Why Alibaba can’t stop counterfeiters
are forgotten in favor of generic "made in China" versions.
This parallel economy is no secret. Last year, Alibaba co-founder Jack Ma bluntly told a gathering of retailers that counterfeiters use exactly the same factories and raw materials as legitimate manufacturers. Local governments tend to look the other way — or worse. A 2009 diplomatic cable released by WikiLeaks reported that China's economic downturn at the time was weakening efforts to enforce intellectualproperty protections. In one passage, it described how Apple Inc.'s effort to shut down a MacBook counterfeiting line was rebuffed because it would threaten "100 local jobs."
That's actually pretty sizable for a knockoff operation. I've visited counterfeit iPhone "manufacturers" in Shenzhen that consisted of only a handful of family members. They would expertly assemble parts into reasonable facsimiles for sale via online marketplaces such as EBay, Lazada and Taobao. Though none of these marketplaces welcome counterfeiters, they do welcome small Chinese manufacturers -and distinguishing between the two is often difficult.
Amazon, for instance, has tried to fight off a growing problem with fakes, but in doing so has risked disqualifying legitimate small retailers, who use the site to sell everything from paperclips to pillow covers directly to consumers worldwide. Such entrepreneurs reduce costs for customers and constitute an important and fast-growing segment of Amazon's online marketplace.
As a China-based company, Alibaba has greater exposure to counterfeiting than Amazon does, given that Chinese consumers are generally quite price-sensitive and less averse to purchasing fakes. But it isn't helpless. For one thing, it could simplify its procedures for brand owners to report instances of counterfeiting. It could also use its global profile and political leverage to push the government to prosecute more counterfeiters.
Although that might be risky for Alibaba, the alternative is to resign itself to a reputation befitting a notorious flea market — not one of the world's most influential e-commerce companies. Given the choice, Alibaba shouldn't hesitate to prove it's better than the counterfeiters.