Fighting fraud online under spotlight
By Ding Yining |
May 9, 2011, Monday
|
Print Edition
Print Edition
THE proliferation of fake products being sold online jumped back into the spotlight after China Central Television recently reported that Taobao, China's biggest online marketplace, was allowing pirated and phony goods to be sold on its website.
In the report, a consumer accused Taobao of allowing vendors on its site to sell so-called genuine leather bags for around 180 yuan (US$27.70) when the bags were really made of artificial leather.
The Internet, due to its openness and fast transmission, disperses such exposés widely and stirs up a lot of public debate.
Jack Ma, president of Alibaba Group, which runs Taobao, is a defender of openness and transparency on the Internet, saying they provide the quickest and easiest channel to uncovering retailing fraud.
Taobao settled more than 2.1 million cases of customer complaints about faulty and fake products in the past year. That accounted for six of every 10,000 transactions that Taobao handled.
This year, the company doubled the size of its customer insurance fund to 200 million yuan to cover their losses in the event of refunds.
As vendors continue moving their business to the Internet, their information, including personal identification, bank accounts and mailing addresses, can be easily tracked.
To sell things at Taobao, a vendor needs to submit personal ID information that corresponds with the bank account used for receiving payment from buyers and verifying their mobile phone numbers.
Sellers of clothes, digital products and cosmetics, to name but a few items sold online, are also encouraging users to give feedback on their purchase and on the service they received - information made available to other customers.
That makes it pretty hard for a wrong-doer to last long.
At the end of April, the Ministry of Commerce, the Ministry of Industry and Information Technology, the Ministry of Public Security and six other government agencies urged local law enforcement authorities to step up their scrutiny of online shopping platforms that may be selling fake products or infringing copyrights.
Deeper problem
The notice also urged law enforcement departments to disclose big cases of fraud. Vendors found to be violating laws may face disconnection of their telecommunication services.
Such administrative orders may help eliminate online sales fraud in the short run, but they don't really address the deeper problem of distribution channels that allow such goods to be made and dispersed into the marketplace.
Online shopping platforms like Taobao have set up elaborate evaluation systems allowing users to rank products and vendors.
On Taobao, for example, users can rank vendors as "good, intermediate or poor" following each transaction. A "good" rating gives the vendor one point, while a "poor" rating deducts a point. When a vendor accumulates 250 points, he gets a "diamond" crown. Higher levels of points add blue crowns or gold crowns.
These "crowns" become an important standard for buyers to decide which vendor to choose. Those with crowns are more likely to get robust sales.
But let us not forget that fake products didn't originate with the Internet.
Illegal hawkers still tout fake watches with Swiss brand names and handbags bearing designer labels along some of the most fashionable shopping streets in Shanghai.
People who crave the vanity of brand names at low prices don't much care whether they purchase fake goods on the street or online. The problem for authorities is really the manufacture and distribution that feed such goods to both channels.
Criticism that the Internet is encouraging the fake goods markets isn't really fair. Indeed, the Internet is but a mirror that reflects both good and bad in society.
"One cannot demolish the bad things simply by destroying the mirror and say, 'Hey, it isn't there anymore,'" Ma said.
Shutting down online shopping platforms certainly isn't the answer. A lot of budget-conscious consumers really need the low-cost advantage the Internet offers, and most of what they buy is perfectly legal.
Why shoot the messenger?
Taobao knows that its success hangs on the need to offer as many products as possible to meet public demand and it's hard to keep track of every vendor. Taobao also places great stock in its credibility and certainly will make every effort to ensure that connivers don't end up on its website.
Public trust is a hard thing to earn, and once it's earned, a responsible vendor will do everything possible to safeguard his reputation. It's become a tougher environment as consumers grow ever more skeptical in the face of scandals like dairy company Sanlu's use of melamine to make its milk powder seem more protein-rich.
Everyone agrees that online shopping is a boon to the country's small businesses.
Manufacturers and sellers should bear in mind that shortsightedness will not only cost them their credibility but also will damage a healthy long-term business environment.
Cracking down on fake products cannot be achieved by merely posting administrative orders. The process requires the vigilance of everyone, including consumers and industry groups, to ensure that their self-interests aren't destroyed by a few rotten apples.
Ma has invited the police and quality goods inspection watchdogs to partner with Taobao in cracking down on fake products.
