Chinese e-commerce powerhouse Alibaba Group Holding is enlisting the help of an Israeli startup to fight fakes on its online shopping platforms, as the company is hit with a fresh wave of lawsuits accusing it of facilitating the sales of counterfeits.
As part of the group’s ‘Blue Star’ program, Alibaba wants to assign digital tags to 10 billion online merchandises by the end of this year to help consumers verify their authenticity, it said in an e-mailed note. The company is working with Visualead to introduce the so-called “dotless visual code,” an enhanced version of the traditional QR code that can be embedded with a brand’s image, to billions of merchandises. Consumers can receive information of the products’ origins, confirmation of authenticity and promotions after scanning the codes with Alibaba’s Taobao or Tmall smartphone app.
Companies can also monitor how many times, and from where, a code is scanned. Manufacturers can identify the location of fake products if a counterfeiter tries to duplicate the code. Brands including L’Oreal and Ferrero are participating in this program.
The move comes as Kering SA, the owner of brands including Gucci and Yves Saint Laurent, this week filed a suit in the U.S. District Court in New York, alleging that Alibaba knowingly allowed sales of fakes online. Alibaba has said that the lawsuit has no basis and the group will fight it vigorously.
The e-commerce titan is nonetheless feeling the pain of such accusations. Sephora, the beauty retailer owned by French luxury goods group LVMH Moet Hennessy Louis Vuitton SE, earlier this month bypassed Tmall to open a flagship store on JD.com, China’s second largest e-commerce site headed by billionaire Richard Liu. Part of the reason is JD.com’s focus on fighting counterfeits, Sephora has said.
The problem of fakes also stands in the way of Alibaba’s global ambition. Daniel Zhang, the group’s newly appointed CEO, said in a recent speech that the company must achieve the goal of ‘‘global buy and global sell,’’ as it tries to sustain growth. Counterfeits, however, will make global expansion more difficult, says Teng Bingsheng, associate professor of strategic management at China’s Cheung Kong Graduate School of Business.
A feasible way is for Alibaba to build “a portfolio of local marketplaces,” says Jeffrey Towson, a professor of investment at the Guanghua School of Management at Peking University. Starting in developing markets and acquiring local e-commerce platforms would be a good way for the company to globalize, he says.
