Counterfeit sellers pose a growing threat to consumers and brands, especially in ecommerce. According to a January 2020 report by the Department of Homeland Security, there were $509 billion worth of counterfeit goods flowing through international trade in 2016. The rise in international counterfeit trade, which was made easier through the growth of ecommerce, is expected to displace over 5 million jobs by 2022. The threat of counterfeits – both to consumer safety and to economic stability – led DHS to recommend that marketplaces be held liable for counterfeit goods sold on their platforms.
Amazon took notice. According to their 2021 Brand Protection Report, Amazon seized over 2 million counterfeit goods from FBA centers in 2021 before they were sent to customers, and Amazon blocked 10 billion suspect listings from publishing on Amazon.
While Amazon’s heightened anti-counterfeit efforts are sincerely appreciated, the threat remains. Brands cannot wait on Amazon to better police the marketplace; they need to take action themselves to create a robust Amazon brand protection strategy.
In that spirit, we’ve written a new eBook containing 10 strategies for protectively and reactively protecting your brand control on Amazon. You can download it for free, or keep reading for an excerpt.
Legal compliance encompasses the basics: You should file for intellectual property rights (IPR) so you have legal footing if counterfeiters or copycats appear. Your product must also meet all legal criteria for selling the particular product type, which are set by various regulatory agencies, such as the Consumer Product Safety Commission (CPSC), Food & Drug Administration (FDA), Federal Communications Commission (FCC), Department of Energy (DOE), Federal Trade Commission (FTC), Environmental Protection Agency (EPA), National Highway Traffic Safety Administration (NHTSA), and more.
Marketplace compliance largely overlaps legal compliance, but Amazon actually has stricter requirements than many regulatory agencies. You should familiarize yourself with Amazon’s content requirements, otherwise a non-compliant claim could result in your product listing getting suspended for weeks or months.
Unauthorized sellers obtain product through an unsecured distribution network. Counterfeit product enters at fulfillment centers, where it mixes with genuine inventory. Once black market or gray market sellers have inventory and are in your listings, they can add erroneous or misleading content, violate your pricing policy and cause cascading issues with your authorized online and brick and mortar (B&M) retailers, and undermine consumer’s trust in your brand.
Delving deeper into the supply chain issues, there are two types of unauthorized sellers who present different threats and require different solutions.
The gray market represents sellers who obtain and sell genuine goods, but they do so on unauthorized channels not approved by the brand. Amazon does not take action to mitigate gray market sellers, as doing so would be antithetical to their goal of offering the most expansive product catalog available.
The black market represents counterfeit goods that are being illegally manufactured, violating the brand owner’s intellectual property rights. Amazon will take action against counterfeit goods (if you can provide proof), although they won’t take action against copycat products that encroach on IPR.
The vast majority of brands send their product to Amazon’s fulfillment centers so they can provide Prime shipping speeds with FBA. Once inventory is at FBA, Amazon prefers to commingle inventory because it is more efficient; however, this practice makes it incredibly easy for counterfeit products to mix with genuine products.
While the dangers of counterfeit products are obvious – their poor quality puts consumers’ safety at risk and they undermine public trust in your brand – you may be wondering if gray market sellers are really that much of an issue. Afterall, doesn’t more sellers mean more sales, and therefore more purchase orders to you as the manufacturer?
Unauthorized sellers are problematic because they represent how your brand is represented to consumers, without having a vested interest in representing your brand correctly. Any seller carrying authentic product can update content in your Amazon product listing, including title, bullet points, and imagery. This can lead to inaccurate or misleading information, poor branding, and inconsistencies between your sales channels.
Enrolling in Amazon Brand Registry is a huge help for this issue, as it allows you to designate who has permission to edit listing content.
Unauthorized sellers also often drop pricing below MAP to capture sales. Since Amazon and other major marketplaces enforce pricing parity, this can result in rolled buy boxes, which reduces your total sales.
Normal vs Suppressed Buy Box
The break in pricing policy can also harm relationships with authorized sellers, both in online and brick-and-mortar channels. Because there isn’t a direct relationship between your brand and the unauthorized seller, getting them to uphold your pricing policy can be nigh impossible.
So, how do you combat these issues? We’ve written an entire eBook about just that. Specifically, the eBook breaks down how to use 10 programs/tactics you can leverage, including:
Brand protection goes beyond Amazon. All digital and physical sales channels can affect each other because they all affect your brand’s representation to consumers. As such, a holistic approach is essential for long-term stability and success. Whenever you start planning to launch a new product or expand onto a new sales channel, carefully review how it will impact other channels.
If you want help planning your ecommerce strategy, reach out to Kaspien. We have over 13 years of experience helping brands flourish on the world’s leading online marketplaces.
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