How Amazon is Attempting to Make it Easier for Sellers by Cracking Down On Counterfeits
One of the biggest issues for brands selling on Amazon is counterfeit items. The low barriers to entry for selling on Amazon is part of the reason there has been a proliferation of counterfeit items for sale on the site. All Amazon requires a merchant to provide to set up a seller account is a nominal monthly fee, a business name, address, contact information as well as a credit card with a valid billing address. As Amazon has grown, its third-party marketplace has become a key growth driver with more than 50% of the items bought on Amazon being purchased from third-party sellers. There are now more than 2.5 million merchants that sell on Amazon’s marketplace.
While its third-party marketplace has been a boon for Amazon it has been a serious thorn in the side of many brands. After taking its products off of Amazon, Birkenstock CEO David Kahan said: “the Amazon marketplace, which operates as an ‘open market,’ creates an environment where we experience unacceptable business practices which we believe jeopardize our brand.” “Policing this activity internally and in partnership with Amazon.com has proven impossible.” Just how many items on Amazon are fakes? No one knows for sure but it is a material concern. According to Gartner L2 33% of items in categories such as headphones and clothing contain a customer review claiming that the merchandise is fake.
For luxury retailers in particular, the issue is particularly salient as it is estimated that luxury brands loose approximately $30 billion in income each year as the result of counterfeit goods sold on-line. This is one of the reasons why luxury brands generally do not to sell on Amazon.
What is Amazon doing about all of this? In an attempt to appease brands and perhaps off load some of its own responsibility for dealing with this issue recently Amazon launched Project Zero. The name of the project is an ode to getting the number of counterfeits on its marketplace down to zero. The initiative focuses on three areas.
1. Amazon is using machine learning to remove as many as “100 times” more suspected counterfeit products from its marketplace than in the past. According to Amazon: “brands provide us with their logos, trademarks, and other key data about their brand, and we scan over 5 billion product listing updates every day, looking for suspected counterfeits."
2. Amazon is also giving brands the power to flag counterfeit merchandise by providing a self-service tool that allows the brand to immediately remove a counterfeit item from Amazon’s marketplace. In the past brands would report the issue to Amazon, then Amazon would investigate and then take action.
3. Finally brands can now assign a unique serial number to each product that it manufactures then Amazon will scan the serial number associated with each product before every sale transaction is completed to ensure that the product is authentic. A similar process is often used for luxury bags.
Speaking about this process Amazon said: "the product serialization service provides a unique code for every unit that is manufactured, and the brand puts these codes on its products as part of its manufacturing process.” "Every time a product using our serialization service is ordered in Amazon's stores, we scan and verify the authenticity of the purchase." Employing this practice is not cheap it can cost brands, on average, between: $.01 and $.05 a unit.
While it is good news that Amazon is trying to further crackdown on counterfeit goods the new initiative transfers a lot of the responsibility to its merchants for cracking down on counterfeit merchandise even though they were not the ones that created the problem in the first place and are not the providers of a platform that has made it easy for this to become a widespread issue.
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