On Monday, a major scandal broke out of Alibaba’s B2B market.  Over 2000 of its paid member (called golden suppliers) deliberately cheated overseas buyers.  The company launched an internal investigation and both its CEO, David Wei, and COO, Elvis Lee stepped down.

Alibaba’s B2B market, Alibaba.com, doesn’t sell goods to the public, or arrange auctions like eBay. It helps businesses find trading partners online. And one way it attempted to monetize the process, and offer some protection from fraud for businesses, was by creating levels of trust for suppliers. Even though it warned all companies to be wary of fraud, it claimed that those it labeled “Gold Suppliers” had been checked out by Alibaba and found to be reliable.

What was particularly jolting for the company was that the fraud it uncovered was among these Gold Suppliers. And, even worse, they operated with the complicity of the Alibaba.com sales staff, who had a financial interest in boosting sales because they were paid commissions.  Here is an article about the incident from Alibaba, http://alizila.com/details/index.php/news/2011-02/92/.

Start your free trial now.

Get instant access to all our premium content, archives, newsletters, and online community.

Monthly Membership

Yearly Membership

What you get

Full access to all premium content and our full archives

Members'-only newsletters

Preferential access and discounts to all TechNode events

Direct access to the TechNode newsroom

Start your free trial now.

Get instant access to all our premium content, archives, newsletters, and online community.

Monthly Membership

Yearly Membership

Sherman So

Author of Red Wired: China's Internet Revolution, the first book to completely survey the nature of China's internet. (http://redwiredrevolution.com/) She previously was the lead China technology reporter...