If you’re a skincare brand, you’ve probably put a lot of thought into how your products smell and feel. So reading reviews on Amazon.com that say one of your creams reminded the consumer of “month-old milk” or that “it literally feels (and smells!) like rubbing your face with ham grease” is bound to be distressing.
That’s the position that Debora Pokallus, CEO of natural skincare brand Bel Essence, found herself in a few years ago when she realized that a third-party seller on Amazon had been using expired product to fill orders for Bel Essence’s Intensive Anti-Aging Treatment.
For Wei-Shin Lai, CEO of SleepPhones—headphones designed to wear while sleeping—trouble on Amazon has come in the form of inferior knockoffs.
“They basically take a generic headband, make a slit in the back, shove some earbuds inside and call them ‘sleeping headphones,’” she explains. “Then with Amazon Ads, they bid on ‘SleepPhones’ so that their cheap product shows up next to our premium product. Customers are lured to try out the cheaper product, which are often shipped from overseas with fake reviews.”
Stories like these highlight a growing problem: Copycat products are widely available on Amazon thanks to the proliferation of third-party sellers—1.2 million of which were added in 2019.
A spokesperson for Amazon emphasizes there’s a difference between knockoffs, which are regarded as generic versions of a product and are therefore acceptable; counterfeit products, which the company has developed programs to prevent; and unauthorized sellers—who, according to the spokesperson, sell legitimate products and whose presence point to a distribution issue.
Regardless of which category they fall into, though, the availability of these products on Amazon poses a real problem for brands that want to control quality, the customer experience and their reputation. And battling them can be a never-ending process.
“Sometimes I feel like it’s a full-time job just managing Amazon,” says Ira Kaganovsky Green, CEO of natural deodorant company Free Brands.
Even if a brand determines that a product is fake and succeeds in getting Amazon to take down the listing, 10 to 20 other listings pop up in the meantime, says David Barnett, CEO of consumer electronics accessories brand PopSockets.
“It’s like Whac-A-Mole,” he says. “You’re almost always losing the sale to one or another counterfeiter.”
So what’s a business to do when its product gets knocked off on Amazon? And what’s Amazon’s responsibility not just to brands but also to consumers who may not know they’re not buying the real thing? We talked to brands big and small in search of answers.
To be or not to be on Amazon
But opting out is more complicated for smaller brands.
While Amazon has not disclosed how many shoppers use the platform—other than noting its Prime membership program has surpassed 150 million users worldwide—analytics firm SimilarWeb estimates the site receives more than 2 billion monthly visits.
Access to an audience of that magnitude can be costly for a small brand to forgo.
In January, PopSockets CEO Barnett testified at a U.S. House of Representatives field hearing on the market power of online platforms and said the brand stopped selling through Amazon because of fakes and lack of what he described as a “true partnership” with the platform in dealing with the problem. Last month, however, PopSockets returned, albeit with a limited selection, in part because “we lost about $10 million last year,” he says.
Like many of the brands Adweek spoke to, PopSockets also realized that because of third-party sellers, its products will be on Amazon whether the brand itself is selling them or not. So it seems if you can’t beat ’em, you have to join ’em.
Brands can certainly implement controls over product distribution, like vetting sellers and implementing price agreements. But, says Adam Sherman, partner at the law firm Vorys, “they will never be in a position where their products aren’t on Amazon at all. If you’re not controlling your brand on Amazon, someone else will.”
Just ask insulated bottle holder BottleKeeper, which started out as a direct-to-consumer brand in 2013 but began listing on Amazon in the fall of 2015 after seeing knockoffs on the site—a phenomenon that CEO Adam Callinan says “exploded” through 2016.
Amazon’s spokesperson counters that BottleKeeper’s concerns have mostly been tied to its utility patent and that, as a retailer, Amazon is “not the appropriate entity to make such assessments, which is why we require a third party, such as a court, to let us know if such claims are valid.”
In the meantime, brands have a tough choice to make.
“If we leave Amazon, then we open the door to potentially having someone sell our products,” notes Pokallus. “So [we’re] on there basically because you don’t have a choice. … 38% of retail is on Amazon. You kind of have to be on Amazon.”
Here are the options for brands that remain.
Report the bad guys
On Amazon, listings feature a Buy Box, the yellow “add to cart” button underneath the price, says Leon Rbibo, president of online jeweler The Pearl Source. But Buy Boxes can be stolen.
Jacynda Smith, CEO of hairstyling-tool brand Tyme, says all a seller has to do is “list a product under our listing and sell it for less—that’s it.”
