V2 of the eCommerce series: How brands are executing innovative strategies to resolve counterfeit issues in eCommerce
In part 1 of the eCommerce series, I highlighted how eCommerce is creating a new user experience, and how stifling competition has led to brick-and-mortar businesses finding innovative ways to rethink some business strategies. We also examined how emerging technologies like blockchain can play a vital role in uniquely solving issues faced by retailers.
In part two, we are going to explore how brands like Amazon are coming out with strategies to overcome counterfeiting, with Nike switching their business model to curb the act.
As eCommerce grows at an exponential pace, the ease of selling online has allowed counterfeiters to infiltrate the market.
Amazon, now the world’s most valuable brand, founded 25 years ago, has leapfrogged giants such as Apple and Microsoft (refer to the chart below). According to Business Insider Intelligence, eCommerce spending is growing nearly five times faster than physical spending, with a majority taking place on mobile.
Coupang of South Korea is currently in place to be the world’s third-largest eCommerce driver in the market, with $119 billion in annual sales by 2021.
The intensity of online competition, the ever-changing landscape of SEO, and the constant struggle to improve user experience and maximize shopping cart conversions are some daily battles one has to overcome. Nevertheless, these issues are nothing in comparison to the degree of counterfeiting that brands face.
Situations like this cause chaos, as thousands of listings containing knockoffs of a particular brand can be found across 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.
Amazon has recently been in “hot soup” for what appeared to be a case of soliciting counterfeit products on its platform. Example: In 2017, Home and kitchen brand/retailer Williams-Sonoma sued Amazon.com, claiming the eCommerce player’s private label furniture division copied a Williams-Sonoma design for a chair. Williams-Sonoma sought damages up to the maximum reward of $2 million per piece.
Although met with challenges, Amazon’s efforts now to remain the largest eCommerce brand has been met by some positive signs, with the company announcing their approach in tackling counterfeiting through Project Zero launched in 2019. Amazon hopes to boost its efforts to eliminate counterfeits by putting the power directly in the hands of the brands that it invites to the program.
Through Project Zero, Amazon will combine self-service counterfeit removal for brands with automated scans of logos and trademarks on its website and unique codes (product serialization) on physical items that will help confirm authenticity. Brands who join the program will be able to delete a listing that they deem fake without having to report it to Amazon first, ensuring its quick removal. This information will be used to strengthen its own automated processes, hence reducing counterfeiting.
Although there were measures taken by Amazon to tackle counterfeiting, the depth of the issue may not have been realized until the announcement of Nike pulling out its product from the eCommerce giant, citing jeopardy on their image as the biggest concern.
In a recent interview with Bloomberg, a former employee of Amazon, James Thompson, mentioned: “For years, the only Nike products sold on Amazon were gray-market items — and counterfeits — sold by others. Nike had little control over how they were listed, what information about the products was available, and whether the products were even real. Nike reportedly struggled to control the Amazon marketplace. Third-party sellers whose listings were removed simply popped up under a different name. Plus, the official Nike products had fewer reviews, and therefore received worse positioning on the site.”
Shortly after the Amazon incident, Nike unveiled plans to overhaul its retail strategy, focusing more on its direct-to-consumer (D2C) avenues, concentrating mainly on the Nike app and website (refer to the screenshot below). The concept of D2C is an alternative way for brands to create strong relationships with customers. It also gives brand owners more depths, and more information can be captured from customers. Data is visualized through purchases that can be utilized to provide better services to consumers. This strategy also enables brands to create a new “community-like” fans that would be able to contribute, leading to longer-lasting relationships and business in the long run.
Although eCommerce is snowballing, the counterfeit issue still remains a huge problem. Brands such as Nike have shifted away from Amazon due to this, and are moving to explore their own sales channel (D2C). Many attempts are taken by a brand to protect their image while adding value to their own products to differentiate themselves from other brands.
Latest, brands are trying to provide a better customer experience to the consumers, and blockchain plays a vital role in supporting this whole ecosystem, technology-wise.
Nike recently participated in a pilot testing Nike Kids Air Force 1 shoes. The test was done to capture information on its distribution on the blockchain. All the Nike shoes come with an RFID tag. However, different retailers’ tags store data differently, and there’s little to no data interoperability.
As retailers operate their systems through different languages across the globe, there was little that could be done.
The pilot, with the help of researchers from Auburn University, created a common language that operated from a “translator tool.” The system was configured using EPCIS standards developed by GS1 that allowed a coherent stream of data.
In Chaintope, we work with our clients to solve issues like counterfeiting through blockchain-enabled track-and-trace solutions. If you realize that your brand has been infringed and you are interested to see how we can overcome this for you, feel free to visit our website and drop us your details, and we would reach out to you in due time.
References:
1)https://apnews.com/Business%20Wire/ecb617c9a8434993a07b9127831c563c
2) https://www.incoproip.com/how-ecommerce-platforms-facilitate-online-counterfeiting/
3) https://www.fool.com/investing/2019/10/12/amazon-has-a-notorious-counterfeit-problem.aspx
4) https://brandservices.amazon.com/projectzero
5) https://www.cnbc.com/2019/02/28/amazon-announces-project-zero-to-reduce-counterfeit-products.html
6) https://www.bloomberg.com/news/articles/2019-11-13/nike-will-end-its-pilot-project-selling-products-on-amazon-site
7) https://www.coindesk.com/nike-macys-run-blockchain-trial-with-auburns-rfid-lab
8) https://www.cbinsights.com/research/direct-to-consumer-retail-strategies/
