Alibaba.com's response to the fraud issue

Last week in Hangzhou, Alibaba held its annual "AliFest," Alibaba's annual event to celebrate SME's using e-commerce to grow their businesses. The event always features big name speakers. This year it was Tom Friedman and actor Jet Li. In 2010, it was Arnold Schwarzenegger.

Interestingly, Alibaba.com also revealed its plan to improve trust and data verification following the announcement in February this year that there had been some systematic fraud among several thousand of Alibaba.com's listed suppliers.

Alibaba.com's response is... to become a bit more like Global Sources. Sort of. Alibaba.com plans to launch "an ambitious program calling for on-site inspections of all Chinese manufacturers and distributors selling through Alibaba.com's international website to ensure they are legitimate."

This is similar to Global Sources long-standing policy to visit paid suppliers listed on the company's online sourcing platform. Global Sources' then-CEO Merle Hinrichs outlined the company's approach in a letter written in response to the Alibaba.com fraud announcement.

Global Sources visits listed suppliers a minimum of three times and uses third party partners including Sinotrust and First Advantage to confirm registration data.

Alibaba.com plans to begin visits to its 112,000 paid suppliers in China - a process which could take up to one year. The company will also use a third party inspection service to conduct random site visits.

Alibaba.com reports that fraud complaints have dropped 77% since February this year and claims to its "Play Fair Fund" are down more than 80%. The fund was set-up in March 2010 by the company to compensate users of Alibaba.com who experienced fraud using the website.

Alibaba.com and Global Sources may be different companies in terms of focus and strategy, but their data verification processes are looking a lot more alike.