Amazon might be online retail’s 800-pound gorilla, but that doesn’t mean it doesn’t face significant challenges and threats to its business.
Arguably one of the biggest is the presence of counterfeit products. While it’s impossible to know just how prevalent counterfeits are, some investigations have produced disturbing results.
Even so, the counterfeit problem clearly hasn’t dented the growth of Amazon’s business and, specifically, its marketplace, but combined with other problems, such as fake reviews, one can’t help but wonder how Amazon might be hurt if enough shoppers eventually have a bad purchase experience.
To date, the process that brands have had to follow to deal with counterfeits they discover in the company’s marketplace has led some to pull their products off of Amazon entirely.
But Amazon is not standing idle and last week announced a new initiative, Project Zero, that aims to empower brands to police counterfeits with much less involvement required on Amazon’s part. As Dharmesh M. Mehta, Amazon’s VP of worldwide customer trust and partner support, stated in an announcement, “Our aim is that customers always receive authentic goods when shopping on Amazon.”
To that end, Project Zero uses machine learning to automatically detect suspected counterfeits using, in part, the logos, trademarks and other data brands supply to Amazon. According to the company, “onaverage, our automated protections proactively stop 100 times more suspected counterfeit products as compared to what we reactively remove based on reports from brands.”
Project Zero also includes a “self-service counterfeit removal tool” that brands can use to directlyremove counterfeit product listings without Amazon’s involvement. The data collected from brandusage of this tool will be fed into Amazon’s machine learning algorithms to help them improve.
Finally, Amazon is also giving brands the option to “serialize” their products so that it can scan each individual product that is purchased to verify its authenticity. Amazon’s Mehta explained:
“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.”
A case of be careful what you wish for?
The ability to directly remove product listings they believe to be counterfeit without going through an involved process will no doubt make Project Zero appealing to many brands. But will Amazon actually benefit more from Project Zero than the brands that use it? It just might.
For one, Project Zero is currently invite-only. Brands that want to be considered for inclusion in the program must enroll in Amazon’s Brand Registry and provide certain data to the company. Many brands are already doing this, but it does serve as a reminder of the fact that Amazon forces brands to engage with it the way it wants.
Secondly, in giving brands a counterfeit removal tool, Amazon is effectively shifting much of the counterfeit enforcement burden onto brands. Yes, the current system under which brands must grapple with a convoluted process isn’t ideal, but once brands are able to remove suspect product listings
themselves, Amazon will theoretically be in a position to step back and say to brands, “You’re on your own now. You have everything you need to deal with the problem.”
It’s not clear whether that’s a good thing for brands long-term.
Finally, while Amazon isn’t charging brands for use of its automated counterfeit detection technology or the counterfeit removal tool, it will charge a fee for brands that want to utilize product serialization. Not only will brands that want this level of protection be forced to alter their manufacturing processes to serialize products, which of course has a cost, they will also need to pay Amazon a fee of $0.01 to $0.05 per unit.
In some if not many cases this cost might be tolerable, but when one considers just how much Amazon is often already taking from each transaction, the fact that Amazon can turn something that should be
its liability — counterfeit enforcement — into a revenue stream highlights just how powerful it has become.
Even as brands embrace Project Zero, they’d be wise to keep that in mind.
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