U.S. researchers uncovered 11,000 retailers soliciting consumers to place fake orders, with 4,000 of them on Alibaba’s Taobao.

Many merchants generate fake orders on popular Chinese marketplaces, such as Alibaba Group Holding Ltd.’s Taobao.com, to move up in search results, and marketplace operators struggle to detect the phony sales, according to research led by Xu Haitao from College of William and Mary and Liu Daiping from University of Delaware.

To measure the rate of fake orders, the researchers signed up on 88sxy.com, where Chinese retailers recruit consumers to place bogus orders, typically paying about 50 cents per order placed. The researchers decided to get an inside view of the scheme.

“We opened accounts on 88sxy.com, pretending to be part-time workers and accepted tasks from merchants in order to find out who is really doing this.” Xu tells Internet Retailer, “After working as paid fake consumers for two months, we could identify a total of 11,000 online merchants generating fake transactions, including 4,000 merchants operating stores on Taobao.com. The total value of the merchandise involved reached $3.45 million. ”   

The bogus sales help raise the profile of the merchants that pay for them, Xu says. “After analyzing the data, we found merchants with fake sales achieved a higher rating 10 times faster than others,” he says. “Most of the merchants creating fake orders are new sellers, as we found 50% of them had launched stores less than 18 months ago.”

To avoid detection by marketplace operators, the merchants often ship empty boxes or pay delivery companies to record that they delivered a parcel, creating what appears to be real shipping data in the carrier’s system. Xu says merchants seeking to scam the ranking system also ask paid shoppers to navigate to their stores from a search engine, rather than go there directly, and even ask them to have a short conversation with an agent before making the fake purchase in order to mimic how legitimate consumers shop.   


However, marketplaces like Alibaba do uncover some of this fraudulent activity, Xu says. “We found 2.2% of those 4,000 merchants on Taobao.com, about 89 merchants, disappeared suddenly,” he says. “That indicates Alibaba detected the fraud and closed their accounts.” He says it’s possible Alibaba may detect a considerably higher percentage of merchants engaging in fraud, perhaps as much as 20%.

Alibaba would not comment on this research. But the e-commerce giant is aware of the problem, as Alibaba vice president Yu Weimin explained in an interview in November. He said Alibaba had found 1.2 million sellers had faked 500 million transactions worth 10 billion yuan ($1.61 billion) in 2013 and that those phony sales were “only the tip of the iceberg.”   

Alibaba is strengthening its efforts to detect merchants soliciting fake orders.Alibaba’s logistic subsidiary Cainiao Network Technology last week announced that it has ended a partnership with a Chinese shipping company called City 100 because City 100 helped some merchants create fake orders. Cainiao also says it will put more resources into offline investigations to reinforce its fraud-detection technology that mainly relies on online data analytics.  

Big Chinese marketplaces face a big job policing all the sellers on their e-commerce sites. Alibaba alone says 9 million sellers, ranging from well-known Western brands like Burberry and Apple to small Chinese firms, offer 1 billion items at any time on Taobao, the biggest of Alibaba’s Chinese web marketplaces.