Alibaba ousts gray market goods as luxury brands come on board

By George Anderson

AUGUST 11, 2014

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There probably isn't anything that luxury goods manufacturers hate more than counterfeiters (an up to $650 billion issue worldwide). A not too distant second on the scorn list are sites that sell gray market goods. Alibaba (China's largest e-commerce company) has been addressing the gray market issue head-on. According to a Wall Street Journal report, Alibaba has been making good on a promise to rid its Tmall site of gray market goods if luxury brands open their own stores on the marketplace.

Alibaba needed to take this action because, as an Internet Retailer report from June pointed out, "Western retailers hear much about the gray market and copycats on Tmall, but very little about why Tmall came to dominate China's B2C market."

Burberry is one of the luxury brands that put Alibaba's word to the test. According to the Journal, there were more than 50 unauthorized vendors selling goods with the Burberry brand before it opened its own store in May. Today, that number is down to two.

According to a Burberry press release issued in April, its presence on Tmall offered "the purest articulation of the Burberry brand on any of the Alibaba platforms to date. A luxury brand first, the collaboration reflects a shared commitment to offering Chinese consumers the best luxury experiences."

The Journal report says that American brands New Balance and Nike are among the companies that are seeing gray market goods being removed from Tmall. That has led to sales increases for the brands. The New Balance store saw its share of the total sales of the company's products on Tmall grow from 57 percent in April to 69 percent last month.