Alibaba: Still a market for fakes

This holiday season – Christmas, New Year, Kwanza, you name it – is a time of giving and a truly happy time of the year. For me, it is a time when all members of my immediate family – children and their spouses and my grandchildren – gather to give thanks to God for another […]

This holiday season – Christmas, New Year, Kwanza, you name it – is a time of giving and a truly happy time of the year. For me, it is a time when all members of my immediate family – children and their spouses and my grandchildren – gather to give thanks to God for another year of peace, health, and blessings. We often invite extended family members and close friends to join us during this joyful period of the year. Of course, a very huge part of the celebrations is the exchange of gifts between each and every member of the family and the friends that celebrate with us.
For the past several years, a sizeable number of my family members orders gifts online, via some e-commerce platform – wherever this may be located on the globe. Enter Alibaba, the Chinese e-commerce behemoth. Last week Thursday, the U.S. government told us that the goods that Alibaba mails out to you this holiday season may be counterfeit after all!
The U.S. Trade Representative (USTR) has asked Alibaba to intensify its efforts to straighten out the companies it works with that are the purveyors of fake products. Taobao, the company’s massive online bazaar, is particularly notorious for fake products, and has stayed on the U.S. “Name-and-Shame” list for some time. You could get an iPhone, complete with Apple’s logo, at a bargain price on Taobao, even before the phone has been released by Apple! “Brand owners continue to report that Alibaba platforms, particularly Taobao, are used to sell large quantities of counterfeit goods,” the U.S. report said. The report also said that brand owners continue to complain to USTR even after Alibaba claimed to have enacted new measures for getting fakes off its platforms. “Despite these new procedures, USTR is increasingly concerned by rights holders’ reports that Alibaba Group’s enforcement program is too slow, difficult to use, and lacks transparency.” In response, Alibaba said it is committed to fighting counterfeits.
Alibaba is like eBay, Google, and PayPal rolled-up into one in terms of the range of offerings. It consists of a family of Internet-based businesses that cover business-to-business (B2B) online marketplaces, retail and payment platforms, shopping search engine and data-centric cloud computing services. The company operates its business primarily out of China. Alibaba’s B2B marketplace is driven by www.alibaba.com , through which importers and exporters from more than one hundred countries and regions are brought together. Alipay (www.alipay.com) is a third-party online payment platform. Alipay is said to partner with up to 100 financial institutions, including Visa and MasterCard, to provide payment solutions for Taobao.com  and Tmall.com , both owned by Alibaba. Alibaba is believed to be the world’s largest e-commerce company by some metrics. The company claims to have 386 million active buyers on its platforms at the end of Quarter 3 this year.
Alibaba’s struggle with fake products is not a new development. In fact, this column carried an article on this topic in the 22 October 2012 issue. Other than working with dubious companies that peddle fake products, Alibaba is also different in many other ways from your typical e-commerce company in the West. Alibaba operates mostly out of China, where it dominates retail. In the West, the dominant retailers are the likes of old-economy, brick-and-mortar company, Wal-Mart of the U.S. In addition, it is generally believed that Alibaba’s corporate structure is opaque, coupled with the strange investment model in which an investor into Alibaba does not get a true ownership stake in the company’s operating businesses, but only a contractual right to profits from the businesses! Some in the West also worry about Alibaba’s spending pattern and the fact that the company does not have a fully-fledged distribution network. Compared to the West, these features are irregular.
You should note that the Chinese government frowns at the IP regulation abuses in Chinese companies like Alibaba, and it has once been stated that Alibaba “gets an earful from Chinese government officials” on the need to address the prevalent privacy issues in the company. One motivation for the Chinese government in fighting violation of foreign-owned trademarks and copyrights is that it is one of the most persistent problems in the country’s business relationship with the U.S. and other developed countries. Also note that this “IP-stealing” image of Alibaba conflicts with Jack Ma’s belief in originality and his “we-never-copied-a-model-from-the-U.S.” brag ado. You can then see why he may truly be working very hard to change the image of Alibaba as a piracy sanctuary. To boot, it’s my hope Alibaba will accept returns of the fake products shipped to innocent customers.
To end today’s article, I would like to say Happy Holidays to you and thank you very much for being one of the ardent readers of this column. May 2016 bring peace, happiness, good health, and abundance to you and your family. (Amen).