Amazon’s Counterfeit Problem is Also an Opportunity
CNBC 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