Is Amazon Enabling Counterfeiters?

A Forbes article I read recently painted a pretty shocking picture of the dangers facing both Amazon sellers and customers from Chinese counterfeiters.

What’s the fuss about?

counterfeitI After some research, you hit on the obvious. Hang your shingle in one of the biggest, busiest and best known markets in the world: Amazon.

You’re not too sure of how it all works, but it looks easy enough. You perhaps buy an Amazon selling course from a big name internet marketer that lays everything out in seemingly simple steps.

You either already have a product you can sell, or you’re on the lookout for something that will sell like hot cakes and not require a huge amount of capital to set up. Your internet guru points you in the direction of China as a source of cheap priced products that can be resold at a profit.

Here’s where it gets interesting:

Scenario A: You already have your own product.

Amazon requires you to furnish all kinds of proof before they’ll allow you to sell your product. They want proof it’s legally yours to sell. You have to register your brand, register your physical location, provide them references, invoices and photographs. After a lengthy qualification process you then set up the product on Amazon’s system – itself a lengthy and complex process.

You begin to sell. By providing an excellent product and top notch customer service you slowly build your brand reputation and recognition. Positive reviews begin coming in. Your sales are growing and you might even see some profit. You’re on a roll. You add more products and keep pushing to grow the business.

Things go really well and you’re beginning to feel like an internet entrepreneur. Till suddenly, they’re not going so well. You either cop on quickly or struggle trying to figure out what the problem might be. Your sales are dropping and your reviews are becoming quite negative.

Scenario B: You source an in demand product from China.

amazon counterfeiters

The set up process is similar to that of Scenario A, except here you have to disclose your supplier and wholesale costs to Amazon along with all the rest of the information. Your internet guru advises you to private label your product so that you can begin building a brand and avoid copycat ripoffs.

You too go through this not inexpensive and very time consuming process which includes getting samples from China, negotiating prices, organizing shipping, registering your brand, organizing payment to the manufacturer and paying customs duties on entry into the U.S.

You then deal with receiving the goods, checking that you actually got what you ordered and paid for, wrangle with your supplier over either inferior quality that doesn’t match the samples on which you based your order, or, equally frustrating, over refunds for broken or missing units.

Should all go well, you can then send the goods on to Amazon’s fulfillment center and after a few more weeks, you’re ready to sell.

By now your ‘on a shoe string’ business has likely cost you more than you anticipated, in money, time and frustration.

After working hard, you begin building a good brand reputation and have garnered some great reviews. Until suddenly, things change for the worse.

There’s something you might not have known, or realized, was a big deal when selling on Amazon. As a customer, you probably used this feature, but now that you’re on the other side of the transaction, it likely is a nasty shock.

amazon counterfeit

Products shown are just examples of alternative sellers of a single product, no allegations of counterfeiting are implied or intended.

Suddenly your ‘exclusive’ product is being sold by a host of other ‘entrepreneurs’ even though your brand is supposedly registered and you’ve told Amazon that you are the sole supplier. Worse still, it’s not your product, it’s a knock-off being sold at a cheaper price. You’re not getting the sales but you are getting the bad reviews from dissatisfied customers… and there’s literally nothing you can do about it.

Yes, there is a procedure, however it’s time consuming, expensive and frustrating. The onus is on you to prove the injury plus you’ll likely have Amazon penalize you for the problem or even shut you down.

So what’s actually happening?

In Scenario A, Chinese manufacturers are simply copying your product, in an inferior quality, then taking advantage of Amazon’s desire to sign up increasing numbers of Chinese sellers who are only too happy to flood the western market with cheap knock-offs. Amazon even makes shipping cheaper and easier for these Chinese sellers with preferential shipping rates that put local sellers at a distinct disadvantage.

In Scenario B, the friendly Chinese manufacturer from whom you are sourcing your product, has been keeping a close eye on your activities. Once you’ve succeeding in pushing through the bleeding edge of gaining market share and brand recognition, they step in selling the very same product they supply you, direct to your customers, at lower prices than the rate you pay them ‘wholesale’.

What’s the bottom line?

Essentially, Amazon is penalizing local market sellers, whether in the U.S. or U.K. or elsewhere in Europe, giving preference to the what is widely regarded as the counterfeit capital of the world.

It makes one wonder about the company’s ethics. It can be argued that the organization has grown so large so quickly that administrative and bureaucratic red tape allow common sense to to be obscured. However, the principal of the matter is not.

It’s a similar scenario to what happens when a big box store moves into an area where independent, locally owned businesses have flourished for decades. Deep pockets of national and global concerns allow organizations to produce or source product at incredibly low costs. These same deep pockets will sustain local losses for as long as it takes to undercut local businesses. Huge marketing efforts entice customers away from the local Mom and Pop shop who cannot compete on price or selection. Soon the losses are too severe to be sustained and the local enterprise shuts its doors, whereupon the big box discounter ups prices in what is now a monopoly in that area.

Whether it’s bricks and mortar or online business, putting local entrepreneurs out of business isn’t good for anyone except for huge organizations (or countries) that are far removed from the ordinary daily life of local citizens. It’s a classic case of profits before people and not in the way that anti-capitalists use that phrase. It literally creates a dictatorship that stifles local capitalism and entrepreneurialism.

It’s very sad to see Amazon, which was once an icon of entrepreneurial innovation, following the same path as the bricks and mortar behemoths that dominate the western commercial landscape.

Which begs the question, will this situation be remedied under the ‘America first’ policy or will this be another bit of hyped political rhetoric?

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