“Amazon has zero tolerance for the sale of counterfeit items on our site. We work closely with manufacturers and brands to identify offenders, and remove fraudulent items. We are taking legal action and aggressively pursuing bad actors.”
The above was a copy and paste statement from Amazon’s media relations department in response to my inquires about counterfeit products being sold in their marketplace. Their take sounded good, but when any layman can go onto Amazon.com and do a search for “Michael Kors” and find knockoff accessories on the first page of results or a new pair of $1,200 Adidas Yeezy Boost 350 Oxford sneakers going for the bargain price of $40, it's clear that the company may not be as effective in its mission to cleanse its ecosystem of counterfeits as they claim.
“Amazon does talk a big game. It has said it has "zero tolerance for the sale of counterfeits," and that it works "closely with manufacturers and brands, and [pursues] wrongdoers aggressively.” Yet, counterfeits abound and consumers and brands alike are growing increasingly unforgiving,” said Julie Zerbo from Fashion Law, a website which covers the legal aspects of the fashion industry.
While counterfeits have always existed in the Amazon marketplace — and every other ecommerce platform for that matter — the issue has seemingly grown to epidemic proportions over the past couple of years. It has gotten to the point where big brands like Apple, after finding that 90% of “their” chargers that were being sold on Amazon were fakes, have filed precedent-setting lawsuits against the ecommerce giant, and some brands like Birkenstock have sworn off Amazon altogether because of the company’s inability to keep counterfeit sellers at bay.
Amazon’s counterfeit problem grew exponentially when the marketplace began to aggressively target Chinese sellers in 2015. To help cut out the import/export middlemen and allow Chinese manufacturers and merchants to sell directly to buyers in the USA, Canada, and Europe, Amazon streamlined the shipping process by doing things like registering with the Federal Maritime Commission to provide ocean freight, which allowed for Chinese merchants to ship entire containers directly to Amazon’s fulfillment warehouses.
“Amazon wanted all those Chinese sellers in the US. They actively invited them to sell,” explained Chris McCabe, an Amazon Seller consultant from ecommerceChris and a former Amazonian who once worked in the company’s merchant account investigation division.
Once these bulkheads were removed, China-based merchants began pouring into the marketplace, doubling their presence in 2015 alone, and making Amazon the cross-border ecommerce choice for Chinese sellers. That same year, Amazon moved past Walmart as the most valuable retailer in the USA, Jeff Bezos moved up to number five on Forbes’s wealthiest person list, and profits soared by 20%.
While it made sound business sense for Amazon to make themselves more accessible to sellers in the world’s most populated country — which also happens to be the origin of a large share of the products in their marketplace anyway — doing so also meant opening a Pandora’s box of other issues. China, the World’s Factory, unsurprisingly is also the source of the bulk of the world’s counterfeit goods. According to an OECD report, over 60% of the world’s knockoffs originate from China — a big chunk of an industry worth half a trillion dollars per year.
“Did we see a rise in counterfeits being sold on Amazon after the marketplace became popular with Chinese merchants?” I asked Julie Zerbo.
“We absolutely did,” she replied. “Sure, counterfeits were present on the site prior to Amazon’s push for a greater presence of Chinese sellers, but the influx of fakes since then has been enormous.”
It is unreasonable to assume that Amazon expected anything different, as China’s prevalence for counterfeit production was well know prior to their big China push. According to China’s state-run Xinhua news agency, 40% of the country’s domestic online marketplaces were made up of counterfeit goods in 2015, the same year that Amazon bridged the ecommerce hemispheres.
According to research by Marketplace Pulse, Chinese and Hong Kong sellers now make up a little over 11% of Amazon’s total marketplace.
Amazon claims to be doing whatever they can to inhibit counterfeits in their marketplace, even going as far as to initiate a couple of much publicized lawsuits against a small handful of sellers who they deemed to be “bad actors.” From the litigation of one these suits, Amazon claimed that they “invests tens of millions of dollars annually developing sophisticated technology to detect bad actors and potentially counterfeit products, and it employs dedicated teams of software engineers, research scientists, program managers, and investigators to operate and continually refine its anti-counterfeiting program.”
But when fake items on Amazon are about as easy to find as authentic ones, I have to wonder what these anti-counterfeit measures actually consist of -- and why they don't seem to be working effectively.
Contrary to the way it sometimes may seem from browsing the site, Amazon does have a very complex system in place for weeding out counterfeits. These processes range from taking action based off of buyer and seller complaints to a sophisticated algorithm that spiders through all the pages on the site, flagging potential counterfeits and dumping them into a massive queue for fraud prevention teams to inspect manually. It is in this later stage where the system appears to break down.
Michael Jakubek, who worked on Amazon’s fraud and abuse prevention teams between 2004 and 2012, stated bluntly that the quality of the Amazon marketplace comes down to the quality of these manual investigations. He posits that one of the main reasons why so many counterfeit listings continue falling through the gaps of Amazon’s quality control dragnet is that these investigation teams are not simply being trained or administered properly.
“The big problem with this is that the investigators get rewarded based on how quickly they go,” Jakubek said. “There's no reason they can't identify that these sellers are bad, but they're compensated to go so quickly that they typically just do really cursory reviews.”
Chris McCabe, who investigated merchant violations for Amazon for five years, elaborated:
“You need people, properly trained people with the right kind of SOPs in their hands or in their heads, and that's where a lot of the failures come in. I mean, they are being pressured to review work very quickly. They have this IPH (investigations per hour) which always slowly inches up . . . If you know you have a certain number of investigations to do during an hour and you've done two that were incredibly complex and you have to do ten more in the rest of the hour, but those two took you half an hour or 20 minutes, it means you have to blow through the rest of them to catch up.”
Like its sellers, Amazon runs algorithms to quantify, measure, and analyze employee performance in their ongoing mission to revolutionize the modern office into a finely tuned machine — almost literally.
Another major reason for the lapses in quality control when it comes to counterfeits is the fact that Amazon endures an extremely high rate of employee turnover. Called “purposeful Darwinism” by a former human resource director in a landmark NY Times report, Amazon employees are not only pressured to work extremely rapidly — often sacrificing quality for quantity — but many positions are perpetually filled by those who are new on the job.
“The highly skilled, experienced, trained people that I used to work with are gone,” McCabe explained. “They need better training. They need more auditing of investigations, because it's clear that all the wheels have come off the cart when it comes to the quality of the work that goes into an investigation of an appeal, a review of an account.”
While Bezos claims that Amazon has the "gold standard culture for innovation," the company has the second highest rate of employee turnover of all Fortune 500 companies, with the average worker lasting just nine and a half months.
To put it simply, Amazon’s high-pressure, high-turnover, metrics-driven work environment seems to result in torrents of seemingly mindless mistakes, oversights, and copy and paste responses. While Amazonians are encouraged to tear apart each other’s ideas, be available to respond to emails 24/7, and treat their job like a lifestyle, scammers and counterfeiters are running amok, selling knockoffs on their marketplace with near impunity — even when caught they just open up a new account under a new name and hope to fall through the cracks of Amazon's porous HR strategy once again.
