By Zofia Reych
Alibaba.com, the world’s biggest e-commerce company whose traffic exceeds that of eBay and Amazon combined, has been long criticised for tolerating and profiting from the sale of counterfeit goods. In 2015, the French owner of luxury brands Gucci, Yves Saint Laurent and others filed a lawsuit against Alibaba, claiming that the company facilitates the sale of fakes and violates intellectual rights. Alibaba’s membership in the International AntiCounterfeiting Coalition (IACC) was suspended over the accusations, despite the company’s long-term efforts to fight knock offs.
The latest comments from Jack Ma, the visionary founder of Alibaba.com, have stirred further controversy.
“The problem is that the fake products today, they make better quality, better prices than the real products, the real names,” explained Ma in his speech at the Global Smart Logistics Summing in Hangzhou, China.
Globally recognised luxury brands have long been benefiting from moving their production lines to low-cost Chinese factories. But the same factories that stitch together Gucci handbags sold by the brand for thousands of dollars in boutiques and online, have started dealing directly with e-sellers who then offer those same goods to consumers for a fraction of the original price. These ‘replicas’, sold with or without the logo, can be ordered in bulk for as little as 2-5 USD, with the original retail price at hundreds, if not thousands, of dollars.
Ma’s comment was met with criticism from Cao Lei, a director at the China E-Commerce Research Center. “It’s inappropriate for a person of Jack Ma’s status to say something like this,” he noted in a statement for Bloomberg.
Despite being blunt about the situation, Ma has been cooperating with the Chinese government to fight piracy. In 2015, 300 people were arrested and fake items worth hundreds of millions of dollars were confiscated by the officials. Ironically, Chinese courts are known for illegally reselling items seized in anti-corruption operations on Taobao.com, an Alibaba owned e-retail platform.
Alibaba’s latest approach to fighting counterfeit products is through giving support to local brands. “Quality made in China” is a program designed to encourage Chinese factories to create products under their own logos. In Putian, a city built equally on luxury brands’ factories and fakes, Alibaba is helping 17 shoe manufacturers launch their own, legitimate e-commerce ventures.
However, critics of the program point out that putting efforts to removing fakes from Alibaba owned sites should be Ma’s biggest concern. Indeed, last year alone, 12 million illegitimate listings were taken down from Taobao.com and others.
With over 400,000 million individual shoppers and millions of businesses using Alibaba services, the company has an invaluable asset in fighting counterfeits: big data. “We have the scale, we have the data and we have the commitment to be a global leader in anti-counterfeiting,” said the group’s president Michael Evans in response to the IACC suspension.
Some claim that in the third quarter of 2015, the sales of fake goods on Alibaba owned pages amounted to 45 billion dollars. Xinhua estimates that over 40% of products sold online in China is fake, and Alibaba.com can be seen as both a victim and a perpetrator. However tangled in the fight with fakes, the company is doing very well, especially given the extreme economic slowdown in the region. Jack Ma’s Hangzhou speech revealed plans for growth.
Alibaba’s ambition is to serve 2 billion shoppers by 2036, while moving half of its revenue sources abroad within the next decade. The latest South-East Asian acquisition by the group is in-line with this policy: a controlling stake in Lazada.com was recently purchased for 1 billion USD.
Lazada, a privately owned Singaporean e-commerce company, is active in all of the major ASEAN markets of Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
“These six countries combined have a population of approximately 560 million and an estimated Internet user base of 200 million, according to Internet Live Stats. With only 3% of the region’s total retail sales conducted online, Southeast Asia is expected to offer tremendous growth potential to both companies as internet penetration continues to rise,” stated a press release from Alibaba.com.
Alibaba Group’s e-payment service, Alipay, is already set for domination in the ASEAN region and is likely to dramatically alter the financial services landscape in the coming years. While the use of mobile phones is extremely popular, the online marketplace is still in its early days across Southeast Asia and foreign giants such as Alibaba are rubbing their hands at the potential for growth.
Indochina is already identified as a hotspot for collaboration between Southeast Asian and Chinese factories assembling and packaging fake goods, and Lazada also has a history of battling piracy. At this stage it is hard to predict Alibaba’s impact on the counterfeit products industry in the region, but as the demand and supply for ASEAN’s e-commerce continues to grow, the problem is likely to amplify as well.