Alibaba vice chair defends e-commerce giant’s integrity
Joe Tsai, executive vice chairman of Alibaba, had harsh words yesterday for a report by the State Administration for Industry and Commerce (SAIC) in China that alleged the e-commerce giant has not done enough to rid counterfeit goods and illegal products sold by parties on its Tmall marketplace.
Calling the report "flawed," Mr. Tsai told analysts Alibaba was "a company with strong values." He added that while counterfeits are an unfortunate reality online and in brick & mortar stores today, Alibaba has a "zero tolerance policy" when it comes to illegal activities, because the "health and integrity of our marketplaces depend on consumer trust."
Mr. Tsai said that last year, Alibaba had cooperated with Chinese Law Enforcement in over 1,000 counterfeiting cases and that 400 suspects were arrested from 18 crime rings. Some 200 stores, factories and warehouses were shut down as a result.
Last August, a Wall Street Journal report pointed out that Alibaba had struck deals with a number of consumers brands including Burberry, New Balance and Nike in which they would open stores on Tmall if the marketplace operator removed gray market goods from the site. In the case of Burberry, Alibaba was successful in closing 48 out of 50 unauthorized vendors.
Discussion Questions
Do you agree with Alibaba’s Joe Tsia that the ultimate success of the company’s business is built on the trust that consumers place in the site? Do you think most e-commerce marketplace operators are doing a sufficient job in getting counterfeiters and others engaged in illegal activities off their sites?
Let’s see …
China—Trust. Trust—China. For most people one of these words is not like the other. An oxymoron perhaps.
Alibaba seems committed to breaking that proven stereotype and I’d love to see them do it. Given the prominence and visibility of Alibaba, Mr. Tsia has his work cut out for him. Nothing short of “squeaky-clean” will do it. My suspicion is that smaller and less visible entities might be tempted to let counterfeit products slip by, especially if they are quality counterfeits.
The ultimate success of any legal business is a direct result of building consumer trust. China has long had a reputation of allowing counterfeiters to operate with relative impunity. Periodically, primarily to please a visiting head of state, they would crack down on these enterprises, only to see them return once the state turned its attention to other matters.
Billions of dollars are lost each year due to gray-market goods. This negatively impacts workers, legitimate businesses and governments. China is not doing enough to combat piracy.
All businesses should take steps to eliminate counterfeit goods and illegal activities and governments should be forceful in pursuing those that don’t.
Trust is the cornerstone for success in business, any business. For online marketplaces, counterfeit products become the headwinds and hurdles that suppress company growth and customer trust.
For Mr Tsia, the challenge is even higher—shutting down 200 stores, factories and warehouses sounds like a lot but according to Financial Times there were eight million sellers on Alibaba in fiscal 2014, suggesting that the opportunity to clean up counterfeit products and raise trust remains significant for Alibaba. Expect this to be a recurring topic in 2015 and beyond.
Come on now. China is famous for stealing trade secrets online, and for counterfeit goods, and the Chinese government is shocked—SHOCKED!—that counterfeits are being sold. Way too cute.
Yes, success is built upon trust. However, how can an e-tail site guarantee that there aren’t counterfeit products on their site? Inspect, purchase and reinspect all products from every listing company? The policing of products is not an e-tailer’s job, except for when consumers provide feedback that they suspect they are getting fakes when they purchase from a particular company.
I applaud the company for addressing a very serious issue. They are, of course not the only merchant affected by these criminals. Consumers do need to be able to trust their merchants as much as they trust their CPG brands. The biggest sites are the most visible, however, smaller sites are working diligently to remove counterfeit goods and sellers from their marketplaces.