E-commerce has been perhaps the single biggest change in people’s habits over the past decade. Now we can realize that we need something totally obscure at 5pm and have it in our hands by 9am the next morning, where previously we would have needed to search for weeks just to find it. It has also created a new economy, where there are now thousands of people who can sell their own products directly to consumers through e-commerce platforms. There have even been stories of people making six figure salaries by selling through these kinds of platforms instead of holding down regular jobs.
However, the opportunities that it has given honest people has also led to a considerable rise in the number of counterfeit and low quality products available. There have been stories like that of Amit Sharma in the UK, who earned over £1 million in 4 years selling counterfeit clothing on eBay and was jailed for 21 months after being caught. It is not just a problem for US and European countries either, with Alibaba suing Liu Huajun and Wang Shenyi for 1.4 million yuan for ‘violation of contract and goodwill’ after they were found to have been using Taobao to sell fake Swarovski watches.
Similarly there have been issues with low quality goods being sold as considerably higher quality than they are. This is achievable because many online sellers have realized that they can utilize companies who offer to increase the user ratings for products and seller accounts on e-commerce sites. This means that people who buy these products normally do so under the impression that hundreds of customers have been happy with the quality of the product and service offered by the seller. In reality they may have simply paid a company to increase their user ratings.
This represents a serious issue for e-commerce sites, as it abuses the one thing that they can never offer - a preview.
In a brick and mortar store, if you want to buy a watch, you can try it on, check that everything is working properly and check the authenticity. Nobody will ever be able to do this with the majority of e-commerce companies, so if people are a victim of either of these problems they are far more likely to be driven back to traditional forms of shopping experience. It also has an impact on the amount people are likely to spend online. After all if you get burnt buying a $50 watch, you are never going to risk it with a $500 one. This creates a situation where e-commerce sites will struggle when it comes to selling big ticket items, but will still need to stock them - so excess stock will be held by the company, wasting warehouse space and likely requiring additional security.
This then causes issues for genuine sellers who refuse to use these kinds of services, because traditionally the companies with the most highly rated reviews are the ones who appear at the top of searches.
However, there are moves being made to prevent these issues from becoming unmanageable, with Alibaba teaming up with several companies to try and combat counterfeiters. The company is going to be working with a selection of companies including Louis Vuitton, Samsung and Mars to utilize big data and identify fake products on their platforms. Alibaba have great faith in the move with their chief platform officer, Jessie Zheng claiming ‘The most powerful weapon against counterfeiting today is data and analytics, and the only way we can win this war is to unite…With our robust data capabilities, we are confident the alliance will accelerate the digital transformation in our global fight against counterfeits.’
It is likely that the collaboration with companies with a vested interest in stopping these counterfeiters and damaging their brands. It is likely to bring even more robustness to Alibaba’s already reasonably robust approach, having already seized $207.2 million of counterfeit goods, shut down 417 production rackets and helped to arrest 332 counterfeiting suspects between April and July 2016.
Using machine learning, Alibaba’s system scans 10 million product listings every day and had removed 380 million product listings and 180,000 third party sellers in the 12 months leading up to August 2016. It is hoped that by bringing together every stakeholder impacted by fake products this process could become even more thorough and effective. It is little surprise that this has been such a focus for the company given that some form of the word ‘counterfeit’ appears 30 times in Alibaba’s 2016 annual report.
Alibaba aren’t the only company suffering from this phenomenon though, with Amazon being a highly visible target for counterfeiters. For instance, according to a lawsuit filed by Apple, 90% of Apple products (mainly chargers and peripherals) sold on Amazon are counterfeit, meaning that Amazon’s reputation and Apple’s reputation is damaged when these fake goods malfunction or break. The fraudsters are even taking advantage of the logistics offered by Amazon, allowing them to send their fake products directly to an Amazon warehouse, giving them an air of authenticity. It has created a major headache for Amazon, who’s attempts to make selling through their marketplace as simple as possible has led to a huge number of fraudulent products flooding the site. To prevent this, they are also looking to utilize big data with their partners, as well as making it more difficult for third party sellers to sell big brand products. The public details of this are limited, although Amazon have said they spend ‘tens of millions of dollars’ on the endeavour. They also say that they need to work with brands in order to make the process work.
It is little surprise that both Alibaba and Amazon are suddenly taking this move seriously, because it is beginning to hit them where it hurts - in the courtroom and in the media.
For instance, Apple filed a lawsuit against Mobile Star who sold Apple products through Amazon after it found that 90% of the Apple merchandise sold by the company was counterfeit. Although this was not a lawsuit against Amazon, having the world’s most valuable company suing somebody for something they did through your marketplace is not good for business. There are also multiple examples of smaller companies like TRX and Birkenstock openly criticizing Amazon for their approach, with Birkenstock actively withdrawing all products from Amazon as of January 1 2017.
In many ways you have to feel sorry for Amazon, as it seems that their biggest strength has also turned into their biggest weakness - their size.
Amazon stocks over 398 million products as of January 2017, with an 8% increase from December 2016 alone. Taking a ‘human first’ approach would be impossible in the face of these kinds of numbers. Many of the sellers who have complained about counterfeiters have needed to rely on a reporting system where they can report to Amazon who then take down the counterfeiter’s page, only for the same seller to appear under a different name days later. This could happen to any one of the nearly 400m products, so trying to manage this with a report system and complaints team would be impossible.
As technologies progress and the use of data, machine learning and AI improves even further, the chances of stopping this more quickly and effectively is going to increase too. It is something that Amazon is desperate need of and perhaps they should be taking the cues from their biggest Chinese rival.