Amazon’s Counterfeit Problem is Also an Opportunity

4214439719_4480a71d71_bCNBC has a report this week which details how Amazon is quickly shifting from a great place to shop and a trusted retailer to being the next iteration of Ebay and flea markets.

The report focuses on the counterfeit problem, but it's really just the beginning of Amazon's problems:

"Amazon is making money hand over fist from counterfeiters, and they've done about as little as possible for as long as possible to address the issue," said Chris Johnson, an attorney at Johnson & Pham LLP, which focuses on intellectual property and brand enforcement and represents clients including Forever 21, Adobe and OtterBox. "Word is out in the counterfeit community that it's open season on Amazon."

It's not just niche brands like BedBand feeling the pain.

Birkenstock has seen dozens of stores at a time hawking its Arizona Sandal for $79.99, a full $20 below the retail price. The names of the online storefronts change all the time, one day including the monikers Silver Peak Wine Cellar and Ryan Hollifield and the next Keila*Knightley and Bking sewneg.

The only way to contact the sellers is by going to their storefront and clicking the "Ask a question" button. On a single day in mid-June, CNBC sent notes to seven sellers on the list, asking how they're able to price the product so cheaply. Every response was the same: "It is a secret."

Red flags are everywhere. Michael Kors has a signature tote bag listed as low as $101 by multiple stores, compared to its $198 retail price. Canada Goose's highly popular Expedition parka sells for $1,000 on its own site and is available for under $650 on Amazon, a price that sellers of the brand say is too good to be true.

"As long as the logo looks legit, people assume you have that item," said a Canada Goose seller, who asked not to be named so as not to cause strain with Amazon.

Counterfeiters running free is just the first of Amazon's problems. Other problems include the way Amazon is selling prime placement in its search results, and how the retailer is competing with its own suppliers.

As Bloomberg reported in April, the retailer is producing copycat products of the more successful products sold on its site, including a laptop stand and other items sold under the AmazonBasics brand. And the retailer is also launching its own clothing brands so it can make more on each sale.

Do you know what all this adds up to?

A frustrating experience for both buyers and sellers, and an opportunity for Amazon to be disrupted.

I found this story via The Passive Voice, where a number of commenters complained that Amazon now more closely resembled Ebay than the retailer they were used to. "Over the past 12 months, Amazon.co.uk feels more like ebay than the amazon I’ve used since its inception. I used to buy with confidence, now I have to be careful about delivery times, location of goods (lot are China or Hong Kong), prices etc," one wrote.

Another said "have to say, three months ago ordered two knives from amz. They are c. What was advertised and what was delivered were two different things. So far no refunds. It appears from the correspondence replies, English is not a known language."

This is a problem for Amazon. They're not a giant retailer; Amazon has many strong offline competitors, and is dwarfed by Walmart.

Amazon is just one of many sources of these products, and all they have going for them is their reputation. Once people no longer trust Amazon to deliver the product as promised, that will mark the beginning of Amazon's fall.

After which some other retailer (say, Walmart) will disrupt Amazon.

Don't think that could happen?

Then you should consider Ebay.

In the early DotCom bubble, Ebay was one of the major online marketplaces. That was where you could find all sorts of stuff which simply could not be found in your local stores. (In particular, I found Ebay useful for locating several-year-old computer games which were no longer in circulation.)

But then as online sales continued to grow, Ebay became less and less important as consumers switched to other sites. We switched in part because the shopping experience on Ebay ranged from marginal to terrible. This created an opportunity for retailers like Amazon to offer a better experience and steal customers.

Amazon's latest missteps could create that same opportunity for another retailer to rise up and replace them.

One possible contender is Jet.com. Even though that site is still trying to work out the bugs, if it can offer a consistently better experience then it will best Amazon. Another site that would like to be a contender is Wish.com, but that site works with the same Chinese manufacturers which are selling counterfeits on Amazon.

So who do you think it will be?

image by indi.ca

About Nate Hoffelder (11593 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

5 Comments on Amazon’s Counterfeit Problem is Also an Opportunity

  1. The perfect time to launch my new product: Oil of R’lyeh.

  2. Interesting enough, my husband ordered a Surface Pro 4 on Amazon’s warehouse deals for 689. He felt it legit since it was amazon’s warehouse deals. What arrived however, was a cheap, RCA 10″ tablet, probably worth about 100 bucks.

    I don’t know if it was a return and the customer bait and switched them and they just didn’t check it or if it was just a mix up and they sent me the RCA and the person that ordered the RCA got the Surface (which I’m sure if thats the case they are doing a happy dance). Either way, I called Amazon, they had USB pick it up without a problem and refunded me even before they got it back at their warehouse.

    I also bought a straight talk hotspot from Walmart, paid to get it overnight. However I couldn’t activate it. It couldn’t be activated unless it was ran through Walmarts register in the store. So I went to the store, no one knew how to fix the issue since I didn’t buy it at the store and they act like Walmart.com wasn’t them. After an hour an a half I told a manager this is not my problem, figure it out. so they finally returned it and rung it up again, problem fixed.

    Carsons online. I made an order at 3:30 am then changed my mind 15 minutes later. I called first thing when they opened only to be told I had to cancel within 30 minutes. Well how can I if there is no cancel button and your closed. So I complained in a email to corporate that this is a non issue with Amazon as I can just go on the website and cancel. They replied back that they weren’t as big of a company as amazon so didn’t have a cancel button. I’m like seriously did they just try to do a were a poor, small company so we can’t have a cancel button. They are owned by Bon’Ton’s and also own Elder Beerman. They might not be as large as Amazon but they aren’t some small mom and pop shop either.

    Another purchase, Kohls, I refused shipment on June 6ths. Imagine my surprise when I went to check my statement to find out they never refunded me.

    My point is Amazon isn’t perfect but they are still miles ahead of running an online store than the others and I find I end up comparing everyone online experience to what I get at Amazon. Hopefully 3rd party sellers (which I am one as well) don’t ruin it for the rest of us.

  3. Ebay failed in good part because of their shipping policies for sellers (e.g., mandating a max price for shipping, which was always way below actual shipping cost), guaranteeing the seller to lose money. So up went the prices and down went the consumers.

    Second, they raised their fees.

    Third, the rating systems was changed. It was okay to slam a merchant, but you could NOT call out a buyer for being a jerk about the transaction.

    And numerous tiny changes against the sellers that, discretely, weren’t much. But collectively, it was too much.

    Ebay didn’t decline because it screwed the buyers. It declined because it screwed the sellers.

  4. I had hopes for Jet when they were in beta. I connected with one of the organizers there and talked to him about offering the ability for authors to sell ebooks on their site. We discussed Amazon, how the Big A serves and dis-serves authors, what indies would want from Jet, royalty rates, etc.
    They sounded interested, sort of, but it seemed that they weren’t really thinking in that direction to begin with. So one thing indies can do is connect with Jet themselves and let them know that they would be interested in having a different way to reach readers through Jet..especially if there are no price restrictions. I have a book sale plan that I can’t push through the Big A because they limit the upper price for 70% at $9.99…and the program, if I set it up for an author, runs $2,500. Obviously I’m not going to charge that much for the ebook but I’m also not going to take 70% of $9.99 or 30% of something higher.
    So, Amazon needs to change for a lot of reasons. As far as indies are concerned, Jet would be great if they could offer the same…only better.

  5. Walmart.com also lists third party sellers and, given some of their pricing or ability to get long out-of-stock inventory, should raise an eyebrow.

    Amazon’s customer service and prompt resolution of issues really does raise them above most of the others.

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