The Counterfeit Report(TCR), an advocacy group that collaborates with brands to detect fake products has found almost 58,000 counterfeit products on Amazon since May 2016.
That’s only a small slice of the pie consisting of 560 million items present on Amazon. The actual number could be much higher. And that’s how big the Amazon Counterfeit problem really is.
Amazon, the largest selling marketplace in the world, has come under the radar for being too lenient in combating the counterfeit problem. For example, if you search Yeezy’s, an exclusive brand of shoes by Adidas, you’ll get countless search results that will be obvious fakes. The biggest flaws will be in the design and the ridiculously low price. Yeezy’s don’t sell for a mere $20.
So before we understand the Amazon counterfeit problem in-depth, let’s first understand what counterfeit products and listings are.
What are Counterfeit Products?
Counterfeit goods are made from lower quality materials in an attempt to sell cheaper imitations of products by brands that are popular and trusted.
Counterfeit products can range from diverse industries like apparel, accessories, books, music, software, electronics, FMCG products, toys and more.
How to spot counterfeit products?
You can spot counterfeit items by looking at these ‘3 Ps’-
- Price: If the price of an item looks too good to be true, then it probably is. If the price of the item is not even close to its original price, being heavily discounted, then it’s safe to assume its a fake.
- Packaging: If the packaging of the product seems low quality, is torn or has printing errors (faded words and logo, grammatical mistakes, blurry pictures) then it is probably counterfeited.
- Place: Consider where the product is being sold-
- Online: counterfeit sellers often steal pictures, graphics, and ideas from real websites to make their site look legit. Read the product descriptions, FAQs and Contact Pages carefully for any errors, to be sure.
- Offline- looking at the product, you can get an idea whether that kind of product will be sold in a well-established store.
Let’s take the example of Birkenstock sandals and try to spot the differences between real and fake.
Not surprising in the least, but Birkenstock quit Amazon US in January 2017 after facing an enormous counterfeit surge. The renowned shoe brand also said it will not authorize third-party sellers to sell on the site.
Impact of counterfeiting on branding and sales of genuine brands
Counterfeiting can have major consequences for the authentic brand. Some of the key impacts of counterfeiting are-
Stealing sales by subverting prices
If you’re selling a product and a counterfeiter is selling a fake of your product at a lower price, obviously, you’ll lose some sales to the cheaper versions.
The lines between fake and real products are blurred when shopping online. It is easy for counterfeiters to operate online since they can easily steal the genuine product’s logos, images, and reviews. This leaves customers guessing which is real and fake.
Damaging the reputation of the real brand
Since customers cannot identify between fake and real products easily, so when they buy counterfeits unintentionally, and the product fails to deliver, they naturally blame the authentic brand.
Such a group of disappointed customers can leave negative reviews about the product influencing the opinion of potential customers and further fortifying this reputation problem.
Leaving it on the company to deal with fallouts with customers and business partners
When a customer buys a counterfeit product unknowingly, naturally it is offending. Consequently, they demand compensation or resolution to their problem in the form of an exchange or refund from the genuine company. In such cases, the authentic companies are left to deal with angry customers for no fault of their own.
Since the real company doesn’t know they’re dealing with counterfeit items, they have to initiate returns/refunds for their fake counterparts, losing out on sales, draining resources after fake products, and handling fallouts with business partners.
Negatively affecting the trust between the company and various stakeholders
The damage done by counterfeiters doesn’t only affect customer relationship. It drives a wedge between the long-term trust and business relations with the various stakeholders of the company, such as investors, distributors, retailers, and logistics partners.
Forcing brands to spend time, money and effort into identifying and fighting fakes
Fighting counterfeiters can be an exhausting endeavor since it requires spending valuable resources, time, money, and effort on dealing with counterfeiters. Genuine companies face copyright issues on Amazon, eBay, or Alibaba. Battling these legally leads to spending thousands of dollars handling infringements and keeping the wave of counterfeits at bay.
These resources could have been used in development, advertising, innovation, and investments.
Circumstances like these cause the company to lose focus on current business needs and setting a vision for the future.
