Alibaba’s Jack Ma: Fake goods often better than originals

Alibaba

Alibaba

Beijing (AFP) – China’s unbranded goods are often better than the branded originals they imitate, founder of e-commerce giant Alibaba Jack Ma has said, posing an additional challenge to the battle against sales of counterfeits.

“The problem is that the fake products today, they make better quality, better price than the real product, than the real names,” he said in a speech at Alibaba’s investor’s day in the southern city of Hangzhou Tuesday.

“They’re the exact factories, the exact raw materials, but they do not use that name,” he added.

China’s factories have traditionally churned out products for branded companies at low cost, but with the rise of e-commerce platforms such as Alibaba, they are increasingly finding opportunities to market their own goods online directly to consumers.

More than IP problems or fake products, it was this shift to a new business model that was “destroying” traditional brands and “revolutionizing the whole world”, Ma said, noting: “The way of doing business has changed.”

Alibaba has come under fire in recent years for the ease at which knock-off goods are available to consumers on its online Taobao marketplace.

Taobao is estimated to hold more than 90 percent of the domestic consumer-to-consumer market, while the company’s Tmall platform is believed to have over half of China’s business-to-consumer transactions.

As the leading force in China’s e-commerce industry, Ma said Alibaba could handle the problem of counterfeits “better than any government, any organization, any people in the world”, but that a continued market for cheap knock-offs was unavoidable.

“We cannot solve the problem 100 percent, because it’s fighting against human instinct,” he said.

Yet the company’s efforts to date have been the subject of increasing scrutiny.

“It’s inappropriate for a person of Jack Ma’s status to say something like this,” Cao Lei, director of the China E-Commerce Research Center in Hangzhou, told Bloomberg News.

“For some individual cases what he’s saying might be true, but it’s wrong to generalise the phenomenon.”

If you use a contract factory in China to produce your goods, don’t be surprised if high-quality fakes pop up online. That’s the feeling of Alibaba founder and executive chairman Jack Ma, who stands accused of effectively endorsing counterfeit goods while speaking at an investor event. The Wall Street Journal quotes the executive as saying that “the fake products today are of better quality and better price than the real names.” It’s a big issue for Alibaba, since its consumer-facing retail portals have something of a reputation for being the place to go when you want a knock-off device.

The paper explains that Alibaba has been under pressure to do something about its piracy problem for a while. An anti-counterfeiting group attempted to include Alibaba amongst its membership, prompting luxury brands like Tiffany, Michael Kors and Gucci America to kick up a stink. The company even received censure from China’s industry regulator, which said that (retail portal) Taobao has “paid insufficient attention to the illegal business activities on Alibaba platforms.” The company derided the claim, saying that the report was “biased” and “malicious,” causing “serious damage” to Chinese businesses that operate online.

We’ve previously reported on the prevalence of Chinese companies that produce knock-off goods, especially in the technology space. Ma is, at least, correct that pirated devices are often made in the same factories and on the same lines, that the real gear uses. For instance, a third-party facility might have a contract to produce 30,000 sets of high-end headphones or microSD cards. But once the run is complete, it could be possible to rush out a further 10,000 with leftover parts and some cunning alterations to the name — Boots by Drew or SpanDisc.

At the same event, Ma said that Alibaba isn’t the villain here, describing his company as the “leading fighter of the counterfeits.” He added that “every fake product we sell, we are losing five customers,” but conceded that it was “human instinct” for people to look for cheaper products. Which means that the folks patrolling our borders for Fakebits and Fauxheiserswon’t get any downtime in the near future.

Update: This story has been corrected to reflect that Jack Ma is the founder and executive chairman of Alibaba, but is no longer acting CEO.

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