Alibaba’s 1.8 Billion RMB Peace Offering to Small Businesses Ends Tmall.com Digital Protests

This Tmall.com mini-site was put up today to outline the 1.8 billion RMB agreement with small businesses.

The virtual protests by smaller vendors on Tmall.com, the B2C e-commerce platform that’s owned by Alibaba (HKG:1688), have come to an end today. It comes after intervention from the government, and a large peace-offering, totaling 1.8 billion RMB (US$282.5 million) in measures to assist small businesses, from the website’s parent group.

The issue had dragged on for a full week, and was sparked by higher technical support charges and cash deposits required by small-scale sellers who operate on Tmall. Although Alibaba contended that both those outlays are returnable, it incited virtual vandalism by some angered users, who flooded larger e-tailers with thousands of malicious, spoof orders and one-star ratings.

Yesterday, the government’s Ministry of Information Technology ordered mediation, and Alibaba jumped to order, starting an online discussion, via group IM, with some of the so-called “insurgents” on Sunday afternoon, who immediately suspended any further digital attacks. And today the company announced to the media the input of 1.8 billion RMB to help small business use its platform, as well as the delay of the implementation of the new rates, and some other concessions.

The entente cordiale is even displayed on a special Tmall mini-site – take a look here – which includes a slightly odd cartoon timeline of what happened in the past week.

In total, there were five key agreements made, which all together looks to end the dispute and allow the whole platform to get back to normal. The total cost of these make up that 1.8 bil RMB figure. They are:

1. The new rates are delayed until September 30th, 2012, for current Tmall vendors who are not in the bottom 10 percent of merchants (by the site’s consumer satisfaction index). It’ll be implemented on January 1st for new-comers to the site.

2. Alibaba’s own ‘consumer protection fund’ – which uses half of the deposits from some dubious e-commerce vendors to reimburse wronged customers – will be bolstered by 1 billion RMB of the company’s own cash.

3. The company will provide 500 million RMB in loan guarantees for eligible small businesses

4. The remaining 300 million Alibaba will use for marketing purposes to increase brand awareness and traffic

5. Small vendors who fail on Tmall will be given assistance to make the digital leap to the company’s C2C Taobao platform instead

An Alibaba Group spokeswoman told PO Tech in Asia this afternoon that they came to this treaty after open communication with all sides, and that the policy of raising the bar on vendors in general on Tmall was not to discriminate against small businesses, but to ensure quality service, and to stamp out counterfeit items.

Although iResearch stats indicate that Tmall holds 48.5 percent of the B2C e-commerce market, it’s a potentially pivotal time in the industry, as specialist sites – such as 360Buy, or Vancl – grow stronger. Alibaba will be hoping that the whole rather ugly situation has now been drawn to a satisfactory close.