Amazon Strikes Back

It doesn’t really matter whether you’re a promotional products supplier or distributor, you don’t have to sniff around too much to find something that smells like competition. And the scent sometimes isn’t all bubblegum and roses.

We’ve talked several times before about the advantages Amazon (and the other large online sellers) try to gain with your end-users who don’t look much beyond the lowest price. We’ve also talked about the challenges presented to promo suppliers when their intellectual property is knocked off by counterfeiters selling online, in places like the Amazon Marketplace, or Alibaba.com. It has become almost a yearly request from the AAFA (American Apparel and Footwear Association) to have Amazon designated a “notorious market” by the U.S. Trade Office.

The AAFA specifically highlighted ‘amazon.co.uk’, ‘amazon.ca’ and ‘amazon.de’ for the second year in a row, adding ‘amazon.fr’ and ‘amazon.in’ in its annual request for the first time this year. It also asked that the U.S. Trade Representative consider domestic markets, including Amazon's U.S. site, along with international marketplaces. AAFA said many of its members "report that the same issues they encounter on Amazon's foreign marketplace extensions also persist on Amazon.com.”

Last year, Amazon chose to stay mum on the notorious market suggestion, but this year couldn’t quite hold its corporate tongue. Last month, Amazon responded strongly with a four-page letter to Daniel Lee, the acting assistant U.S. Trade Representative for innovation and intellectual property. The letter from Brian Huseman, VP of Public Policy at Amazon, claimed that the company goes "well beyond our legal obligations and invests heavily in proactive efforts to prevent counterfeits from ever reaching our stores." Amazon also said that it stands behind all products sold on the site "even when third-party sellers do not."

If you, or your trusted suppliers consider counterfeiters potentially unfair competition, why should this be more important to you now? Because those third-party sellers now far outpace Amazon with its own first-party sales. In fact, the share of gross merchandise sales sold on Amazon by independent third-party sellers—including those small- and medium-sized businesses that may or may not respect suppliers’ intellectual property—have grown from three percent of total Amazon sales to 58 percent. In last year’s shareholder letter, Jeff Bezos put it bluntly:

“Third-party sellers are kicking our first party butt. Badly.”

Whether or not you think Amazon is interested in a level playing field, at least when it comes to providing a sales platform for third-party suppliers free of counterfeiters, Huseman’s unprecedented response offers an interesting insight into Amazon methodology. His letter says the company invested over $400 million in personnel and employed over 5,000 employees to fight fraud and counterfeiters in 2018. “Our primary focus is on preventative, technology-driven tools built on machine learning and data science to proactively scan the more than 5 billion changes submitted to our worldwide catalogue each day. We willingly make these investments because they are good for our customers, good for the honest entrepreneurs who account for more than 58% of the physical gross merchandise sales made through our stores, and good for the rights owners and brands that invent the hundreds of millions of products for sale in Amazon’s stores.”

Other insights from the Amazon response to the AAFA include:

• So far in 2019, Amazon Brand Registry tools have proactively blocked over 400% more listings suspected of violating IP rights than during the same period in 2018.
• Amazon’s proactive efforts prevented over 1 million suspected bad actors from publishing a single product for sale in Amazon stores.
• The company blocked over 3 billion suspected bad listings from being published on its stores.
• Over 99.9 percent of products that customers actually viewed in Amazon’s stores have never received a complaint about a suspected counterfeit from a customer or rights owner.
• More than 200,000 brands are enrolled in Amazon’s Brand Registry, and those suppliers are finding and reporting 99% fewer suspected infringements than before the launch of the registry.

To put the exclamation point on his response to the AAFA, Huseman wrote, “AAFA’s suggestion that Amazon is not doing its part to eliminate counterfeits from its stores does not stand up to the data from Amazon’s efforts on behalf of AAFA members” and that, “when brands refuse to use the tools that Amazon makes available to them, offer only anonymous criticism that is directly refuted by available data, or conflate concerns about counterfeits with questions like the ‘unauthorized’ distribution of authentic products, the shared goal of combating counterfeiting is undermined rather than enhanced.”

The traditional supply chain model in the promotional products business of supplier/distributor/end-user assumed that the investment suppliers made in proprietary product development, product safety, and responsible sourcing would be respected, and product differentiation translated to market advantage. You know that’s a “shared goal” that is frequently no longer the case in an industry where slim margins get slimmer by the day. I’m not suggesting that your client is using an English agent to shop Alibaba’s Taobao, regularly on the bad actor list, to compete with you. At least, not today. Beware of conversations that start with “I’m looking for something just as good as” the brand names you represent. Little good can come from a client wanting brand quality and safety but expecting to pay knockoff prices.

Jeff Jacobs has been an expert in building brands and brand stewardship for 40 years, working in commercial television, Hollywood film and home video, publishing, and promotional brand merchandise. He’s a staunch advocate of consumer product safety and has a deep passion and belief regarding the issues surrounding compliance and corporate social responsibility. He retired as executive director of Quality Certification Alliance, the only non-profit dedicated to helping suppliers provide safe and compliant promotional products. Before that, he was director of brand merchandise for Michelin. You can find him volunteering as a Guardian ad Litem, traveling the world with his lovely wife, or enjoying a cigar at his favorite local cigar shop. Connect with Jeff on Twitter, LinkedIn, or Instagram, or reach out to him at jacobs.jeffreyp@gmail.com.