Singles' Day spree blighted by fakes transactions

Consumers were finally able to celebrate the e-commerce fiesta of the year as the date consisting of four ones arrived on Tuesday, instantly prompting most of China's Internet population to go on a shopping spree.

The celebration of Singles' Day on November 11, which was turned into an online buying festival by Chinese e-commerce giant Alibaba Group Holding in 2009, logged a record-breaking 57.1 billion yuan ($9.29 billion) in sales on Alibaba's tmall.com on the day, according to figures revealed by the company.

Being chosen for participation in the headline-grabbing carnival virtually guarantees massive traffic on the big day for participating merchants, although it could also mean rising pressure on profit margins for merchants offering discount options of 50 percent or even more.

A total of 27,000 vendors were picked to participate in this year's shopping festival, Alibaba said in a statement e-mailed to the Global Times on Tuesday.

The combined stores on tmall.com, the business-to-consumer marketplace, and taobao.com, the consumer-to-consumer platform, could be about 6.78 million stores as of the third quarter, with tmall.com accounting for 9 percent of the total stores, according to figures from a research report released in late September by T.H. Capital, an independent research and investment advisory firm in Beijing.

The participating vendors are the "best of the best," according to the Alibaba statement. Although it didn't specify the selection criteria, one requirement can't be overlooked - high sales rankings.

The ranking, the lifeblood of merchants eking out a living among a galaxy of vendors, however, has long been a cause for concern due to its connection to fake transaction activities.

These fake transactions, known as deal frauds, occur when merchants employ people to fake purchases in an attempt to jack up their sales figures.

Other fraudulent activities, especially during the big day, include artificially raising prices prior to the event by some merchants to give the impression of offering huge discounts.

The existence of this practice has led to skepticism over the authenticity of then record-breaking $5.75 billion reported by Alibaba on last year's "Double 11."

In preparation for the first festival after pulling off the world's biggest IPO in September, Alibaba has set tougher rules to crack down on fake transaction activities.

"Tmall has always pledged zero tolerance for non-credible activities" that target fake ratings as well as sales figures, Alibaba said in the Tuesday statement, which noted that a few vendors previously selected for the big day were recently restricted in their participation or even struck off the roll, in a sign of the company's resolution in combating against wash sales.

"All eyes are now on the e-commerce giant as people are wondering how authentic the new record really is," Lin Wenbin, an industry analyst at Beijing-based research firm Analysys International, told the Global Times on Wednesday, citing concerns over deal fraud which he believes would be hard to rule out.

Other e-commerce sites that include jd.com, the smaller rival of Alibaba, have also taken a harsher line against fake transactions.

Stores involved in deal fraud face penalties ranging from 10,000 yuan to several tens of thousands of yuan amid jd.com's recent crackdown targeting brand owners on its platform that break the rules, e-commerce news portal ebrun.com reported on Monday quoting unnamed sources. Jd.com has yet to confirm the report.

As for merchants tempted to seek a shortcut to online fortunes by employing people to conduct fake deals, they could become embroiled in problems deeper than just punishments from operators of online marketplaces such as Alibaba and JD.com Inc.

Some merchants have found themselves falling into a trap set by their employees, who not only took the money that had been promised by their employers, but embezzled the payments for the product provided by the merchants for completion of the false transaction, the Guangzhou-based Yangcheng Evening News reported on November 7, citing the case of a man surnamed Lei who owned a store on taobao.com.

Lei had resorted to filing a complaint at a local police station in Guangzhou, according to the report.

Becoming a victim of certain nefarious activities is barely worth imitating, noted Analysys International's Lin, urging diligent merchants to value their own credibility, and platform operators to push for even harder rules to create a truly even playing field for both buyers and vendors.