By Laura Stevens
Amazon.com Inc. has made it easy for small brands to sell their
products to large numbers of customers, but that has also enabled
some counterfeiters to cut into their business.
Sassa Akervall gets much of the sales for the SISU-brand
mouthguards that her family invented from Amazon. The
Michigan-based entrepreneur said fake versions of the product on
the site have undercut her price and hurt her business. She has
reported the problem repeatedly to Amazon, but the fakes keep
resurfacing.
"It's frustrating," Ms. Akervall said, adding that the fake
products and their reviews have hurt the brand's reputation.
Amazon said it prohibits the sale of counterfeit products. "We
invest heavily to protect the integrity of our stores," a
spokeswoman said in a statement, and "will continue to aggressively
pursue those who harm our customer and seller experience."
Counterfeiters, though, have been able to exploit Amazon's drive
to increase the site's selection and offer lower prices. The
company has made the process to list products on its website simple
-- sellers can register with little more than a business name,
email and address, phone number, credit card, ID and bank account
-- but that also has allowed impostors to create ersatz versions of
hot-selling items, according to small brands and seller
consultants.
When retailers log into Amazon's website for sellers, most
product pages have a button next to the item that makes it easy for
someone to list the same product. That strategy works well for
consumers and Amazon on widely distributed items like shampoo and
sneakers because it increases competition and that usually leads to
lower prices for consumers.
Most small brands, however, are closely held and harder to get
access to outside of authorized distribution. So, in some cases,
counterfeiters are listing their versions of hot-selling items on
the same page and at lower prices. Amazon's pricing algorithms see
the lower price and then assigns the default "add to cart" option
to the counterfeiter, elbowing brands out of selling their own
goods.
"The reality is this is a cat-and-mouse game," said James
Thomson, a brand consultant with Buy Box Experts. "You have to find
a way to remove more and more of the cheaters. As soon as [Amazon]
closes one loophole, somebody else finds another loophole."
The surge in successful new brands on Amazon has helped fuel the
counterfeiter problems, consultants say. While the problem is hard
to quantify, sellers and consultants who work with them say it has
become common.
Cal Chan said recent counterfeiters on the Amazon listing for
the teeth-whitening product his company created have posted prices
less than a third of his usual $20 to $25, and he has matched
pricing and lost money to ensure customers get the authentic
product. He has tried changing the labels for his Active Wow
teeth-whitening charcoal powder -- which is one of Amazon's
hottest-selling items by unit -- to differentiate from impostors
who have grown increasingly sophisticated at imitating his
packaging.
"Amazon has a strict no-counterfeit policy, but there are
criminals that are trying to manipulate their systems," Mr. Chan
said.
After inquiries from The Wall Street Journal, counterfeiters
were removed from Mr. Chan's and the other sellers' listings
mentioned in this article.
Amazon has long fought counterfeiters, who in the past have
typically targeted big, established brands. It has sued phonies and
enabled brands to register themselves, which gives the brands more
control over their listings. Amazon also uses that information to
help scan its systems for potential counterfeits and to block fakes
before they can list on the site.
Amazon has said its platform has helped millions of small
businesses start new products. More than half of sales on its site,
by unit, now are from independent merchants, including those who
sell their own brands. Those transactions typically are more
profitable to Amazon than selling its own stock, because it takes a
roughly 15% cut and avoids inventory costs.
The Amazon spokeswoman said that less than 0.1% of site page
views were flagged for potential infringements, and that the
company investigated and takes action on 95% of brand-registered
products within eight hours. The company also has developed
algorithms and other systems to identify fraud.
Still, fakes continue to pop up. After Rob Ridgeway, inventor of
a musical board game called Spontuneous, registered his brand with
Amazon, a new Ukraine-based seller showed up, undercutting his
$29.99 price by about $5.
The Austin, Texas-based entrepreneur tried to order the game to
get proof it was a counterfeit, but the item never arrived -- its
tracking number was fake, too.
"It's frustrating," Mr. Ridgeway said. "At some point you just
kind of throw your hands up in the air and say what am I supposed
to do?"
Consultants and sellers said many counterfeiters are in China,
based on shipping addresses or locations specified on Amazon's
website.
Ben Frederick, one of two physicians who created the
health-products brand Dr. Frederick's Original, said he spends a
lot of his time warning and reporting sellers from China who hop on
his listing. Sometimes they don't know it's a registered trademark,
he said, and they get off. Other times they ignore him or even send
threatening emails.
Dr. Frederick blamed those sellers for cutting his company's
revenue by as much as $40,000 a month; the company is on pace to do
as much as $4 million in revenue this year. A counterfeiter won one
of his buy boxes on Monday, hurting his Prime Day sales. He got
Amazon to remove the seller, but it reappeared about 90 minutes
later.
The impact can linger even after a seller is expelled. Jon
Rubenstein, president of Campus Colors, said his college T-shirt
company reported more than 5,000 fake versions of its shirts last
year -- and eventually succeeded in blocking the counterfeited
items after going through a university for help. But bad reviews
about misspellings and poor quality remained stuck on his listing,
something he appealed to Amazon for help on.
"Amazon is very hesitant to clean these up," he said.
The Amazon spokeswoman said the company investigates each claim
and takes "forceful action against both reviewers and sellers by
suppressing reviews that violate our guidelines and suspend, ban or
pursue legal action against these bad actors."
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
July 19, 2018 12:31 ET (16:31 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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