Small businesses hurt by fakes from China on Amazon Marketplace
Counterfeit goods proliferate on Amazon Marketplace, a platform for independent sellers which makes up roughly half of Amazon's e-commerce business. Chinese sellers have flocked to Amazon Marketplace since 2015, when Amazon simplified the process by which they could sell merchandise to North American and European buyers. With easy access to those markets, Chinese counterfeiters have aggressively copied popular products on Amazon, often those created by small North American businesses.
Chinese counterfeiters can devastate small firms on Amazon. Unlike multinationals, small companies lack legal teams well versed in IP protection who pursue counterfeiters and alert the relevant authorities, a time-consuming - and sometimes costly - process.
Indeed, IP thieves wrecked the Amazon business of Canadian baby-clothing start-up Wee Urban, founded by former schoolteacher Holly Maclean, notes CNBC. Wee Urban's smartly designed, Canada-made baby sleepwear was a hit on Amazon, with revenue reaching US$500,000 in 2016.
That's when the counterfeiters arrived. The trouble started after Maclean - at the behest of Amazon staff - decided to sync her Amazon.ca account with Amazon.com. That move was supposed to simplify the global sales process. Instead, fake Wee Urban products began appearing on Amazon sites worldwide.
Worse yet, Maclean believes that fraudsters gained access to her account. She tried to close the account in August 2017; per Amazon's rules it should have been terminated 60 days later in October. Yet the account remained open. She found that someone was changing the prices on her products and had successfully applied to sell Nike and Apple products using her account.
Maclean told CNBC that she first tried to solve the problem with Amazon support staff. Yet despite having "more than 100 conversations," with them, the counterfeits proliferated. In 2017, cheap Chinese knock-offs of Wee Urban products caused sales to plummet 80%. She also removed her products from Amazon platforms.
Maclean finally hired attorney Phil Mann in a bid to get Amazon to cooperate. Mann previously represented pillow maker Milo & Gabby, which unsuccessfully sued Amazon for allowing the sale of fake versions of its products. The jury concluded that Amazon was not responsible for infringement by third-party sellers.
Portland tech entrepreneur Casey Hopkins, founder of Elevation Lab, recently criticized Amazon for allowing Chinese counterfeiters to sell knock-offs of the company's electronics accessories. In a March post, he said that "when Chinese counterfeiters tool up and make copies of your product, send that inventory to Amazon, then overtake the real product's buy box by auto-lowering the price - it's a real problem."
In a March statement, Amazon told tech news site Engadget: "We remove suspected counterfeit items as soon as we become aware of them, and we remove bad actors from selling on Amazon. We have successfully taken legal action against a number of bad actors and will continue to pursue legal action and work with law enforcement."
Meanwhile, Amazon's approach to counterfeiters is coming under closer scrutiny. During a recent investigation, the US Government Accountability Office found that 20 of 47 products purchased from Amazon, Walmart and eBay were fake - as determined by the trademark holders. All of the Urban Decay cosmetics purchased on the three sites were counterfeit. So were six of nine Yeti mugs.
Republican Senator Orrin Hatch, chair of the Senate Finance Committee and the person who requested the recent report, expressed concern about its findings in a statement. Hatch said that he would convene a Senate hearing on the issue, given the "alarming ratio between authentic and counterfeit goods purchased online." E-commerce has benefited consumers and businesses enormously, but increased threats to IP and consumer safety, he added.
Beverly Baskin, chief executive officer of the Council for Better Business Bureaus, told CBS News in statement that the failure by "marketplace leaders" to prevent the proliferation of counterfeit goods could undermine consumer confidence in "the entire retail market."