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How Reliable is Alibaba Gold Supplier?

by Matt Slater January 24, 2014

How Reliable is Alibaba Gold Supplier?

[Article updated 16 December 2014]

The global B2B sourcing platform Alibaba basically has two categories of sellers: Free and Gold. Free sellers usually pay no fees and undergo no checks before they are permitted to use the platform, so no-one in their right mind would source from them.

Gold suppliers pay a relatively substantial annual membership fee, and undergo a verification process that Alibaba calls 'Onsite Check'. This creates a sense of trustworthiness, but how reliable is the system in practice?

Alibaba Gold Supplier

Alibaba Gold Supplier is a large source of income for Alibaba. Suppliers wishing to be granted the icon on their profiles must pay an annual fee to Alibaba, in the region of 10,000 USD. That’s really all that the Gold Supplier status shows: that the supplier is paying money to Alibaba in order to have a logo placed on their profile. If that reduces the legitimacy of  Gold status in your eyes, then you likely have a healthy level of scepticism. Alibaba Gold Supplier is arguably more about money exchanging hands than it is about safeguarding the interests of buyers.

Having said that, this system does at least eliminate all of the lowest effort fraudsters and scammers. Because of Alibaba Gold Supplier, there is a basic selection pressure on suppliers to stump up some capital before anyone will take them seriously. However, you could also interpret this as meaning that the fraudsters who remain are the most dedicated ones.

Onsite Check

It would be wrong to claim that absolutely no checking or verification goes on at all for Alibaba Gold Supplier status. Gold status includes a service called ‘Onsite Check’, which involves someone going to the supplier’s production location and checking that it actually exists. That is the full extent of Onsite Check and Alibaba is upfront about this:

"The supplier’s company premises is checked by Alibaba.com’s staff to ensure onsite operations exist there." [source]

Despite this, we have come across clients who mistakenly believed that Onsite Check would in some way guarantee the quality of the deal, goods or company. In fact, Onsite Check merely shows that a minimum of something vaguely resembling a production site does exist at the location the supplier claims it does. It says nothing about how that supplier conducts it operations or how it interacts with clients.

 

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As well as checking that the supplier's location exists, Alibaba also outsources confirmation of business registration record information for each Alibaba Gold Supplier, and this information is displayed on their profile. However, very little information is disclosed about who carried out the verification, using what methodology and when. We often find that the information displayed has since become out of date. Further, there have been serious issues in the past with these anti-fraud verifications becoming subject to fraud themselves (see section “The 2011 Alibaba fraud scandal” below).

Other Verifications

In addition to Onsite Check you may see the following verification services on Alibaba’s platform:

A&V Check

A&V Check is a verification carried out on Alibaba Gold Suppliers located outside of Mainland China, Hong Kong or Taiwan. Alibaba claims that it is carried out by a third-party but there is often no evidence presented on who the third party is. From this link it seems Alibaba themselves aren’t very clear what A&V Check stands for.

Supplier Assessment

This optional service is available to China-based Alibaba Gold Supplier customers and includes a verification by a well-known company such as TÜV Rheinland or Bureau Veritas. Alibaba Gold Suppliers who have chosen to pay for this option have downloadable assessment reports available on their Alibaba profile page.

The 2011 Alibaba Fraud Scandal

In February 2011, two senior executives at Alibaba Group resigned after the revelation of large-scale fraud surrounding the Alibaba Gold Supplier scheme. It came to light that around 100 members of Alibaba’s 5000-strong sales team where taking kickbacks in exchange for allowing fraudulent suppliers to skip the already meagre verification process. Due to this, large numbers of very low-quality or outright fraudulent suppliers were able to get the Alibaba Gold Supplier badge on their profiles.

That saga is now over (Alibaba blacklisted hundreds of suppliers), but it remains up to buyers to consider how much trust they want to place in the Alibaba Gold Supplier system in the future. Ultimately, the best policy is always to have the important information independently verified by a third party with no interest in the outcome of the verification. This way you can ensure that you’re seeing reliable information that you can make an informed decision with. Once a supplier has passed these basic checks, the next step is to arrange audits and independent visits. This process is up to the buyer and shouldn’t be left to organisations such as Alibaba who have a strong interest in the outcome.

To Verify an Alibaba Gold Supplier

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Matt Slater
Matt Slater

Author

Hi there, I'm Matt, the founder of China Checkup. Originally from the UK, I am now based in Brisbane, Australia.

Frustrated by the scarcity of concise, high-quality and timely information about Chinese companies, I setup China Checkup whilst living in Shanghai in 2013.

My team are proud that China Checkup's company verification reports have now helped thousands of clients from all corners of the world to do business in China more safely.

  

 


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