By Herman Lai, posted Nov 25, 2011 at 2:43 AM, 463 views,

Everything You Want to Know About “Anti-Taobao Alliance” (video)

Back in October, thousands of small business owners launched an online protest against Taobao Mall (TMall) after Alibaba announced new merchants rules for its B2C e-commerce platform Taobao. These changes had significantly put them at a disadvantage to bigger businesses. The matter has touch off the government and ordered Taobao.com to respond to vendors’ demands. Alibaba’s CEO Jack Ma has already made five agreements with vendors, but that doesn’t seem to end the dispute. The “Anti-Taobao Alliance” continues. Full coverage after the break.

New merchants rules…

1. The current annual “technical service fee” of RMB6,000 (US$945.2) that had applied to all sellers would be varied based on the vendor’s category of goods — costs of RMB30,000 (US$4,726) and RMB 60,000 (US$9,452), a 400% and 900% increase respectively.

2. Vendors would be eligible to receive a year-end refund of part or all of their technical service fee based on business criteria such as operational scale, service quality and other positive merchant indicators.

3. Merchants must contribute a “liability deposit” which could be forfeited if they are found to have violated their contract in some way. The liability deposit set aside by merchants ranged from RMB 50,000 (US$7,876) to RMB100,000 (US$15,753) to as much as RMB150,000 (US$23,629). Depending on the extent of a violation , the merchant will incur a one-time deduction of at least RMB10,000 (US$1,575) that can then be used to compensate cheated customers.

The new regulations incited online attacks by some angered users against the larger merchants at the mall last week, the malicious campaign involved more than 1,000 people and was coordinated through QQ groups and YY IM (a local voice-chat platform), they named it “Anti-Taobao Alliance“. What they do are deliberately snapped up goods at large vendors’ online shops and then ask for refunds or filing complaints; made spoof orders and wrote bad reviews.

Online Attacks

Taobao was first being considered as an online shopping marketplace that embraced small merchants. But as Taobao began expanded, the e-commerce platforms developed growing reliance on bigger merchants such as Hanyidushe, Uniqlo, Osa, and Gap. Small online vendors are feeling like they were being marginalized by Taobao Mall as it has sought to be the home for more large online retailers.

Here is a case with how protesters undermine big merchants. The victim is the clothing chain UNIQLO, which received thousands of malicious purchase orders, and most orders were cancelled soon after being placed. Vandals then placed thousands of negative reviews on the products.

Due to the large amount of orders were cancelled, sellers would have difficulties dealing with orders and shipping them within the agreed timeline. Meanwhile, the buyers can apply for financial compensation. And that is when the merchant’s “liability deposit” take place. Therefore, since the attack began, most major Tmall sellers had already to put ‘out-of-stock’ notices on their products in hopes of avoiding further attacks. Of course, this is not the solution apparently.

Alibaba released an announcement to call this malicious campaign a “riot“. Here is what the statement said about:

We accept critiques and suggestions on our new rules but we will not tolerate the malicious deeds against innocent merchants on TMall. We have reported this to the police and will take technical measures to protect TMall merchants from further attacks.

The malicious online attack also extended to Alipay. The anti-Taobao group “instigating” a large number of users to withdraw money from their Alipay accounts at the same time. And that is disturbing the financial order of the system, which is supposedly an illegal act. However, the simultaneous withdrawals will not impact Alipay because of Alibaba’s financial backing.

Alibaba’s Amendment…

After the Ministry of Commerce stepped in and expressed its concerns over the protest, Alibaba agreed to revise its fee structure as well as input a 1.8 billion RMB investment fund to support small businesses and take active measures to address reasonable demands of small- and medium-sized vendors on its platform, which included in the following:

1. Existing merchants that have maintained good ratings will be given an additional 9-month grace period before they must begin paying the new fees. New merchants will revised policy will have to pay the revised fees beginning on January 1, 2012.

2. The cash “liability deposit” to be paid by vendors would be reduced by 50% to RMB 25,000 (US$3,938) to RMB50,000 (US$7,876) to as much as RMB75,000 (US$11,814).

3. The RMB1.8 billion (US$282.2 million) investment fund that Alibaba established will be distributed as such:

RMB1 billion (US$157.5 million) will go directly into the fund that is set aside to compensate purchasers for fraudulent transactions. In effect Alibaba is making up the shortfall in the compensation fund resulting from the reduced merchant contributions. RMB500 million (US$78.8 million) will be put into a fund to help small online traders obtain loans from banks. RMB300 milllion (US$47.3 million) will also be set aside to help SMBs with technical support and promotion.

Protesters still don’t think is fair…

Gallery: Anti-Taobao Alliance Outside Alibaba HQ

As many as 2,000 protesters gathered outside Alibaba HQ in Hangzhou, holding up banners, having occasional speeches, argue that the new fee structures “disproportionately hurt them“. They’re calling for abolishment or fundamental change in these rules. They’ve also requested direct dialogue with Alibaba’s CEO and founder, Jack Ma.

Alibaba has already posted a notice on its forums saying that no changes will be undone, and that new rules are needed to push forward user security and combat pirated goods. But they had also said they’re “willing to listen to any constructive feedback and suggestions.”

Protesters had made a funny song (Chinese) to scold Alibaba’s new plan.

Wrap-up

The 2012 plan will definitely upgrade Tmall to a next level, as it will bring up the number of pirated goods, commercial goodwill and its security level. But the down side is, it will harm many small merchants like being downgraded by Alibaba from b2c marketplace to the c2c marketplace, and that’s like a company only being able to sell on eBay but not Amazon. The massive protest is very likely to mess up Chinese e-commerce system if Alibaba cannot find a solution that fulfills most of the protesters. But from the other aspect, it’s not certain if the anti-Taobao group is really working for the benefit of the small merchants in Tmall. Therefore, the group may not represent the real interests of small merchants.

Allegedly, the Guangzhou police have uncovered a case of fake goods, which seized a large number of counterfeit bags. In the investigation, the police arrested a man who named Lam as he sold counterfeits on the internet. But what interest us is, he also admitted he is one of the leader of the anti-Taobao alliance. But doesn’t seems enough to end the mess.

Source: Xinhua, Global Times (1), (2), CNTV (Chinese), Digital East Asia, Sohu, HSW