Alibaba Loses Face

Mark Tanner

2016/05/18 Mark Tanner
1 Comment

Alibaba is a great company in many ways. It has developed world-leading online shopping systems, pioneered Corporate Social Responsibility in China and has been a significant driver of China’s consumption growth. Yet some recent events illustrate that the company still has much work to do.

Alibaba was admitted to the prestigious International AntiCounterfeiting Coalition (IACC) last month, causing an outcry from many of the IACC’s existing members.  Gucci and Michael Kors quit the coalition claiming the admission provided cover to our most “dangerous and damaging adversary.” Tiffany was next to exit.

To counter the revolt, Alibaba’s Michael Evans made the announcement that any brand can now have access to Alibaba’s IACC MarketSafe Program, at no cost.  But soon after, a scandal surfaced about the chief of the IACC having close ties with Alibaba and owning their stock. This was the final straw for many members, with threats of mass defection. As a result, Alibaba was suspended from the coalition last Friday.

There was hope that the NYSE listing would make the company more accountable and discouraging of illegal activity such as removing fakes. Whilst some progress has been made, Alibaba could be better utilising its big data and algorithms, and working closer with brands, to make life harder for the peddlers of counterfeits.

Beijing also has many tools in its belt, and could be as effective at regulating fake products as it has been at stopping inappropriate content.

One of the current buzz words in the Capital is ‘Supply-Side Reform’, which Beijing hopes will increase the attractiveness of local products to Chinese consumers. This is less likely to happen through initiatives such as increasing the price of imported goods through the now-postponed cross border taxes. It will come from addressing the root of the problem – trust. Chinese have little faith in local products, mainly due to dubious supply chains and fakes. While product quality and supply chains appear to be a focus of structural reform, eliminating fakes would help build trust and better reward innovation.

Unfortunately Alibaba’s fakes don’t just stop at products, but are also endemic for sales.  “Brushing,” or fake sales, is a technique vendors commonly use to bolster their product’s search ranking and reputation.  Not only does this overstate Alibaba’s enormous sales results, but it also disadvantages honest brands that don’t cheat the system.

Fakes will be a challenge for brands operating in China for some time yet. However, there are strategies and tactics that can make fakes less attractive to value-seeking consumers. China Skinny can help with that.

For our Australasian-based readers, China Skinny’s Mark Tanner will back chairing the Sydney-leg of the China Digital Conference on 2 June.  It will be a great forum to understand more about the opportunities and challenges of promoting and selling your brand online in China.  More information hereGo to Page 2 to see this week’s China news and highlights.

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