Amazon’s war on fakes — an opportunity for respectable Sellers?
Between 2008 and 2015, the value of counterfeit goods across the globe nearly tripled from $650 billion to $1.77 trillion, according to the International Chamber of Commerce. In 2018 alone, the U.S. Government of Accountability Office found that two out of every five products purchased online were counterfeits.
Approximately 80% of these fakes come from China, and the percentage of top Sellers on Amazon that are based in China has only continued to rise — until very recently. Although COVID-related FBA disruptions are partially responsible for this shift, so are the steps Amazon has put in place to combat the number of fakes on their marketplace. For example, Sellers will have to display their name and address from 1 September 2020.
In 2018, Amazon spent more than $400 million to combat fakes. Since, they have rolled out a number of measures that are transforming the platform for Sellers, including the creation of a counterfeit crime unit in June 2020.
In addition to removing counterfeit competition, changes designed to identify counterfeits could deliver a significant number of advantages to brands that play by the rules — providing them increased access to customer data, powerful analytics tools, and control over their listings.
With the increased importance of digital channels within the “new normal”, understanding all of the options now available on Amazon is critical. Here’s what you need to know about counterfeit products on Amazon and how you can use Amazon’s war against fakes to your advantage.
Fakes on Amazon: a brief history
Businesses, both big and small, have taken significant hits on Amazon’s platform due to competitors selling counterfeits. Most significantly, in the clothing industry.
Take Hannah Steele, founder of Jessie Steele, a kitchen apparel company — at one point she was making over $5 million in revenue on the platform. However, fakes produced by a factory in China and sold on Amazon cut revenue down to just $500k, leading her to pull her products from the platform. Even big companies like Nike have pulled their products from the marketplace after struggling to compete with counterfeit products.
Amazon’s initial position was always that they were doing more than required by law to deal with the issue. As a “marketplace” for buyers and sellers to meet, they don’t have the same requirements as a store — similar to the debate about whether or not social media companies are ”publishers” or “platforms”. This was the subject of a court case that was decided in favor of Amazon on 2 April 2020, although appeals may resurface.
In some ways, there actually wasn’t much of an incentive for Amazon to do much more since additional sellers and selection means more revenue for them. For example, when Amazon first started to crack down on counterfeits in 2017, product selection growth stalled, so they started aggressively adding new merchants again.
However, in 2018, Amazon finally publicly acknowledged the problems that counterfeit products create via their filing with the SEC for that year, after spending over $400 million to address those problems that same year:
"... To the extent any of [the selling of fake goods] occurs, it could harm our business or damage our reputation and we could face civil or criminal liability for unlawful activities by our Sellers."
So what are they doing to combat this now in 2020 and does it actually help sellers succeed?
The short answer is yes. Here’s how.
What Amazon is doing to combat fakes in 2020 (and what it means for Sellers)
Amazon’s revenue contribution from third-party sellers and small to medium-size companies is higher than it’s ever been, generating $53.7 billion from them alone in 2019.
In the words of Bezos: “Third-party sellers are kicking our first-party butt.” So needless to say, they aren’t ignorant to the contribution these businesses make to their bottom line and the importance of keeping them around.
Here’s what they’re doing to help these brands deal with counterfeit competition.
1. Amazon Brand Registry
Amazon Brand Registry was introduced to help brands protect their intellectual property and combat competition from counterfeit products or unauthorized resellers. It gives brand owners access to a dedicated team of people who can help them resolve any policy infringement, unauthorized listings, and more.
Amazon’s Brand Registry 2.0 took this concept to another level, offering a dedicated internal team, tools to monitor your brand on Amazon, as well as other marketing and authenticity tools to help you better compete against fakes. Check out this article about Amazon Brand Registry if you want to learn more.
What this means for sellers
As of January 1, 2020, Amazon reported that over 130,000 brands are currently using Brand Registry, with 99% of those reporting fewer incidents with counterfeits. Clearly, it works!
And when you consider the listing control and access to data that comes with it, it’s a strong choice for brands who are serious about succeeding on Amazon.
2. Project Zero
Project Zero is, in Amazon’s words, a new program that “leverages the combined strengths of Amazon and brands to drive counterfeits to zero.” It’s a huge upgrade to Brand Registry that gives brands who are enrolled the ability to remove counterfeit listings for their products all by themselves without ever contacting Amazon.
Plus it also gives brands access to machine learning tools that automatically scan over 5 billion listing updates for counterfeits every day — and then puts that information right in the hands of brands themselves.
While Project Zero was initially launched as a pilot with just 15 brands, Project Zero is now accessible to everyone. To be eligible for it, you have to meet several requirements:
- You have to be enrolled in Amazon’s Brand Registry with a government trademark.
- You have to be the owner of that trademark and have an account with Brand Registry access.
- You have to have a history of submitting reports of potential infringement in the last six months with an acceptance rate of at least 90%.
What this means for Sellers
There’s no word on how effective it is just yet, so time will tell. But at first glance, it appears to give brands an enormous amount of autonomy over their brand within Amazon’s marketplace — so much so, that they may never need to speak with an Amazon representative about intellectual property infringement again.
3. One-Tap Reviews
Last year, Amazon quietly rolled out one-tap reviews in an effort to get more people to provide product feedback.
At first, this may seem counterintuitive, given Amazon’s long history of trying to combat fake reviews. However, the thinking behind it is that if more people leave honest feedback, it will drown out the fake ones and also help better reveal which products are fake as well.
The way it works is pretty simple: it has customers select a rating for a product from one to five stars for a product with a single tap or click. Plus, it’s restricted to the just products that someone has purchased.
What this means for sellers
Simply put, it means that justice will be served. Products that are fake or of low quality will be marked as such by consumers now more than ever before. And products that are legitimate will receive the ratings they deserve.
The big change: Amazon Brand Analytics
The big transformation for Sellers on Amazon is Amazon Brand Analytics (ABA) — a data reporting platform that provides unprecedented information about customer behavior and search trends.
ABA was rolled out in 2019 to Sellers, and was merged with the older Amazon Retail Analytics (ARA) in early 2020. What this did was make a bunch of customer data that was previously only available to 1P Vendors for the cost of about $30k per year, available to Brand Registered Sellers and Vendors — free of charge.
Realistically, ABA is the main incentive for Brand Registry — helping Amazon better combat fakes. In turn, this provides Brand Registered merchants with an unparalleled view of their customer data — and even the ability to use advanced third-party analytics tools to calculate things like customer lifetime value. ABA is a critical tool for Sellers and Vendors alike — if you want to learn more, check out our free eBook — Master Amazon Brand Analytics.
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Data is the key to fighting fakes
Amazon has made it pretty clear that the key to fighting fakes and supporting legitimate businesses is rooted in data (in fact, they’ve shifted in their entire strategy towards data).
For example, when you register your brand with Amazon Brand Registry, you give them data about your business they can use to help you protect it. Then, they also give you access to their data via Amazon Brand Analytics to help you compete with the market (including counterfeits that may be out there).
Data on both sides is improving Amazon’s ability to regulate their platform, and is giving a leg-up to respectable Sellers. The challenge that Sellers now have is to use this data in the best ways possible. With more information flowing around the marketplace, and even the ability to augment ABA data with information from Amazon MWS, making the best use of that information has never been more important.
As data consultants and SaaS providers for Amazon, we can help — in more ways than one. Get in touch if you want to audit your campaigns or develop a data-first strategy for Amazon in 2020 and beyond.