Chinese E-commerce Giant 360Buy Employees Abusing Power Over Merchants for Bribes, Free Gifts with the promise of helping them build traffic

360Buy Employees Abusing Power Over Merchants for Bribes, Free Gifts

Mar 26, 2013 at 09:30 AM by C. Custer, in E-commerceWeb

China’s e-commerce market may be gigantic and hugely profitable, but it’s also still a little bit like the wild west, as regulators are still trying to figure out the best way to oversee the industry without smothering its growth. That means that even at respectable sites, things sometimes go awry, and that’s exactly what happened at 360Buy recently according to the IT Times, which has the story of a 360Buy employee who extorted thousands of dollars and valuable goods out of merchants with the promise of helping them build traffic.

One merchant, a clothing manufacturer, told the IT times that his relationship with the 360Buy operations manager — whose job it was to liase with merchants, discuss activities and promotions, etc. — started out well enough, with the merchant providing the 360Buy manager with free clothing in return for being promoted on the site. This was meant as a friendly gesture, the merchant says, and it wasn’t something the 360Buy manager demanded; the merchant just wanted to give back in thanks for the promotion his site was getting.

But slowly, the 360Buy manager started asking that the clothing company buy him items — expensive items. Plane tickets, laptops, and phones were all on the menu, but the manager was careful enough never to ask directly for the items, rather referring to it as “borrowing” or “purchasing it on behalf of [the manager].” When he received money, it was almost always via friends’ accounts. Still, he never paid back the money spent or returned the items, even when the clothing manufacturer coughed up 30,000 RMB ($4,615), ostensibly to help the 360Buy manager’s friend purchase a house.

Last October, the clothing supplier decided it had finally had enough, and stopped fulfilling the 360buy manager’s demands. Almost immediately, things went south. The company’s traffic dropped, all kinds of problems arose, and payments from 360Buy for purchased items came through slowly, or not at all. The 360Buy manager had an excuse — ‘the purchased items have unresolved complaints filed’ — but that had never caused a delay in payment before the clothing supplier stopped giving him what he wanted.

According to a former 360Buy operations manager in the same position who spoke with the IT Times on the condition of anonymity, an operations manager may have 50 to 100 merchants under their jurisdiction at any given time and they have quite a bit of leeway in terms of who they can give allotted resources like access to the highest profile events and promotions. And the abuse of that power is apparently not uncommon.

It’s a problem that 360Buy and other similar e-commerce sites are aware of, but may have some difficulty combatting. The IT Times report claims that 360Buy CEO Liu Qiangdong addressed the problems in an internal meeting and suggested he was not satisfied with some team members attitudes. Publicly, the company has already responded to the IT Times report with a fairly boilerplate statement about how it is increasing internal controls to eliminate corruption and how it also welcomes oversight from consumers.

But how effectively 360Buy will actually be in combatting internal corruption remains to be seen. More merchants willing to blow the whistle would be an excellent start, but ultimately it seems like this is something Liu Qiangdong and his team will have to address at a more fundamental level.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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