How ecommerce platforms facilitate online counterfeiting

Ecommerce continues to grow at record pace, with many of today’s most well-recognized brands having first established themselves online. However, the ease of selling anything online has allowed counterfeiters to infiltrate marketplaces and social media alike.

Consumers are flocking to online stores, with huge sale events becoming a regular occurrence. Over 175 million items were sold by Amazon during Prime Day alone in 2019[1], and ecommerce ad spending is helping to fuel the process having reportedly increased by 40% in 2019 Q2[2]. However, with the tectonic shift towards ecommerce, the global scale of counterfeiting has only increased. Corsearch alone collects information on over 9 million infringing items every week.

In part one of this ecommerce series, we examine the scale of this online threat facing brands and how marketplaces and social media platforms are helping facilitate this illicit activity. In part-two, we explore how platforms and governments are fighting back, before discussing why, ultimately, it is critical that brands take responsibility for the issue.

Ecommerce – With great reward comes great risk

Amazon, now the world’s most valuable brand according to Kantar, was only founded 25 years ago but has leapfrogged established giants such as Apple and Microsoft. Alibaba, an even younger ecommerce business based in China, has rocketed up brand value rankings in recent years and now sits at the 7^th most valuable in the world, above the likes of McDonald’s, IBM and Coca Cola.

However, Amazon and Alibaba’s meteoric rise are not isolated cases, and according to Business Insider Intelligence, ecommerce spending is growing nearly five times faster than physical spending, with much of this taking place on mobile[3].

Indeed, industries such as fashion are embracing ecommerce, with fast-fashion websites such as Boohoo acting as trailblazers. The 2019 ‘State of Fashion’ report found that fashion ecommerce retailers generate four times the revenue of traditional retailers[4]. Discounted prices and the ease of returning goods are both key drivers to this success.

Ecommerce poses a number of challenges to already established brands – the intensity of online competition and low barriers to entry for agile start-ups, the ruthless world of SEO and paid search, and the constant scramble to improve user experience and maximize shopping cart conversions.

However, these issues pale in comparison to the scale of online counterfeiting facing brands. At any one time, thousands of listings containing counterfeits of a particular brand can be found across countless marketplaces, websites and social media platforms. Mor­e often than not, these listings, accounts and websites are all controlled by the same parties and are part of a wider illicit network as highlighted in an example below.

Most concerning is the degree of exposure, with millions of consumers using marketplaces on an everyday basis, many of which are subscribed to rewards schemes – Amazon Prime now has over 95 million members, for example[5].

Marketplaces – Online counterfeiters hide in plain sight

A recent survey by WBR Insights notes that 81% of retailers see marketplaces as an opportunity rather than a threat[6]. In the State of Fashion report, 54% of respondents indicated that increasing omnichannel integration, alongside investing in ecommerce and digital marketing, is their number one priority.

Counterfeiters often hide in plain sight on marketplaces, fooling consumers into purchasing low quality and dangerous fakes online. Although not by design, the marketplace model favors these bad actors.

Frictionless account creation and listing of products, at a low cost to the seller, means it is easy for counterfeiters to climb places on product search results. The ability to sponsor listings also allows counterfeiters to push their products to the top of the first page of results and above genuine products. Finally, bad actors are free to view listings for genuine products and duplicate this information on their own product pages.

A 2019 study found that up to 65% of consumers chose ecommerce apps for discounts and special offers[7]. Counterfeiters routinely use low prices to draw in unwitting consumers who believe are simply getting a bargain on a genuine product. The legitimacy offered by a marketplace will often lull consumers into a false sense of security when purchasing discounted goods.

Social media – Ecommerce functionality suited for clandestine counterfeiters

Recognizing the behavioral shift in how consumers engage with other internet users and their favorite brands, counterfeiters have expanded to platforms where consumers spend most of their time: social media.

Platforms such as Facebook and WeChat (a messaging app popular in China) have inbuilt ecommerce functionality, further blurring the traditional shopping experience. This allows sellers to message potential buyers directly rather than overtly broadcasting their counterfeit goods. Entire closed groups dedicated to selling counterfeits can be found on social media, with brands’ legal teams often struggling to gain access to take them down.

Sites without transactional functionality are also attractive to bad actors; external links can be added to their direct messages and posts, leading potential buyers to low-profile websites, marketplace listings or even directly to PayPal accounts.

Recent efforts by marketplaces to curtail infringement have had mixed results but have played a part in driving counterfeiters to use a combination of social media platforms and marketplaces to continue their operations. Amazon’s Project Zero (‘self-service’ counterfeit removal) and VeRO, eBay’s Verified Rights Owner Program (allows brand owners can easily report sellers and listings) are making it more difficult for counterfeiters to ‘hide in plain sight’ on marketplaces.

Why brands should take responsibility

At Corsearch, we work with our clients to create effective Online Brand Protection strategies, leveraging our expertise in intellectual property, criminal intelligence and technical design. We allow our customers to meaningfully reduce online infringement and increase their online sales. If you believe your brand is infringed online and are interested to see the scale of the threats on marketplaces, social media and websites, you can request a free Brand Health Check below.

Our obligation-free Brand Health Check provides a high-level overview of the online threats to your brand, highlighting how you can eliminate these threats and capture the value you are missing.

References:

[1] Amazon says this year’s Prime Day surpassed Black Friday and Cyber Monday combined (CNBC, 2019): https://www.cnbc.com/2019/07/17/amazon-announces-prime-day-2019-results.html

[2] e-commerce ad spending increases by 40%, with Amazon in the lead (The Drum, 2019): https://www.thedrum.com/news/2019/07/30/e-commerce-ad-spending-increases-40-with-amazon-the-lead

[3] Mobile Shopping Apps Are Getting Wildly Popular — And Retailers Need to Take Notice (Footwear News, 2019): https://footwearnews.com/2019/business/retail/mobile-shopping-apps-internet-retail-1202805581/

[4] The State of Fashion 2019: A year of awakening (McKinsey & Company, 2018): https://www.mckinsey.com/industries/retail/our-insights/the-state-of-fashion-2019-a-year-of-awakening

[5] Amazon Statistics You Should Know: Opportunities to Make the Most of America’s Top Online Marketplace (Big Commerce, 2019): https://www.bigcommerce.co.uk/blog/amazon-statistics/

[6] Personalisation, Automation and Internationalisation: A 2019 Benchmarking Report (eTail, 2019): https://etaileurope.wbresearch.com/downloads/personalisation-automation-and-internationalisation

[7] The No. 1 Reason People Use Mobile Shopping Apps Is Actually Very Old-Fashioned (Footwear News, 2019): https://footwearnews.com/2019/business/retail/mobile-shopping-app-ecommerce-business-tips-1202786356/