Amazon has a counterfeit problem. That’s just a fact, and Amazon even admitted it in February of this year. In its annual SEC report, Amazon stated that they “may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies.”
We all know this already — we see it every day. But has Amazon really admitted that they may be powerless over putting a complete stop to the rampant abuse happening on the marketplace?
The annual report this year marks the first time Amazon publicly admitted this problem, which shows that the problem has gotten bad enough that the company can no longer ignore it.
Although the SEC filing didn’t offer a solution to Amazon’s counterfeit problem, Amazon has since rolled out its Project Zero program. Project Zero is an ambitious effort to curb counterfeiting on the platform and push the number of knockoffs down to “zero”. But is a counterfeit free platform really possible?
Amazon’s Counterfeit Problem
Watchdog site The Counterfeit Report finds that as of June 2019, 16% of the fake goods it reported were listed on Amazon – that makes Amazon the second largest source of fake products on the internet, just slightly behind eBay. We all know how Amazon works — unfortunately, the counterfeiting problem makes sense. Sales on Amazon come from third-party sellers, and for every honest seller on the platform there’s another fraudulent one trailing right behind.
Despite the bad actors constantly wreaking havoc on the marketplace, third party sellers still make up more than half of Amazon’s overall sales, hitting a whopping 58% in 2018. Amazon is well aware that this business model poses a huge risk of counterfeits — but that’s a number that will be tough to part ways with.
Past efforts at managing and controlling counterfeiting were reactive and unfortunately, insufficient. Amazon’s previous model relied almost entirely on customer complaints to identify fake products and sellers. This has a number of drawbacks. First, it’s slow. The customer has to lodge a complaint and Amazon has to investigate that complaint. In the meantime, the offending seller can go right on selling counterfeit products before facing any consequences.
Second, this process poses a massive risk to the buyer experience. If the customer is complaining, that means they’ve already received a product they’re unhappy with, making Amazon look bad. Wouldn’t Amazon choose to stop such an item from shipping out to begin with? Some fakes are obvious, but some are very well-made, and an average buyer might have no idea how to tell a fake from an authentic item. Plus, it shouldn’t be the customer’s job to do so.
With all the flaws in this system, Amazon needed a more proactive method of controlling counterfeiting — this laid the groundwork for the Project Zero program.
Project Zero for Amazon Sellers: How It Works
The process starts with an invitation from Amazon, as Project Zero is currently an invite-only program. To be eligible for an invite, a brand must have a government-registered trademark and brand registry with Amazon. Once invited, brands can upload their logos, trademarks, and any other key data that counterfeiters might try to replicate. Amazon then scans its marketplace for suspected counterfeits. Brands can also serialize all their products with unique numbers to confirm which goods are authentic, without any other sellers knowing these numbers. Serialization isn’t required to enroll in the program, but Amazon reports that serialized brands are seeing the best results. The program overall is free, but serialization costs between $0.01 and $0.05 per unit.
Project Zero also provides what Amazon calls a “self-service counterfeit removal tool.” Rather than brands reporting counterfeit products to Amazon and Amazon then investigating the claim, Project Zero gives established brands the ability to remove suspected counterfeit listings themselves, expediting the speed of the process dramatically. It’s an unprecedented level of power for companies to control and oversee the marketplace.
Are There Downfalls to Project Zero?
Potentially. In its current form, it doesn’t seem like the program does much for smaller brands with fewer sales. Amazon hasn’t released information on which brands received invites to the program, but since Amazon was specifically trying to woo large brands with its anti-counterfeit efforts, it’s a good assumption that we’re talking about big companies getting invites. Vera Bradley, for example, confirmed its involvement. Smaller brands can apply for an invitation and join the wait list, but there’s no indication on how long this wait is.
There’s also some concern that large brands will abuse their ability to remove suspected counterfeit listings. Abuse of this system could definitely pose a threat to third party sellers, who have authorization from the brand owners to sell legitimate products. Amazon assures sellers that Project Zero brands will be heavily monitored and must maintain a high level of accuracy in reporting to keep Project Zero privileges. Still, it’s a legitimate concern that this program could result in even more sellers being accused of counterfeiting and facing account suspensions.
Amazon has placed an unprecedented level of authority in the hands of brand owners in its fight against counterfeiting. The plan has only been in operation a few months, and we don’t have a ton of information on its success so far. Undoubtedly, though, Project Zero stands as the latest and most ambitious attempt from Amazon so far in controlling counterfeiting on the marketplace.