Today it is easier than ever to order luxury products online as cyber marketplaces gain more and more popularity. One rapidly growing website is Alibaba Group, which started in China 16 years ago and now competes with eBay and Amazon. Alibaba’s consumer-to-consumer Taobao, similar to eBay.com, features nearly a billion products and is one of the 20 most visited websites globally. This multi-billion dollar company has plans to further expand throughout the globe. The slowdown in China’s economy has led to only a 27% growth in revenue in the last quarter compared to 60% in the previous seven. This increase was primarily caused by the rise in sales of luxury products. As consumers in China get more disposable income, they are prepared to pay as much as 4,200 Yuan ($661) for a single item and they want to know that the product is real. Unfortunately, Alibaba has gained the reputation of being a counterfeit haven.
This is an image that will be hard to shake off, as China is known to produce ‘close to real’ Rolex watches and other luxury goods for as low as 1% of the original price. Many ordinary sailors could be spotted wearing these expensive watches when they came back from long trips oversees. At least it was understood that they were not getting the real deal when buying from a sales guy that had 25 watches on display in downtown Hong Kong.
In order to become a trusted online marketplace for luxury goods, Alibaba needs to put in a solid effort to prevent selling fake products. Their measures should be transparent and verifiable in order to convince not only local consumers, but also those in western countries where Alibaba wants to expand.
There are many ways to have fake products enter the supply chain, starting at the source, the production facility. After that, the final product makes its way through many warehouses and modes of transportation. In order to assess the vulnerability of the supply chain, there needs to be a detailed mapping of all these steps along with a review of the risks involved by site, transition phase and the transportation legs. Luxury brands will have to put pressure on companies like Alibaba to allow for thorough assessments performed by reputable management or security companies. The vulnerability assessment will result in recommendations to mitigate the risk of fake products entering the supply chain and in the end protecting the customer from buying a real fake Rolex.