The Counterfeit Problem on Amazon
Amazon has long struggled with the problem of counterfeiting and misleading information on their site. When users post fake products they can have a lasting impact on the brands they are trying to fraud. The real brands can be forced to lower their prices to compete with the fake versions of themselves.
Amazon has tried to remove counterfeit listings from its platform but sometimes the effort backfires. An instance was that right before Prime Day 2017, a real store was suspended due to a fake intellectual property violation by a non-existent law firm.
Why the counterfeit problem?
One of the biggest reasons for this huge Amazon counterfeit problem is that the marketplace heavily relies on third-party sellers for product listings and fulfillment.
This is also a warning for Amazon FBA sellers that are selling counterfeit on Amazon. Amazon CEO Jeff Bezos says although these sellers aren’t affiliated with the brands they sell, yet they make up almost half the listings on Amazon. The graph below shows the penetration of third-party sellers against first-party merchants.
Amazon does not divide the product page according to sellers. Instead, it lists down all sellers under one product listings page, making it easy for counterfeiters to steal ASIN numbers and list their names as sellers without the trouble of optimizing their own Amazon product listing. For example, if you’re looking for an Apple charger, you will find numerous sellers selling the same item including Apple itself. You can check whether the product is sold by Amazon or a third-party seller.
This results in a huge amount of commingled inventory in Amazon’s fulfillment centers. When items are stickerless and not associated with a particular Merchant ID, all sellers have the option to mix their products with other sellers selling the same products. Commingled inventory is an easy way for counterfeit sellers to encroach their way into genuine products listings.
This allows Amazon to keep prices low but it also gives fraudsters an opportunity to take advantage of genuine product listings.
The huge Amazon counterfeit problem could have far-reaching consequences for sellers, brands, and Amazon.
Many customers don’t want to shop on Amazon due to counterfeit products while some brands refuse to list their products to avoid fraud.
Why Don’t Major Brands Sell on Amazon?
Amazon sells almost anything under the sun. Except for branded and luxury items. Since luxury apparel, accessories, perfumes, watches, bags are highly vulnerable to counterfeiting, brands are reluctant to list their products on Amazon.
However, the marketplace giant has struck a deal with some luxury brands like Nike, Hugo Boss, and Disney. Amazon has agreed to police and prevent counterfeit listings of items like perfumes and shirts from these exclusive brands.
Other big brands that are low on listings on Amazon are Fila, Rolex, Versace, Chanel, and others.
The Drive to Solve the Counterfeit Problem:
Amazon Project Zero
In a bid to cut down counterfeit listings on its platform, Amazon announced Project Zero on February 29th, 2019. The program empowers brands to drive counterfeits to zero.
Project Zero is a combination of Amazon’s advanced technology, machine learning capabilities, and innovation with the knowledge that brands have of their intellectual property rights and how to detect counterfeits of their products.
Amazon makes this possible with the help of 3 tools:
- Automated Protections- This is powered by Amazon’s machine learning technology that continuously scans stores on the platform, and removes any suspected counterfeits. Brands share key data such as logos, trademarks, and Amazon scans over 5 billion listings daily to unearth counterfeit listings.
- Self-service Counterfeit Removal Tool- This tool provides brands with the power to remove counterfeit listings themselves. Prior to Project Zero, brands would have to report counterfeit listings to Amazon, who would then investigate and take necessary actions, if any. Now they can delist counterfeit listings easily on their own providing them with complete control over removing fraudulent listings. This information also gets noted in the automated protections so that it becomes easier for Amazon to identify counterfeit listings faster.
- Product Serialization- With this sellers apply unique codes to each unit of their registered products. Every time a unit is purchased from Amazon, it allows Amazon to scan and verify the authenticity of the units. Through this Amazon can stop counterfeit items before it reaches the customer.
How does Project Zero work?
Project Zero gives brands the power to manually take down counterfeit listings. They also have the opportunity to train Amazon employees on a few counterfeit- spotting techniques.
