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Losing customer trust forever

Phuong Thao
Friday,  Nov 3,2017,14:20 (GMT+7)
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Losing customer trust forever

Phuong Thao

In the business world, trust is always the most valuable asset for companies to grow. Many enterprises in Vietnam seem to ignore this, though. Khaisilk, a high-end silk brand which has been in existence for more than 30 years, is among those enterprises as it has turned its back on its customers by resorting to malpractices.

The scandal erupted when Facebooker Dang Nhu Quynh in Hanoi posted a complaint about one of the silk items his company had bought from a Khaisilk store in Hanoi. According to the post, his company bought 60 Khaisilk scarves at the shop on Hang Gai Street for VND644,000 each. However, one scarf was found to carry two different labels with one reading “Khaisilk - Made in Vietnam” and the other “Made in China.” The company checked the other scarves and found remaining traces of “Made in China” labels.

Quynh said in his post that he would let readers draw their own conclusions about the case. And his post went viral on Facebook the next day and a Khaisilk representative asked him to remove it from the social network. However, Quynh declined the request.

Hoang Khai, chairman of Khaisilk, later admitted in local media that the scarves actually originated in China. Khai apologized and said his customers could ask for full refunds. He said that half of silk products for sale at Khaisilk stores came from China and the rest from craft villages in Vietnam.

Khai said silk villages in the country had not been able to ensure sufficient supplies for his stores, so he imported silk products from China. In explaining why a product bears both “Khaisilk - Made in Vietnam” and “Made in China” labels, Khai said his corporation had expanded to other fields like real estate and tourism, leading to a loose oversight of silk business.

His explanation quickly came under fire, with some calling him a liar and others urging a boycott of his products. 

The customer trust which he has won after three decades is lost overnight. His silk boutiques are located at the prime sites in major cities with sales staff trained to be polite, professional and fluent in English. Khaisilk scarves are much more expensive than similar local products, let alone Chinese items, but customers are willing to pay far higher prices for Khaisilk goods because they trust their high quality and origin.

Mai Phuong Thao, a Vietnamese businesswoman living in Canada, says on Tri Thuc Tre news site that she felt frustrated. Thao said she had bought many Khaisilk scarves as gifts for her foreign friends for years because she is proud of Vietnamese goods. Khaisilk is always her top choice when it comes to buying Vietnamese silk products. They are not only made-in-Vietnam scarves, but also a luxurious brand item designed and created by the Vietnamese.

“I don’t know how to say to my friends whom I have given Khaisilk products. I was proud of the brand when I introduced it to my friends. I told them that (Hoang) Khai is a talented man as he has built a Vietnamese brand that has won international recognition… What a shame now…,” the reader wrote.

Authorities have quickly intervened. Minister of Industry and Trade Tran Tuan Anh has ordered the Market Surveillance Agency to look into the origin of Khaisilk products and clarify signs of violating regulations on goods origin and possibly committing trade fraud. Inspectors have raided Khaisilk boutiques in Hanoi and HCMC. The minister even asked the case be transferred to law enforcement agencies for a criminal probe. The ministry has also formed a task force comprising the police, the customs, the tax authority, the Vietnam Textile and Apparel Association, and the Vietnam Standards and Consumers Association to probe a Khaisilk-linked firm.

Minister and Chairman of the Government Office Mai Tien Dung said of the case that it is unacceptable. The case shows signs of violating both laws and business ethics. At a time when the nation is deepening its global integration, the scandal delivers a blow to the nation’s image globally.

Minister Tran Tuan Anh said Khai’s admission that silk is imported from China and sold with Khaisilk label had constituted a violation of the Law on Intellectual Property as businesses are required to clearly show the origin of their products when registering for brand protection. In addition, the group has violated the Law on Consumer Protection. It could face criminal charges if the value of fake products is over VND30 million.

All Khaisilk stores in Hanoi and HCMC have been shut down following the scandal. The scandal is also a good lesson for enterprises in the country. As reported by Tien Phong newspaper, National Assembly deputy Duong Trung Quoc says Khaisilk is a lesson for local enterprises to think about business morality.

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