Since its CEO stepped down in February for failing to adequately combat an outbreak of e-commerce fraud, Alibaba.com has in the past several months strengthened its policies and procedures in a bid to restore the confidence of buyers using the international B2B website.
As part of its regular quarterly earnings report released May 12, Alibaba.com officials outlined a five-point plan that has been implemented to reduce the number of scammers who are able to circumvent the website’s screening process and join Alibaba.com as “Gold Supplier” members in order to defraud overseas buyers.
The plan includes tougher verification procedures when granting the fee-based Gold Supplier memberships, improvements in “proprietary methodologies” for monitoring the website for suspicious behavior, faster response to buyer complaints so that offending suppliers can quickly be ejected from the online marketplace, and changes in corporate organization and sales staff compensation.
Alibaba.com spokeswoman Linda Kozlowski said specific changes include requiring Alibaba.com sales staff to collect more information on companies applying for a Gold Supplier memberships than was gathered previously. In the past, applicants were required to provide business registration documents which were inspected by third-party verification services. But Alibaba.com found that scammers were using fake papers to gain membership. Now, in cases where an applicant “looks suspicious, a sales supervisor is required to go and visit the company” to ensure it is legitimate, Kozlowski said.
Alibaba.com is restricting memberships in other ways to keep out companies that are considered likely to defraud, she said. The website no longer accepts companies that list business addresses in one country while holding business licenses in another country. Owners of multiple companies can no longer transfer a Gold Supplier membership from one company to another. And the website has eliminated its “Individual China Trustpass,” a type of membership that allowed Chinese nationals to become Gold Suppliers using their personal names. “We are no longer selling those because we saw a higher incidence of fraud,” Kozlowski said.
The announcement of the five-point plan is Alibaba.com’s first official comment on the fraud issue since Feb. 21, when CEO David Wei and COO Elvis Lee resigned in the wake of an in-house investigation that found senior management did too little to address a noticeable increase last year in the number of fraud cases being reported against suppliers. The investigation focused on a group of about 100 Alibaba.com sales employees who were helping organized Chinese criminal rings establish Gold Supplier storefronts so they could pose as legitimate businesses. All employees who participated in fraud were fired. The company has about 5,000 sales staffers worldwide.
Changes are also being made to corporate organization, customer sales and service procedures, and employee compensation to address concerns that internal factors contributed to dishonesty among sales staff. “We’ve made compensation of the sales team less dependent on commission by raising the base salary,” Kozlowski said. Sales staff are now responsible for managing customer relationships on an ongoing basis; previously they handed off new Gold Suppliers to customer-service staff after deals were completed. And supervisors are more closely monitoring which employees sign up Gold Suppliers that wind up on a fraud blacklist. “If you have an unusually high number of blacklisted companies, you will be penalized for that,” Kozlowski said.
Alibaba.com has been developing data-gathering techniques to help root out scammers operating among its hundreds of thousands of paying members. Kozlowski said a new technology is being implemented this week that will help determine “where a fraud is coming from,” will prevent scammers ejected from the site from signing up again under a different company name, and will improve the company’s ability to work with law enforcement agencies to prosecute lawbreakers. She declined to provide details about this or other in-house anti-fraud technologies “because that would help fraudsters get around it. We’re never going to give tons of detail,” she said, “no company would do that for security reasons.”
Kozlowski added that since the five-point plan was put in place, “there has been a drop” in the number of fraud complaints from buyers, but specific numbers were not available.
