Cornering e-commerce fraud

Updated: 2013-12-06 09:09

By Yu Wei in San Francisco (China Daily USA)

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New York-based design brand Coach Inc has renewed its Memorandum of Understanding (MOU) with China's largest e-commerce company, Alibaba Group Holding Ltd, to take further steps against counterfeiting on Alibaba's e-commerce site Taobao.

The new MOU was formed based on the two parties' 2011 MOU to deepen and strengthen their cooperation. Under the MOU, Taobao will continue to impose penalties on counterfeit vendors on the platform, as well as provide tools and a platform for intellectual property rights (IPR) owners — such as Coach — to educate the public on IPR and the potential consequences of IPR infringement.

According to Coach, it is a more comprehensive approach that involves education of the public as well as the prevention, monitoring, identification and removal of counterfeits.

"As a responsible corporate citizen, Coach has a longstanding commitment to fighting counterfeiting to protect our customers' interests," said Jonathan Seliger, president and CEO of Coach China. "We appreciate Taobao Marketplace's anti-counterfeiting efforts which help create a better and more transparent online shopping environment."

Since the US fashion brand opened its first outlet in China in 2003, Coach has seen strong sales there. During the year ending June 29, 2013, Coach's net sales rose 7 percent to $5.08 billion from $4.76 billion the prior fiscal year.

China is now the single largest opportunity for Coach and is currently its third largest market after the US and Japan.

In 2011, Coach teamed up with Taobao in an effort to stop the sale of counterfeit goods in China. The two have since removed numerous listings and vendors from Taobao's platform that have infringed on Coach's IPR.

"As a platform that connects buyers and sellers, we are dedicated to protection of intellectual property rights," said Florence Shi, a spokeswoman for Alibaba. "We have a longstanding track record of our commitment to anti-counterfeiting with mechanisms and teams in place to fight against this type of behavior."

However, the battle against counterfeiting and work on IRP protection could be a drawn-out process.

Currently, there are still hundreds of thousands of online stores on Taobao selling Coach products priced from $9 to $8,863. Not all products are fakes; some are authentic Coach products purchased at Coach stores or outlets and then resold, a service called daigou, or buying on behalf of.

Angela Zhang, a native Chinese currently living in the San Francisco Bay area, opened a daigou store on Taobao three months ago that sells products from Coach handbags to Clinique skin care products.

"So many relatives and friends asked me to send them those products that I decided to open my own daigou store," Zhang said. "Sales are up, especially in the past Thanksgiving month."

Zhang said high prices at home are the main reason Chinese consumers turn to buying luxury products through daigou. "Right now, I'm focused on establishing my store's credibility, so I only ask a small mark-up for a product," she said. "Once I get more customers, I can ask a little more."

Zhang said she didn't know about Coach's new MOU with Taobao and admitted that even if her store could potentially be punished, she would not stop selling the products there.

"There are a number of stores on Taobao just like mine," she said. "I don't think the bad luck will come my way."

Wang Xin, assistant professor of marketing at Brandeis University, believes it is hard to completely get rid of counterfeit products online.

"However, selling fake products (or other forms of fraud) is not unique to online selling," said Wang. "What makes this problem particularly frustrating to consumers and to e-commerce companies is perhaps in part our expectations of technology. After all, it has effectively solved many problems and made our lives more convenient than we could have ever dreamed of before."

Wang said it is just plain easier to sell counterfeit products online. "Setting up an online store is just a few clicks or a few lines of code away. With technology as readily available and scalable as it is, it paved the way for fraudulent behavior," she said.

"Many e-commerce companies like eBay and Amazon rely on reviews as well as internal monitoring systems to ensure user behavior is not in violation of company policy," Wang said. "Yelp has a proprietary algorithm to predict if a review is fake or not. Though not perfect, it helps the company keep a close eye on what's been delivered online, and instill a sense of confidence in users."

"The bottom line is e-commerce companies have to be vigilant and grow with the market sophistication to win this war against fraud. It is an ever-evolving process," Wang said.

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