Uphill battle for China in fight against online fakes

Uphill battle for China in fight against online fakes

China is looking to draft new laws to police its booming e-commerce industry, but chasing after counterfeiters and grey-market sellers will be a Herculean task.

SHANGHAI: China is looking to draft new laws to police its booming e-commerce industry, but chasing after counterfeiters and grey-market sellers will be a Herculean task.

From fresh produce to office furniture, entrepreneur Guo Yuli says more than 80 per cent of her shopping is done online. Like the hundreds of millions in China who are turning to the web, Guo says she is in it for the convenience and the deals.

“Busy people like me don’t shop at physical stores anymore. So we have to rely on online promotions like vouchers to draw customers to come to our store for spa or facials,” she said.

In 2014, internet spending in China brought in more than US$420 billion, according to data tracker eMarketer. That number is projected to break the US$1 trillion barrier in the next three years alone. By contrast, Forrester says the US e-commerce industry will rake in just a little over US$400 billion in 2018.

Levi’s says sales at its brick-and-mortar stores have dropped between 10 to 15 per cent at its outlets in China, but it is also gaining new customers via its website.

"A lot of our customers are from tier 3 and beyond cities," said Arun Bhardway, managing director of Greater China at Levi’s. “The roll-out of physical developments obviously takes time and investment whereas the digital world is borderless.

"Lots of consumers in tier 3 tier 4 and 5 cities who don’t’ have access to great malls as yet, as the infrastructure is rolling out, are accessing the brand through online channels. And to a large degree, some of that consumption is incremental to what we would sort of call physical retail space."

But policing China’s e-commerce industry is another thing altogether. In April, Beijing started cracking down on those who faked reviews and the number of transactions online - locally known as “brushing”.

It had emerged that some retailers paid contractors to pose as customers and post positive reviews of products and services to draw more business.

"There’s actually a decline in consumers’ trust in online reviewer comments," said Xu Ruyi, China research head at Mintel. "That used to be a unique advantage for online retailers. That advantage seems to be eroding.”

New rules will put the burden on retailers to screen and monitor illegal activity, but Alibaba for one says it is happy to spend hundreds of millions of dollars to clean up its sites.

The new rules, expected to be drafted by the end of this year, could put millions of small retailers out of business. But some analysts say the sheer size of the Chinese market, and given the vast army of counterfeiters and grey-market sellers, mean rules alone would not be enough to fix China’s problems with knockoffs.

Source: CNA/ec