Currently Project Zero is an invitation-only service. Amazon is seemingly giving a few big brands the first shot at trying out this new program. Some of the brands that are known to be participating are Thunderworks, Vera Bradley, Kenu and Chom Chom Roller.
Is there a fee to enrol on Project Zero?
Enrollment for Project Zero is free and those enrolled are given some administrative privileges. These benefits allow brands to divert from Amazon’s slow reporting system and instead, take down counterfeit listings immediately, arrange refunds for customers that are ripped off.
At present Amazon uses simple and easy-to-fake serial numbers for products. With Project Zero, brands have the option to opt for product serialization. Here, the serial number will be specifically made and can also be different for each individual item.
According to Amazon, “brands that choose to use the product serialization service incur a cost between $0.01 and $0.05 per unit, based on volume.” So, some brands will end up paying an extra $50 for every 1000 units that they sell on Amazon.
How can your brand participate in Project Zero?
For starters, you need to get a trademark for your brand. Zachary of Zachary Strebeck, Attorney at Law states, “you need to have a fully-approved trademark registration, which many sellers don’t bother with. However, if you do have that trademark registration, you can take advantage of Amazon’s search and takedown tools, as well as their algorithms which detect your product photos on listings you don’t own.”
This is the first step in order to get your product listed on Amazon’s Brand Registry.
Deniero Bartolini of D. L Bartolini Trading Inc., who is a seasoned Amazon seller says, “To apply for the Brand Registry you need to have a valid trademark in the country of the Amazon marketplace you are selling on. Good news for those who sell in the UK because trademark applications are fast there, but for the US, Canada, and other countries, it could take up to 2 years! If you are waiting for the trademark and you need to remove a counterfeit item from your listing, you can send a “cease and desist” message to the seller explaining that you will take legal action if they don’t remove their product from your listing. In any case, custom packaging is a deterrent most times so, if you can, make your product look different from your competitors.”
As mentioned before, Project Zero is currently only an invitation-only program. If you want your brand to participate in Project Zero, then you need to apply for the waiting list.
Other ways sellers can fight against counterfeit listings…
Gregory Bullock, Marketing Manager at TheraSpecs opines, “The infringement complaint form (https://www.amazon.com/report/infringement) is the other tool that actually can get counterfeit listings removed from Amazon. We have used it several times to point out unscrupulous sellers that are using our trademark in the absence of an actual physical good or arrangement with TheraSpecs.”
Laura Douglas, E-Commerce and Amazon Specialist at FountainheadME, says, “If you do not have Brand Registry and spot a counterfeit listing, take these steps to remove them. Contact the seller directly and inform them you have identified them as a counterfeit seller and will report them to Amazon if they do not remove the listing. At the same time, report the listing to Amazon through Seller Support. If this does not work, purchase the counterfeit product from the seller, take photos of it and send to Amazon as “proof” that it is a counterfeit. Then, return the product for a refund.”
Industry Reaction towards Project Zero
Most brands believe Amazon’s Project Zero is an anti-counterfeit measure that is long overdue. Since the project has been introduced only recently, many are skeptical regarding how well it’s going to pan out.
However, that doesn’t mean brands want the initiative to fail, rather the reason for so much criticism is that they want it to succeed.
In fact, despite one of the biggest fallouts, between Swatch Group and Amazon, due to counterfeits, the former is optimistic about the initiative by the ecommerce giant. They believe ‘Amazon will make progress.’
The other school of thought is that since not all sellers have access to Amazon Project Zero, as the project is invitation-only, brands might misuse their power by falsely accusing and removing product listings from the ecommerce platform. Amazon, however, lays doubts to rest by saying it has tools and processes in place for maintaining accuracy and training brands on using Project Zero’s services in the correct way.
Is Project Zero right for your brand?
Whether Amazon Project Zero is a fool-proof strategy to fight counterfeits is yet to be seen. However, as a seller, if you’re wondering the initiative will be useful for your brand, it is safe to say that brands who join the project will be better off than those who do not.
Project Zero is a win-win for brands as counterfeiting has become a serious issue and an increasingly lucrative market for ethically-dubious third-party sellers that are operating on Amazon.