by registering extra accounts under the names of family members or friends. When peer-to-peer lending (P2P) platforms offering sign-up bonuses emerged in the early 2010s, the wool party became more organized. Today’s wool-pullers employ multiple burner phones and false IDs to hide their high gains, and are often found in QQ or WeChat groups led by a “head fleecer,” who shares promotional links and provides assistance for a fee.

While wool-pulling activities usually create net loss for businesses, many actually collude with the “wool party” and even tip off “head fleecers” about upcoming promotions to drive up their user numbers. According to a 2017 “Digital Finance Anti-Fraud White Paper” co-authored by JD Finance, over 1.6 million people are engaged in a well-developed gray industry comprising virtual phone number providers, developers of “coupons-snatching” software, businesses that set artificially high prices in order to announce discounts, and the wool-pullers themselves.

Legitimate businesses have reacted differently to being fleeced. Last December, Starbucks terminated its first-time bonus to new app-users after spotting a large number of registrations under burner numbers. A month earlier, however, China Eastern Airlines honored all the first class and business class air tickets that had been sold at a 97 percent discount due to a system bug—losing money, but gaining plenty of positive press.