Jack Ma Says Fakes “Better Quality and Better Price Than the Real Names”
Chinese billionaire and Alibaba founder Jack Ma pictured in 2015 attending a forum in Hong Kong. PHOTO:AGENCE FRANCE-PRESSE/GETTY IMAGES
Alibaba’s Jack Ma stepped into a firestorm on Tuesday with a comment that fakes were sometimes better quality than originals.
“The problem is the fake products today are of better quality and better price than the real names,” he said at Alibaba’s investor day in Hangzhou. “They are exactly the same factories, exactly the same raw materials but they do not use the names.”
Mr. Ma’s comments caused social-media outrage among some who felt he was dodging responsibility for the longstanding presence of counterfeit goods on Alibaba’s online bazaar Taobao. Luxury brands have long criticized Alibaba for not doing more to crack down on fakes and even today, it isn’t difficult to find cheap, fake goods on the website.
The comments come as Alibaba is facing a mounting controversy over counterfeit merchandise on its websites. Last month, a prominent group, the International AntiCounterfeiting Coalition, suspended a newly created category under which Alibaba was admitted, after U.S. fashion brand Michael Kors and Gucci America Inc. withdrew in protest. Michael Kors called Alibaba “our most dangerous and damaging adversary” in a letter to the coalition.
Advertisement
Alibaba subsequently canceled Mr. Ma’s appearance at the group’s annual conference in Orlando, Fla.
As for Mr. Ma’s comments themselves, closer scrutiny indicates he was describing one longstanding reason for the spread of fakes in China: outsourcing. Although Mr. Ma called it a “new business model” in China, his descriptions were mainly about the key flaw of contract manufacturing: Intellectual property ends up in a supply chain that firms can’t fully control.
Observers could be forgiven for interpreting Mr. Ma’s comments on the outsourcing model as a tactic to deflect attention away from Alibaba’s role in the spread of fake products.
Issues around contract manufacturing aren’t new for Western brands.
Much of the time, the same factory produces for big-name clients, then works overtime using the same equipment and materials to make similar products that they sell at discounts. There is a spectrum here ranging from full-on fakes – in which the products masquerade as genuine goods with an identical label – to copycat products that resemble the big-name item but are sold under a little-known brand.
Mr. Ma said that while these copycatters have always existed in China, the internet has made it easier for these Chinese producers to connect with customers and sell their products.
This is certainly true for smartphones. In the past, the necessity of physical sales channels resulted in a high barrier to entry. The ability to do all your sales online – a model spearheaded by Xiaomi – resulted in a boom of little-known Chinese smartphone brands that tapped the same supply chain as global mobile brands to make similar products at lower prices.
Chinese electronics makers like Oppo and TCL – and most major Taiwanese electronics brands including HTC, Acer and Asus – all got their start as contract manufacturers that branched into brands in their own right as they became more technically proficient and innovative. Asus, for instance, juggled making products for companies like Apple while selling under its own brand for years until the conflict became too large and it spun off its contract-manufacturing division. That unit, Pegatron, still makes iPhones today, while Asus makes electronics under its own brand.
In his speech, Mr. Ma was speaking about the inevitability of fakes due to “human instinct” and said Alibaba would continue fighting them, even calling Alibaba the world’s “leading fighter of the counterfeits.”
“Every fake product we sell, we are losing five customers,” he said. “We are the victims of that. We never stop fighting.”
