The encyclopedia · Strategy & Leadership · Strategic decision · 2014–2020
Jumei IPO'd at $5.7 billion — a counterfeit scandal and a pivot to power banks killed it
China's No. 1 beauty e-commerce site lost 96% of its value after fake-goods allegations. The founder's answer was shared power banks and short dramas.
Jumei · 2014-07
What happened
Chen Ou founded Jumei (聚美优品) in March 2010 as a cosmetics group-buying site. His 2012 advertising campaign — 'I am Chen Ou, I speak for myself' — went viral and made him a celebrity founder with 43 million Weibo followers. On 16 May 2014, Jumei listed on the New York Stock Exchange at $22 per ADS, opening at $27.25 and reaching $39.45. Peak market capitalisation was approximately 5.78 billion dollars.
In July 2014, two months after the IPO, allegations that Jumei was selling counterfeit cosmetics triggered a collapse in consumer trust and repeated share-price drops. By the end of 2014 the stock had fallen below $13. Rather than invest in supply-chain verification and rebuild the platform's credibility, Chen Ou diversified: in 2017 Jumei acquired a 60 percent stake in Jiedian, a shared power-bank rental company.
The diversification did not reverse the decline. Revenue fell from 6.17 billion yuan in 2016 to 4.29 billion in 2018, a 26 percent drop. A first privatisation offer at $7 per ADS in 2016 was cut to $3, then withdrawn in 2017 after shareholder protests. In January 2020, Chen Ou offered $20 per ADS to take the company private. Market capitalisation by then was roughly 200 million dollars — a 96 percent decline from the peak.
Jumei delisted from the NYSE in 2020. By 2024 the website displayed only a company introduction with no products; the iOS app had been removed; the Android app listed one food item and two clothing items. Chen Ou had moved on to producing short dramas from a film base in Zhengzhou. The platform that had been China's leading beauty retailer was fined 20,000 yuan for system aging and lack of maintenance.
Why it happened
- The counterfeit allegations struck the one asset a cosmetics platform cannot lose — the belief that the products are genuine — and the response was diversification rather than verification
- Chen Ou's celebrity status had been the brand's trust mechanism; when trust broke, there was no institutional substitute (no authentication system, no supplier audit trail) to fall back on
- The pivot to shared power banks and later short dramas signalled to investors and customers alike that the founder had abandoned the core business, accelerating the death spiral
- The privatisation saga (2016 offer, 2017 withdrawal, 2020 re-offer) consumed management attention for four years while the platform's product catalogue and user base eroded
The lesson
When trust breaks, the fix is audits and guarantees — expensive and boring. Diversifying feels like action but reads as abandonment. The customers who left did not return for power banks.
Aftermath
Jumei's operating company Beijing Kexin is 99.9 percent owned by Chen Ou. The Jumei brand survives as a legal entity and a short-drama production account with 33,000 followers. The case is cited in Chinese business media as the archetype of a celebrity-founder company that could not survive the founder's attention moving on.
Sources
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