AliExpress, Temu, and the rise of Chinese marketplaces: A threat to small brands?

In recent years, Chinese marketplaces like AliExpress and Temu have gained immense popularity across the globe. However, their rise has posed significant challenges to small businesses, particularly in terms of counterfeiting and intellectual property (IP) infringement. 

This article explores the features and popularity of these marketplaces, the pervasive issue of counterfeiting, the impact on small brands, and the case of Spanish entrepreneur Valentí Sanjuan as a striking example. 

Most famous Chinese Marketplaces

AliExpress and Temu are among the most well-known Chinese online marketplaces. AliExpress, owned by Alibaba Group, allows international customers to buy products directly from Chinese manufacturers and sellers at competitive prices. Temu, a rising competitor, offers a similar range of products and aims to provide a seamless shopping experience with quick delivery times and the most affordable prices. 

Important features of these marketplaces: 

• Wide product range: both platforms offer a vast array of products, from electronics and fashion to home goods and beauty products. 
• Affordable prices: low-cost labor and production in China allow these marketplaces to offer products at significantly lower prices than Western counterparts. 
• Global shipping: they provide international shipping, often for free or at a very low cost, making them accessible to customers worldwide. 
• User-friendly platforms: the two marketplaces have user-friendly websites and apps, with multiple language options and easy payment methods. 

Besides all this, why are they so popular?

• Cost efficiency: the affordability of products is a major draw for customers looking for budget-friendly options.
• Variety and convenience: shoppers appreciate the vast selection and the convenience of having numerous product categories in one place. 
• Global reach: effective marketing and logistical operations ensure that these platforms can cater to a global audience efficiently.

The undoubtable presence of Counterfeiting in Chinese Marketplaces

Counterfeiting is a rampant issue on Chinese marketplaces. Reports indicate that a significant percentage of goods sold on these platforms are counterfeit. For instance, in 2021, the U.S. Customs and Border Protection seized counterfeit goods valued at over $1.3 billion, many originating from China. 

Common counterfeiting incidents: 

1. Fashion and Accessories: Brands like Nike, Adidas, and Louis Vuitton frequently find counterfeit versions of their products on these sites. 
2. Electronics: Fake versions of popular gadgets, such as Apple products, are commonly found. 
3. Pharmaceuticals: Counterfeit medicines and health products are also a significant concern. 

In 2019, Alibaba reported removing more than 2.2 million counterfeit product listings and closing down over 96,000 shops selling fake goods on its platforms. Despite these efforts, counterfeit products continue to proliferate, often due to the sheer scale and number of sellers on these marketplaces. 

Impact on small businesses

Small brands are particularly vulnerable to counterfeiting for several reasons. Unlike large corporations, which often have extensive financial and legal resources at their disposal, small brands typically operate on tighter budgets and with more limited manpower. This constraint means they lack the capacity to engage in prolonged and expensive legal battles against counterfeiters. Additionally, monitoring and enforcing IP rights across global marketplaces demands significant time and effort, resources that small businesses simply cannot spare. 

Moreover, the presence of counterfeit products can severely damage a brand's reputation. When unaware consumers purchase counterfeit goods, they often receive items of inferior quality, which they might associate with the original brand. This can lead to a loss of trust and loyalty among customers, who may then choose to avoid the brand altogether, fearing another poor experience. A tarnished reputation can be especially harmful to small brands that depend on word-of-mouth and repeat customers to sustain their market presence.

The financial impact of counterfeiting on small businesses is also profound. Fake products ‘steal’ potential sales, as consumers opt for cheaper imitations rather than purchasing genuine items. This revenue loss can be devastating, particularly for businesses that operate on thin margins. Over time, the cumulative effect of these losses can threaten the very survival of the brand. 

The case of the spanish Valentí Sanjuan 

Valentí Sanjuan's experience vividly illustrates the devastating impact of counterfeiting on small businesses. Sanjuan, the founder of the sports apparel brand Actitú or die, saw his business crumble due to counterfeit versions of his products sold on AliExpress and Temu. 

At its peak, his brand generated €400,000 annually. However, fast-growing counterfeiting led to a drastic decline in sales, plunging revenues to just €100,000. Sanjuan's original products, selling for €60, were counterfeited and sold for as little as €8. 

Despite numerous efforts to have the counterfeit listings removed, the problem persisted, with new counterfeit listings appearing as quickly as the old ones were taken down. The inability to compete with the low prices of counterfeit goods forced Sanjuan to shut down his brand by May 31, 2024. Read the full story here.

The importance of fighting counterfeiting 

Counterfeiting undermines IP rights, stifles creativity, and deprives creators of fair compensation for their hard work. 

It's crucial for brands to invest in IP protection and collaborate with organizations that specialize in combating counterfeit goods. Companies like Smart Protection offer solutions to monitor and remove counterfeit listings, thereby safeguarding the integrity and profitability of small businesses.

The proliferation of Chinese marketplaces like AliExpress and Temu presents both opportunities and challenges. While they offer a vast selection of affordable products, the prevalence of counterfeiting poses a significant threat to small businesses. Protecting intellectual property and ensuring that creators receive fair compensation for their work is essential for fostering innovation and maintaining a fair marketplace.