In the digital retail world, trends seem to come and go at the drop of a hat. But there's perhaps no trend that's more consistent than counterfeits.
Unlike a fraudulent imitation which might be found at a traditional brick and mortar retailer, online counterfeits aren't necessarily low quality consumer goods. They can seem practically indistinguishable from authentic goods, a factor which counterfeiters frequently use to their advantage.
While many detractors may describe eCommerce in terms of an unregulated "Wild West" where virtually anything goes, the reality is that the vast majority of platforms have protocols in place which prohibit bad actors and criminal activities, with Amazon being perhaps the most noteworthy.
But not everyone takes Amazon's word at face value. Particularly when it comes to domestic and international trafficking of counterfeit goods.
Amazon, Counterfeits and Federal Targeting
In January of 2020, the Office of the US Trade Representative (USTR) released their annual review of notorious markets for counterfeiting and piracy. Alongside some of the more questionable entities, including peer-to-peer sharing and torrent sites such as Pirate Bay and VK, one name stood out: Amazon.
More specifically, Amazon sites in France, Italy, Germany, Spain and the UK.
As long time sellers both domestically and in expanding markets know, it's hardly a fair assessment to place Amazon in the same category as a file sharing site or any platform known for retailing bootlegged goods. Amazon has a reputation to maintain as the largest and most legitimate global eCommerce marketplace. Even the slightest attempt to tarnish that image could wind up costing them billions of dollars.
That image extends to the overseas market, as well. As one of the three main segments of Amazon, international net sales for Amazon exceeded $104 Billion in the fiscal year 2020, representing 27 percent of their total revenue.
But third party sellers represent 60 percent of Amazon's overall business. And with 2.2 million active sellers, the process of vetting each entity fully isn't necessarily an easy one.
The Foreign Market for Counterfeits
One of the biggest problems with detecting counterfeit goods online is identifying the lengths in which illegitimate third party sellers will go to actively conceal their activity. Some are practically brazen about pirating, while others can be legitimate third party resellers unaware they're being lured into a sophisticated counterfeiting ring.
Unlike illegitimate goods sold through brick and mortar channels, online counterfeit goods are typically shipped in smaller individual packages at high volume, making interception from customs virtually impossible.
To make matters worse, the international market has historically been a hotbed for counterfeiters. Over $500 billion worth of pirated merchandise and imitations was seized internationally in 2016, while US customs investigators seized approximately $1.3 Billion of counterfeit goods in 2020 alone. Almost 40 percent of all unwitting counterfeit purchases were through third party sellers in 2017.
Yet surprisingly? According to a recent survey, only 52 percent of Generation Z (one of the fastest growing consumer segments) who admitted to purchasing counterfeit products expressed any unwillingness in purchasing them in the future.
While the US Department of Homeland Security issued a list of ten high priority best practices to be adopted by online platforms to combat counterfeiting, the problem remains a legitimate one. But its consequences stretch far beyond retail and commerce. The International Trademark Association estimates that the wider social and economic effects could be as high as $1.9 Trillion, including the impact on local and global economies and job loss—expected to reach 5.4 million in 2020.
The Complaints Against Amazon's Foreign Sites
Among the specific complaints listed by the USTR in their report was the claim that “seller information displayed by Amazon is often misleading such that it is difficult for consumers and right holders alike to determine who is selling the goods.”
Yet a brief review of any top selling item on Amazon's UK and Italian sites clearly indicates both the product details as well as who is dispatching and selling the item.
The USTR's complaint isn't necessarily a malicious one. It's an honest error. But it's an honest error that results from a lack of knowledge and foresight into third party selling practices, not a lack of transparency.
“Right holders also expressed concern that Amazon does not sufficiently vet sellers on its platforms,” the report continued, adding “that Amazon's counterfeit removal processes can be lengthy and burdensome, even for right holders that enroll in Amazon's brand protection programs.”
The removal process for any counterfeit item requires both investigation as well as justifying liability, however. Counterfeiters can disappear overnight without a trace, leaving behind a trail of spoofed IP addresses and fake contact information.
Unfortunately, unless both brands and consumers take proactive steps to monitor and report counterfeits, much of that process will be automated by bots through Project Zero—Amazon's active brand counterfeit initiative.
And as many Amazon sellers will tell you, the margin of error for bots in distinguishing illegitimate items from the real thing can be higher than many consumers might think.
Amazon's Fight Against Global Counterfeiting
It's not hard to see the report as what Amazon has claimed to be “the continuation of a personal vendetta” on behalf of the Trump administration—a heated exchange which infamously included the former President's 2018 suggestion to the US Postal Service to double shipping charges for Amazon packages.
But there's more than a kernel of truth in the report. Amazon, just like any other eCommerce platform, has a counterfeit problem.
But unlike other eCommerce platforms, Amazon has taken major steps to proactively combat counterfeiters.
In addition to the establishment of a Counterfeit Crimes Unit (which they've claimed has blocked over 6 billion suspected bad listings since its establishment in 2019) and Project Zero, they've filed several high profile federal lawsuits against both individuals and group entities on charges ranging from violation of intellectual property rights to bribery and wire fraud; while internationally, they recently announced their partnership in an initiative known as Operation Fulfilled Action, which will be working with US Customs and Border Protections to help staunch the flow of counterfeit items into the country.
The Solution for Fakes?
But despite Amazon's concerted efforts, it's clear that counterfeiting remains an ongoing problem for which there may be no immediate solution. And that lack of clarity certainly isn't helped by recent allegations of Amazon's strategy to produce in-house knockoffs.
As counterfeiters continue to develop even more sophisticated techniques of masking their activities, both digital marketplaces and individual sellers are at their mercy unless they are vigilant in monitoring for any fraudulent activity.
Online commerce may have developed at a remarkable speed in 2020. But so has online fraud.
Don't let the latter stunt the growth of eCommerce.
Bad actors aren't the only threat to brands on Amazon. Find out more at Color More Lines.
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