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Cigarette Smuggling: Alibaba & The Forty Thieves

November 11th, 2007

Last week, a reader of this website dropped a note to point out that Alibaba.com supports tobacco smugglers. Turns out the suggestion is true, and I wonder if this says something about the company’s business model.

In case you’re not aware, by the way, Alibaba’s stock price shot up on its initial public offering, but then the very next day after the IPO, the stock was down 17% on “profit taking” (this is a phrase favored by financial journalists to describe investors rushing out of a position in large numbers). Not so sure about short-term effects on the value of the stock, but as our reader has accurately pointed out - the long-term value of any business model that relies heavily on hustlers has to be called into question.

As mentioned here recently, cigarette smuggling is a problem for the world. An estimated one-third of all cigarettes smoked in Britain are counterfeit with over 80% of those fake cigarettes coming from China. That’s an incredible statistic.

I did a quick search at Alibaba.com to verify the cigarette claim, and, before I did, I checked first to see if you could still find counterfeit running shoes on Alibaba.com. There used to be so many who advertised Nike and Adidas right on their company profiles. It seems that the counterfeiters in this category have been chased off, but in the area of cigarettes, there is no apprehension. One company advertises on Alibaba.com:

Can provide you nearly all kinds of name brand cigarettes, such as Superkings, L&B, B&H, Marl and so on. We’re relying on superior quality, excellent service and competitive price. Guarantee competitive price, guarantee shipping & custom clean. We deal door-to-door service to UK, USA, and other countries. And for now, we even accept small quantity order.

It sounds legitimate and businesslike. I am guessing that “Marl” means “Marlboro” and that the name has been shortened to avoid unwanted attention from Philip Morris.

One of the things I found interesting was that a great many of these companies selling cigarettes are associated with athletic shoe companies in China, and many of these are located in Putian – that capital of counterfeit goods. Cigarette smugglers on Alibaba’s website have company names like “Putian City Risheng Shoes”, or “Putian Kaishun Shoes”.

This idea that Alibaba.com sorts out the good from the bad has been referenced as one of the company’s great value propositions. It’s a joke. The cigarette smugglers are listed as “Gold Suppliers” - as if these companies set the highest commercial standard. One acquaintance who is in trade dismisses the website as a meaningless business tool and suggests that the company ought to go by its fuller namesake – “Alibaba and the Forty Thieves”.

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