Alibaba, Counterfeits, and China’s Shortcut Corporate Culture

Arranged Money (Photo by Anil Mohabir) (CC BY-SA) (Resized/Cropped)
For a long time, China has had the dubious honor of being famous for its ability to produce “knock-off” branded goods for sale. Many Chinese businesses also have been caught for their shady accounting practices and tricks that many businesses relied on to increase valuation for unsuspecting investors or partners. Explosive growth of e-tailers like Taobao (淘宝) and JD.com (京东), along with these two infamous schemes, created a perfect storm.
Just over 40% of goods that Chinese people buy online are counterfeits, said China’s State Administration for Industry and Commerce (SAIC) report. The findings, released in early 2015, accused Alibaba’s Taobao to be the worst among e-tailers — 63% of its goods being fakes. To be fair, with seven million Taobao-listed sellers, Alibaba’s battle against knock-offs may never be over despite its technology improvements and human capital investment for inspection. Given the traditional close relationship that Alibaba has enjoyed with the Chinese government, it is not surprising that SAIC conducted the study in July 2014 but delayed publishing it so as not to damage Alibaba’s US IPO preparations at that time. Furthermore, SAIC removed the report later from public access and did not release any follow-up study or data from 2015.
Compared to counterfeit goods, “brushing orders” (刷单), is a relatively new occurrence as Taobao gets bigger. Essentially, it is an organized, illegal and outsourced process designed to boost customer ratings, star ratings, and product reviews for Taobao vendors. The organizers of these activities, “brushers,” give the appearance of hot items or trust-worthy status for any vendors that hire them. The process is explained in an illustration from a recent WSJ article.
A quick search of “TaoBao Brushing order” (淘宝刷单) on Baidu.com yields 3.98 million results. Most are touting brushing orders as stable part-time income opportunities and are recruiting people into various brushing groups. Despite Alibaba’s ongoing effort to deploy smart software tools, making penalties stiffer, and having tougher audits, it is still very much a ‘Cat-And-Mouse Game.’
The overall numbers are staggering. The 2011 e-commerce market revenue for China was 4.8 trillion Yuan or 741 billion US Dollars. (To put this into perspective, it is only slightly less than Saudi Arabia’s GDP by 5 billion USD.) There is currently no way to determine how much of this e-commerce revenue is generated by brushers and by counterfeit goods. These two issues become thorns in Jack Ma’s side and impact investor confidence. In late 2015, Gucci, Veneta, Yves Saint Laurent, and other luxury brands sued Alibaba for promoting the sale of counterfeit goods. Ma also announced a new strategy of going after counterfeiters and brushers everywhere – not just on Taobao, but also ones operating on rival platforms like WeChat and JD.com. Issues of trustworthiness and integrity affects offline manufacturing or online platform businesses alike; Alibaba is a prime example and paying the price for systemic “shortcut” culture that is prevalent in China. One can only hope this will be the year this Goliath company will finally turn a corner on this fight.
“East meets West,” is a most fitting one-liner for YC Chen. Born in Taiwan, and relocated to the U.S. at age 13, she holds a Bachelor’s degree in Architecture, and an MBA from the Illinois Institute of Technology. She chose to defy the stereotypical Asian image by pursuing a “front-of-the-room” career in training and development.
Over time, YC refined skills by working as a trainer and corporate consultant in higher human performance and learning. She loves to take a situation, break it apart to the basic components, razor into problem spots, generate possible solutions, and then explain it with intriguing imagery and analogies for fuller understanding. She serves as the Director of Operations, Asia-Pacific region for Encephalon Accelerate Learning & Development (USA). Her recent project includes building private kindergartens and schools in Asia, as well as international business consulting. YC currently is based in Singapore and works extensively in China and SE Asian countries.
Trending Now on Affluent Christian Investor
Sermon On The Mount vs. Sermon On The Plain: Different Messages For Different Economies
Mary And The Wise Guy: Why I Wish Christopher Hitchens Had Known More History
What Number Will Signal When the Dollar is About to Plunge to Zero Value?
The Futility of Managing Your Own Reputation
The Most Stupid People In The World
Nude is Natural: Should Clothing be Optional?
Why Big Funds Overlook Places Like Columbus And Why They Shouldn’t
Jimmy Stewart Banking versus James Steuart Banking
King David on The Suffering Leader
An Investment Decision-Making Framework Based on Timeless Principles
What Christian Leaders Usually Fail To Understand About Economics
Norway: Proof Socialism Works?
Christian Economic Forum is Not Yet Another TED-lite Self-Help Hype-Fest
Christian Business and the Ministry of Wealth Creation
Why You Shouldn’t Be Afraid Of Options And Futures
Wealth Equality = Stealing
How Digital Gold Will Make You Anti-Fragile
The Affluent Mix
Two Years Of Global Cooling But Cuomo Attacks Energy Anyway... February 4, 2019 | Frank Vernuccio

Wealth Equality = Stealing February 4, 2019 | Jim Huntzinger

What Christian Leaders Usually Fail To Understand About Economics... February 4, 2019 | Roger McKinney

Last Quarter Markets Got De-FAANGed February 4, 2019 | Jerry Bowyer

Warnings From A Past Pope And A President About Socialism... January 25, 2019 | Jim Huntzinger

Parliament Brexit Rejection Is Continuation Of Elites Rejecting Popular Opinion... January 25, 2019 | Frank Vernuccio

More Tuckerism: ‘Conservative’ Journal Blames Markets For Social Ills... January 25, 2019 | Roger McKinney

One Year Later And The Trump Tax Cut Boom Seems To Be Petering Out... January 25, 2019 | Jerry Bowyer

No, NY Times, A Government Shutdown Won’t Shrink Economic Growth... January 17, 2019 | John Tamny

Tucker Carlson Serves Up Warmed Over Socialism... January 17, 2019 | Roger McKinney

Media Ignores Socialism As Reason For Venezuelan Crisis... January 17, 2019 | Frank Vernuccio

Brazil’s New President Embraces Israel (Literally) And Is World’s Best Perfo... January 17, 2019 | Charles Bowyer

Who Says States Can Nullify Federal Overreach? Madison And Jefferson... January 17, 2019 | Jim Huntzinger

Why Big Funds Overlook Places Like Columbus And Why They Shouldn’t... January 17, 2019 | Jerry Bowyer

AD or ADD: 2019 Years From What? January 4, 2019 | Jerry Bowyer

Why Christmas Won Over Greek Philosophy January 4, 2019 | Vishal Mangalwadi

Madison’s Attack On Government Suppression Of Dissent Is Still Relevant Today... January 4, 2019 | Jim Huntzinger

Stop Blaming Memphis’s Sad Present On Its Tragic Past... January 4, 2019 | John Tamny

No, Washington Post, The Virgin Mary Was Not A Socialist!... December 28, 2018 | Jerry Bowyer

Debunking The Myth That Blacks Need To Be Surrounded By Whites To Succeed... December 28, 2018 | Roger McKinney

Baby, It’s Cold Outside… For Free Speech... December 28, 2018 | Frank Vernuccio

The Economic Philosophy Of The Virgin Mary... December 21, 2018 | Jerry Bowyer

Join the conversation!
We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse.