A single fake sale costs Alibaba Group Holding Ltd (NYSE:BABA) five customers

Alibaba Group Holding Ltd (NYSE:BABA) is battling a proliferation of counterfeit business on its online marketplaces, and the problem is serious as founder Jack Ma, recently outlined. It is emerging that Alibaba loses at least five customers if a single fake product happens to be sold through its platforms. Although Alibaba claims to be a victim of intellectual theft thriving on its marketplaces, critics say the company actually profits from the sale of fakes.

Alibaba Group Holding Ltd (NYSE:BABA)’s reputation is increasingly coming under attack. The company is accused of either benefiting from the counterfeit businesses on its marketplaces or doing little to help fix the problem. According to Ma, it is not true that Alibaba benefits from the dishonest businesses taking place on its online marketplaces. Instead, Ma feels that Alibaba has been a victim of counterfeiting, saying that the company loses five customers for any fake sale on its platform.

Call for government to tight manufacturing rules

Nevertheless, Ma acknowledges that counterfeit trade on its platforms is a serious problem, one that harms Alibaba’s own business as well as that of its partners. To successfully combat online fake business, Ma feels that Chinese regulators need to play along, especially by tightening rules to curb the production of fake goods in China. If that happens, Ma says China will be able to improve the image of its local brands, thus fostering more business locally and across the borders.

It costs Alibaba $157.7 million to fight fakes

Alibaba Group Holding Ltd (NYSE:BABA)’s efforts to fight counterfeit business appear limited. Although the company has hired thousands of assistants to help weed out fake products from its sites, the problem has persisted or deteriorated. Alibaba spends about $157.7 million every year to fight counterfeit business on its marketplaces, which is a costly affair going by the figures.

According to Ma, Alibaba’s singlehanded battle against dishonest trades on its platform has resulted in at least 400 offenders being jailed.

Alibaba Group Holding Ltd (NYSE:BABA) is taking a multipronged approach in fighting counterfeits on its marketplaces. On one hand, Alibaba closely monitors activities on its platforms to identify fake vendors and report them to the authorities. On the other hand, the company helps vendors who have decided to stop selling fakes to build their own genuine brands.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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