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Cigarette Smuggling: Alibaba & The Forty Thieves
By Paul Midler | November 11, 2007
Last week, a reader of this website dropped a note to point out that Alibaba.com supports tobacco smugglers. Turns out the suggestion is true, and I wonder if this says something about the company’s business model.
In case you’re not aware, by the way, Alibaba’s stock price shot up on its initial public offering, but then the very next day after the IPO, the stock was down 17% on “profit taking” (this is a phrase favored by financial journalists to describe investors rushing out of a position in large numbers). Not so sure about short-term effects on the value of the stock, but as our reader has accurately pointed out - the long-term value of any business model that relies heavily on hustlers has to be called into question.
As mentioned here recently, cigarette smuggling is a problem for the world. An estimated one-third of all cigarettes smoked in Britain are counterfeit with over 80% of those fake cigarettes coming from China. That’s an incredible statistic.
I did a quick search at Alibaba.com to verify the cigarette claim, and, before I did, I checked first to see if you could still find counterfeit running shoes on Alibaba.com. There used to be so many who advertised Nike and Adidas right on their company profiles. It seems that the counterfeiters in this category have been chased off, but in the area of cigarettes, there is no apprehension. One company advertises on Alibaba.com:
Can provide you nearly all kinds of name brand cigarettes, such as Superkings, L&B, B&H, Marl and so on. We’re relying on superior quality, excellent service and competitive price. Guarantee competitive price, guarantee shipping & custom clean. We deal door-to-door service to UK, USA, and other countries. And for now, we even accept small quantity order.
It sounds legitimate and businesslike. I am guessing that “Marl” means “Marlboro” and that the name has been shortened to avoid unwanted attention from Philip Morris.
One of the things I found interesting was that a great many of these companies selling cigarettes are associated with athletic shoe companies in China, and many of these are located in Putian – that capital of counterfeit goods. Cigarette smugglers on Alibaba’s website have company names like “Putian City Risheng Shoes”, or “Putian Kaishun Shoes”.
This idea that Alibaba.com sorts out the good from the bad has been referenced as one of the company’s great value propositions. It’s a joke. The cigarette smugglers are listed as “Gold Suppliers” - as if these companies set the highest commercial standard. One acquaintance who is in trade dismisses the website as a meaningless business tool and suggests that the company ought to go by its fuller namesake – “Alibaba and the Forty Thieves”.
Topics: China |
November 12th, 2007 at 1:06 am
You just gotta wonder if all those that rushed blindly into the Alibaba IPO even had the remotest clue?
Not only is it smuggling…it’s outright counterfeiting!
Wonder how many vendors they’d actually have registered on the site if they truly had a housecleaning??
November 12th, 2007 at 1:26 am
Your last point is what concerns most…
November 12th, 2007 at 4:23 am
Ebay also got complains they were selling counterfeit goods from China and other cheap countries!
November 12th, 2007 at 7:51 am
On ebay, recalled toys have been pulled from store shelves but are making their way to ebay. The thing with the United States though is that it’s easier to pursue a legal solution and get results.
November 12th, 2007 at 7:52 pm
There’s an article about how lead toys are getting sold on ebay. There’s problems in America, too, not just Alibaba and companies like that. It’s from CNN.
http://money.cnn.com/news/newsfeeds/articles/newstex/IBD-0001-20928976.htm
November 12th, 2007 at 8:02 pm
Lots of differences, actually. It’s understood that eBay sellers are often individuals working from home. The companies on Alibaba are supposed to be “established”. The companies on Alibaba do not have the same rating system. The highest honor a company on the website can receive is “Gold Supplier” and you have tobacco smugglers earning the the thing only becuase they laid out the cash. You can’t buy your wait to a rating on eBay (or is there a way?).
I still like to think about the advantages of the eBay model from a business perspective. On a $100 sale, ebay earns its portion. But if I find a factory on Alibaba.com and place a $100,000 order with that company, Alibaba gets nothing. Warren Buffett likes to talk about how you want to be the toll on a highway on which everyone must travel. Ebay has that. Alibaba doesn’t.
November 12th, 2007 at 9:18 pm
2 comments:
1) Alibaba’s competitor “global sources” now has companies on their web site than can have a third party (usually a large international quality and standards agency) review the factory (against set quality guidelines) and give them a certificate. Another scam? I’m not sure. ISO9000 was a scam as every factory in China bought a certificate. But done correctly, this could help standardize the system and reduce counterfeits.
2) Who really wants to do away with counterfeits? This truly is hypocrisy at it’s finest. I have soooo many people complaining that their product are being knocked off and sold …. yadda yadda yadda …. and these people are the FIRST to ask me to take them to the copy watch and copy DVD store for them to purchase knockoffs. How can we tell the Chinese “IP good - knock offs - bad” when we help drive 2 of the largest groups : DVDs and watches? Hypocrisy.
November 12th, 2007 at 11:15 pm
it’s not really hypocrisy to not want to get goods that may very well kill you is it?
The “traders” that are using ABB are knowingly buying fake goods in bulk (including pharms, baby formulas, brake pads, etc) with intent to redistribute. That’s premeditated murder in the extreme case with the complicity of ABB.
November 13th, 2007 at 12:05 am
Good point. But I still stand with the sending of mixed messages. It is hard to teach people about ethics and why societies need ethics (including business ethics) when the teacher exhibits questionable and inconsistent acts.
November 13th, 2007 at 12:32 am
I think this is the right time for me to add a disclaimer - opinions expressed are not necessarily that of TCG.com!
November 13th, 2007 at 8:08 pm
Alibaba has no interest whatsoever in the quality and veracity of the China supplier listings. They just want more Chinese companies to list themselves and therefore more subscribers. They even encourage spamming by allowing mass uploading of products and do not moderate any copied / inaccurate / outright false product descriptions being added.
So, basically Alibaba B2B sucks and for serious sourcing you ought to use Globalsources.com instead.
November 13th, 2007 at 9:58 pm
doesn’t yahoo china have part ownership of alibaba?
November 17th, 2007 at 2:18 pm
YK: ISO9000 was a scam as every factory in China bought a certificate.
In China, ISO9000 is eyewash. I got the runs from eating at several Chinese restaurants that claimed to be ISO9000 compliant.