For Tyme, a stolen Buy Box can mean losing anywhere from 70 to 300 orders on a typical day, says Smith, which translates to approximately $13,000 to $50,000 in lost revenue daily.
“Additionally, people who purchase from the fake company when they own our Buy Box can post verified reviews back on our listing stating anything about the appearance, quality or experience with the fake product,” she says. “These reviews then count against us and cannot be removed.”
Amazon did not comment on Tyme’s review problem, but the spokesperson says the company respects intellectual property and expects its sellers to as well. She also says sellers who see inappropriate use of photos can file a report and Amazon will investigate, but adds Amazon did not find any reports from Tyme about the use of Tyme imagery in listings and ads.
Colin Darretta, founder of wellness company WellPath, says Amazon is “aware of the problems, empathetic to them and proactive in attempting to try to help us solve them.”
In fact, the company has launched programs so that brands can report knockoffs and ask to have those listings removed from the site. (More on that later.) But it can take up to two days for a listing to be removed. And even that is only a temporary solution.
“Bad actors continue to spring up,” says Darretta.
Sue the bastards
A brand can also reach out to those so-called bad actors directly, but tracking them down can be difficult.
“All the companies are in shell companies hidden within a company within a company within a company,” Smith says. “If you send a letter to one, it won’t get close to being delivered.”
And the lawyers who send those letters—not to mention any subsequent legal action—don’t come cheap.
“It was a great debate for me,” says Smith. “I would rather spend resources on innovating and creating a better company than getting stuck in a lawsuit with a big, huge platform.”
When its utility patent was published in November 2016, Callinan says, BottleKeeper’s legal team started going after unauthorized sellers and the company burned through $500,000 in legal fees in 2017 alone.
“These are small people buying knockoffs on Alibaba and reselling them on Amazon because anyone with a heartbeat can sell anything they want on Amazon from anywhere in the world,” Callinan notes.
And even though those small companies typically can’t afford to mount a defense, Callinan says pursuing them is “an outrageously expensive process” that stunted BottleKeeper’s growth for a year because it had to divert funds from marketing and production.
Find trusted sellers
Another tactic is to work only with authorized sellers.
Herschel Supply Co., which makes those wildly popular backpacks, has gone as far as adding a disclaimer to some of its product listings on Amazon.
“Amazon.com is the only authorized retailer of Herschel Supply products on this platform,” the image says. “We do not guarantee the authenticity or quality of products purchased from non-authorized sellers on Amazon.”
Herschel did not respond to a request for comment about what prompted it to add this disclaimer.
“There are no authorized BottleKeeper resellers on Amazon, so if you buy a supposed BottleKeeper from someone other than us on Amazon—which can be really confusing because you may not know who you’re buying from unless you know where to look—we didn’t sell that company their BottleKeeper product, we have no idea who they are or where they got it from and could very likely be counterfeit,” Callinan says.
Smith says Tyme has tried using a disclaimer, but when a company hijacks the Buy Box, customers don’t always realize they’re purchasing from someone else.
In the case of Bell Essence and the expired products that inspired all those negative reviews, Pokallus says she fired the distributor who continued to sell old inventory. And she says she emailed Amazon CEO Jeff Bezos directly (his email@example.com email is widely known) to report the problem but Amazon said she did not provide sufficient evidence to support her request and it could not take action.
Amazon’s spokesperson says the platform requires sellers to abide by strict quality guidelines and have processes in place to ensure customers receive products with sufficient shelf life. In addition, she says sellers that have concerns can report the problem so Amazon can investigate, and that it did not find any reports from Bel Essence about its claims.
Establish a minimum price
Another option is minimum advertised pricing (MAP) agreements.
Green says Free Brands lost over $100,000 in sales as a result of third parties buying the product wholesale and selling it to an unauthorized seller “who sells it on Amazon against you for $0.50 less but gets your Buy Box and you lose sales.”
So the brand put in a MAP agreement with all vendors “forbidding them to sell away from or on Amazon, but while it’s helped, it hasn’t stopped,” Green says.
Free Brands also does added due diligence before opening accounts with distributors and has diversified its sales channels “so all our eggs were not in one sales basket,” she says.
(In response to Free Brands’ assertion that it lost money, Amazon’s spokesperson had this to say: “Reselling is a legitimate, long-standing component of the retail ecosystem that provides customers with access to authentic goods at competitive prices. By Free Brands’ own account, it sold these products to a third party and thus has not lost sales.”)
Similarly, wholesalers that want to work with BottleKeeper must agree to a MAP of $29.99 or $34.99 for its products.