After all, the task of catching wrong-doers doesn't fall on Taobao alone. Government regulatory bodies need to define what are Taobao's liabilities before anyone jumps to the conclusion that the online site lacks responsibility.
In the report, a consumer accused Taobao of allowing vendors on its site to sell so-called genuine leather bags for around 180 yuan (US$27.70) when the bags were really made of artificial leather.
The Internet, due to its openness and fast transmission, disperses such exposés widely and stirs up a lot of public debate.
Jack Ma, president of Alibaba Group, which runs Taobao, is a defender of openness and transparency on the Internet, saying they provide the quickest and easiest channel to uncovering retailing fraud.
Taobao settled more than 2.1 million cases of customer complaints about faulty and fake products in the past year. That accounted for six of every 10,000 transactions that Taobao handled.
This year, the company doubled the size of its customer insurance fund to 200 million yuan to cover their losses in the event of refunds.
As vendors continue moving their business to the Internet, their information, including personal identification, bank accounts and mailing addresses, can be easily tracked.
To sell things at Taobao, a vendor needs to submit personal ID information that corresponds with the bank account used for receiving payment from buyers and verifying their mobile phone numbers.
Sellers of clothes, digital products and cosmetics, to name but a few items sold online, are also encouraging users to give feedback on their purchase and on the service they received - information made available to other customers.
That makes it pretty hard for a wrong-doer to last long.
At the end of April, the Ministry of Commerce, the Ministry of Industry and Information Technology, the Ministry of Public Security and six other government agencies urged local law enforcement authorities to step up their scrutiny of online shopping platforms that may be selling fake products or infringing copyrights.
Deeper problem
The notice also urged law enforcement departments to disclose big cases of fraud. Vendors found to be violating laws may face disconnection of their telecommunication services.
Such administrative orders may help eliminate online sales fraud in the short run, but they don't really address the deeper problem of distribution channels that allow such goods to be made and dispersed into the marketplace.
Online shopping platforms like Taobao have set up elaborate evaluation systems allowing users to rank products and vendors.
On Taobao, for example, users can rank vendors as "good, intermediate or poor" following each transaction. A "good" rating gives the vendor one point, while a "poor" rating deducts a point. When a vendor accumulates 250 points, he gets a "diamond" crown. Higher levels of points add blue crowns or gold crowns.
These "crowns" become an important standard for buyers to decide which vendor to choose. Those with crowns are more likely to get robust sales.
But let us not forget that fake products didn't originate with the Internet.
Illegal hawkers still tout fake watches with Swiss brand names and handbags bearing designer labels along some of the most fashionable shopping streets in Shanghai.
People who crave the vanity of brand names at low prices don't much care whether they purchase fake goods on the street or online. The problem for authorities is really the manufacture and distribution that feed such goods to both channels.
Criticism that the Internet is encouraging the fake goods markets isn't really fair. Indeed, the Internet is but a mirror that reflects both good and bad in society.
"One cannot demolish the bad things simply by destroying the mirror and say, 'Hey, it isn't there anymore,'" Ma said.
Shutting down online shopping platforms certainly isn't the answer. A lot of budget-conscious consumers really need the low-cost advantage the Internet offers, and most of what they buy is perfectly legal.
Why shoot the messenger?
Taobao knows that its success hangs on the need to offer as many products as possible to meet public demand and it's hard to keep track of every vendor. Taobao also places great stock in its credibility and certainly will make every effort to ensure that connivers don't end up on its website.
Public trust is a hard thing to earn, and once it's earned, a responsible vendor will do everything possible to safeguard his reputation. It's become a tougher environment as consumers grow ever more skeptical in the face of scandals like dairy company Sanlu's use of melamine to make its milk powder seem more protein-rich.
Everyone agrees that online shopping is a boon to the country's small businesses.
Manufacturers and sellers should bear in mind that shortsightedness will not only cost them their credibility but also will damage a healthy long-term business environment.
Cracking down on fake products cannot be achieved by merely posting administrative orders. The process requires the vigilance of everyone, including consumers and industry groups, to ensure that their self-interests aren't destroyed by a few rotten apples.
Ma has invited the police and quality goods inspection watchdogs to partner with Taobao in cracking down on fake products.
After all, the task of catching wrong-doers doesn't fall on Taobao alone. Government regulatory bodies need to define what are Taobao's liabilities before anyone jumps to the conclusion that the online site lacks responsibility.
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