Alibaba challenges fakes by fostering local brands

FINDING THEIR FEET::Alibaba spokeswoman Crystal Liu said the company has aided manufacturers in online business, quality control, marketing and sales

Reuters, PUTIAN, China

Tue, May 26, 2015 - Page 14

Criticized and even sued by luxury brand Gucci and others for facilitating the counterfeit goods trade, Chinese e-commerce giant Alibaba Group Holding Ltd (阿里巴巴) has been quietly piloting a scheme to try to curb fakes at source.

In the coastal city of Putian, in Fujian Province, Alibaba is working with 17 shoe manufacturers to cultivate homegrown brands online, revitalize a flagging industry and offer would-be counterfeiters an alternative source of livelihood.

Critics say the scheme is misguided and Alibaba should instead focus on scrubbing its online marketplaces of widespread listings of fakes.

However, the “Made in China” plan speaks to what proponents say is one of the reasons why there has been only limited progress in the battle against fake goods in China: A lack of attractive alternatives for those making and hawking goods that infringe on others’ intellectual property rights.

“You can crack down forever and never see an end to it,” said Song Zonghu (宋宗虎), who once peddled counterfeit brand-name sneakers and now runs Shuangwei Sporting Goods Co Ltd (雙威體育用品公司), one of the firms in the Alibaba program. “Creating new opportunities while cracking down is the way to go. Everybody has to eat.”

Alibaba senior director of Internet security Ni Liang (倪良) said the scheme is a key anti-counterfeit initiative this year.

The group plans to expand it to household electronics, toys, bags and other industries, hoping that by building local brands, small manufacturers are more likely to turn away from fakes and serve a legitimate sector.

Putian is the epicenter of China’s high-quality fake sneaker business, a byproduct of a legitimate footwear industry that employs one-tenth of the city’s 3 million people. Copies of Nike Inc, Adidas AG, New Balance Athletic Shoe Inc products and other brand-name shoes made here are hard to distinguish from the real deal, but sell for a fraction of the price.

The municipal government has cracked down on fakes, arresting 156 people and confiscating about 2 million pairs of counterfeit footwear since last year, Putian e-commerce office director Wu Haiduan (吳海端) said. He declined to give an estimate of the overall size of the industry, but a grid of Putian’s sleepy daytime streets near government offices comes alive at night, offering hints as to the scale of the issue.

Hundreds of scooters ferry shoes as runners duck in and out of off-brand storefronts or apartment blocks to fetch more boxes. Sellers check each shoe for blemishes, wielding scissors or cigarette lighters to eliminate stray threads and pencil erasers to clean the foam midsoles. Fake certificates and phony credit-card receipts are tucked in with the shoes.

Curbside courier services then wrap and stack the boxes ready to be trucked out by daybreak.

Alibaba has trained the shoe manufacturers in online business, helped on quality control and marketing, and run sales promotions. In one three-day campaign, the shoe brands sold more than 4 million pairs — or two every three seconds — worth 480 million yuan (US$77.4 million), Alibaba spokeswoman Crystal Liu said.

Sneakers are just the start.

“We’ve received more than 60 requests from other industries,” said Jeff Zhang (張建鋒), head of Alibaba’s domestic retail marketplaces, which include the Taobao (淘寶) and Tmall (天貓) shopping sites.

For most, the hope is that Alibaba can help retool local industry in the face of rising costs and shrinking overseas orders.

“They are all looking for a model that can help them upgrade their local manufacturing,” Zhang said.

Song sees the Alibaba scheme as an economic lifeline, and said the future of his Siweiqi (思威琪) brand canvas shoes, which resemble Converse All-Stars, depends on continued support with sales promotions and exposure.

“What we’ve seen so far is just a signal,” he said.

A sales bump is one thing, but building a successful brand is quite another, said Shaun Rein, managing director at China Market Research Group in Shanghai.

“It is kind of unlikely to be successful, because it is not so easy just to create a brand out of nowhere,” he said.

“For Alibaba, the key is to make a show that they are trying to crack down on fakes,” he said, adding that the company takes a cut on all sales — fake or legitimate.