In the early days of eCommerce, buying significantly underpriced versions of designer goods usually came with the implied warning, “buyer beware.” Counterfeit products have been around far longer than digital marketplaces, but with the globalized economy putting geographically distant retailers on the same playing field, some online retailers are feeling the crunch to control the spread of counterfeiters that siphon sales from legitimate brands.
No online marketplace might know this better than Alibaba.
According to Reuters, Alibaba is locked in a struggle with the Office of the U.S. Trade Representative regarding the overall safety of shopping on the Asian retail giant’s online marketplace. After being placed on the USTR’s blacklist in 2008 and removed in 2011 and 2012, respectively, both Alibaba.com and Taobao Marketplace are again the subjects of U.S. and European retailers claiming that the sites still list counterfeit products that make it difficult for them to sell their authentic wares.
One of those retailers is Kering, the Paris-based fashion retailer that initiated legal action against Alibaba in May 2015. At the corner of the suit is the alleged high numbers of counterfeit Kering-branded handbags and watches being sold in bulk on Alibaba.com to U.S. consumers, according to BBC News. In some instances, products that normally retail for upwards of $800 each were marked down to just $2 to $5 per unit for a 2,000-item order.
"Kering and its brands dedicate a great amount of creative energy, craftsmen's know-how and monetary investments to develop products that speak to consumers and fulfil their needs," a Kering spokeswoman told BBC. "This lawsuit is part of Kering's ongoing global effort to maintain its customers' trust in its genuine products and to continue to develop the creative works and talents in its brands."
Spearheading the issue from Alibaba’s side is Eric Pelletier, the newly hired government affairs chief who assumed the post in June. Reuters explained that Pelletier has been engaged in a correspondence with the USTR that extolls Alibaba’s attempts to crack down on counterfeiting merchants on its sites while recommitting themselves to doing better in the future.
"When you step back and look at our overall efforts to combat illicit activities, our track record is clear,” Pelletier wrote to the USTR. “We are certainly not perfect, and we have a lot of hard work ahead of us ... we will continue to do everything we can to stop these activities.”
While it might appear as if Alibaba’s stated pushback on counterfeit sellers is being done to placate outside critics, Alibaba CEO Jack Ma told Xinhua that his company also takes a hit whenever such a a merchant manages to pull off an illicit sale, estimating that just one fake item can deal enough collateral damage to the site’s reputation and consumer confidence to lose five potential customers on each individual transaction. In response to these potentially damaging numbers, Ma explained that the company plans on using a data-driven approach to root out notorious counterfeiters.
"On the Internet, we have an evaluation system for the goods and also with big data, we can locate those who produce and sell counterfeits," Ma told Xinhua. “Through 15 years of efforts, we have built a credit system that we are very proud of. Credit is the cornerstone of everything.”
If anything, the backlash against Alibaba proves that retailers aren’t alone in their corners of the market anymore. While big-box companies have always been major players on the international stage, eCommerce is now bringing smaller companies into contact with others from around the world – and when one of them starts to cut corners with counterfeit goods, it’s getting harder and harder to hide from the other retailers they're affecting.