Mike Barland, CEO of MGP Caliper Covers, says the automotive accessories brand also uses software to search for anyone selling below MGP’s $250 threshold. Those selling under MAP pricing and other unapproved vendors go on a Do Not Sell list with wholesalers, he says.
“We used to want to sell to anybody,” says Barland. “Now we vet them to make sure they uphold our pricing … and do their best to support customers.”
MGP Caliper Covers sells on Amazon directly, through the platform’s Seller Central interface, and works with three approved resellers on Amazon, but is “always fighting to get rid of the other ones,” he adds.
“When there’s a problem with an unauthorized reseller, the brand is the one that gets hurt,” says Barland. “People see our brand and associate it with a brand experience. If they can’t get hold of anyone, or figure out if this fits [their] car or the seller maybe ships the wrong product, the customer experience then becomes an issue for the brand.”
Join Amazon’s Brand Registry
Yet another option is Amazon’s Brand Registry, a service Amazon says helps brands protect their intellectual property and “create an accurate and trusted experience for customers on Amazon.” Brands that can verify active registered trademarks are eligible, and according to Amazon, more than 130,000 brands participate.
In late 2018, BottleKeeper became part of Amazon’s Brand Registry, which promises brands “complete end-to-end enforcement on Amazon today,” says Callinan. The registry “changed everything,” as it gave the brand “the ability in a structured process to enforce patent infringement.” Then again, he notes, “the only reason it works is because we had court orders.”
John Salzinger, founder of clean technology startup MPowerd, says that’s because “Amazon doesn’t want to get involved in a patent war with two other companies.”
But the registry is not a perfect fix. While SleepPhones is registered, for example, unauthorized sellers can still list SleepPhones headphones, “which may not be the real thing,” says Lai. And they might use the word “SleepPhones” in their product titles or descriptions, or advertise under the company’s brand name.
Amazon also offers a product serialization service called Transparency, which helps identify legitimate products.
To enroll, a seller must be able to verify themselves as the brand owner and supply a valid global trade item number, like a UPC or EAN barcode. Amazon has said it scans Transparency codes “to ensure only authentic units are shipped to customers.” According to the website, over 2,000 brands are enrolled.
Callinan says enrollees can buy Amazon-specific QR codes from licensed printers and then apply the codes to their products—although he also called it “another layer of complication and expense.”
Green, Smith and Pokallus agree Transparency isn’t cost-effective.
“I looked into Transparency, but it costs a fortune, and quite frankly, Amazon has certain obligations to my brand as part of Brand Registry, which registers our trademark in the Amazon system,” Pokallus says. “No matter what, even just under U.S. trademark law, they would have to take down any offending listings, so our needs are met with the registry.”
The Amazon spokesperson responds, “While we’ve seen positive results, Transparency is an optional service, and every brand will make decisions that are best for their company.”
Try Project Zero
Amazon also offers Project Zero, a self-service tool for brands to remove counterfeit listings with automated tools that scan stores and remove suspected counterfeits.
Project Zero is available for brands that are enrolled in Amazon Brand Registry with a government-registered trademark and have “submitted reports of potential infringements with an acceptance rate of at least 90% in the last six months.”
Smith says Project Zero has been effective in some instances, but not when it comes to hijacked listings.
“Amazon as a whole is reactive instead of proactive,” she adds. “They give tools at added expense to the authentic sellers instead of taking action to screen sellers and seller offerings before a new listing or seller goes live. Through these programs and the platform in general, Amazon is asking the seller to police their platform.”
A fine solution?
A January 2020 report from the Department of Homeland Security, which found seizures of counterfeit and pirated goods at U.S. borders increased tenfold between 2000 and 2018, from 3,244 to 33,810 a year, says the onus for fighting counterfeit products is on the ecommerce platforms that sell them.
It noted that while brick-and-mortar retail has “a well-developed regime for licensing, monitoring and otherwise ensuring the protections of intellectual property rights (IPR), a comparable regime is largely nonexistent for international ecommerce sellers.” The report calls for ecommerce platforms to “take a more active role in monitoring, detecting, and preventing trafficking in counterfeit and pirated goods.”
MPowerd’s Salzinger thinks platforms like Amazon should institute barriers to seller entry, like imposing fines.
Salzinger—who notes that Amazon was the company’s first retail customer in 2012 and has “been instrumental in our success and impact”—asserts that since MPowerd sells directly to Amazon, knockoffs hurt the platform as much as they do his brand. And not just financially—knockoffs can also erode consumer confidence.
“If someone is making a product and selling it,” he says, “they will do it until it doesn’t make sense economically.”