WHAT?

Counterfeit products are flooding online shops. It was a lot easier to spot fake products at brick-and-mortar retailers. The dominance of e-commerce has made it increasingly difficult. E-commerce platforms enable third-party traders to sell products. Think of the millions of sellers on e-commerce giants Amazon and Alibaba. While this has positively impacted businesses and entrepreneurs of all size and kind, and provided choice and variety for consumers, it has also dramatically increased the incidence of counterfeits products in the marketplace.   

SO WHAT?

The big business of counterfeit products. According to the World Customs Organization consumers purchase more than $500 billion worth of counterfeit products each year. That’s how big the real business of fake goods is. It’s mostly happening online. Medium reports that 70% of the counterfeit business is conducted via e-commerce stores such as Amazon, AliExpress and eBay. The online commerce platforms have become hot spots for frauds dealing with fake products, since it has become very easy for them to offer their list of products via the online distributors.  This is a concern not just to  consumers who’re victims to fraud, but also to original brands and the e-commerce platforms as they bear the costs of tarnished reputation and negative reviews. 

How it’s done. Forbes explains three ways in which it’s done – fake products that offer ridiculously low prices from seemingly dubious sellers,  white labeling where the name of the original product is replaced with the that of the fake product, and  lastly, image theft where counterfeiters steal images from original brands and use them to market their fake product. 

The damage can be severe. The original brand suffers a devastating hit to its reputation when consumers are frustrated with what they believe is a genuine product from that brand. Big brands and businesses usually recover from this better than smaller brands and businesses. There are numerous instances of smaller businesses bearing fatal losses cause of counterfeiters selling fake copies with low prices. For many consumers who extensively compare prices when shopping online, the possibility that they may purchase fake products, is usually not a salient thought. The satisfaction of having scored a deal or a good bargain takes precedence.

There’s real danger involved. Fake pharmaceuticals, food or machine parts can pose extreme risk to consumers and their health. Mondaq reports the case of counterfeit perfume which contained human urine and cyanide.

NOW WHAT?

Platform woes. Amazon and Alibaba are increasingly facing litigations  because companies argue that the e-commerce giants are making insufficient efforts to tackle this problem. The Atlantic notes that even products which are listed as “shipped from and sold by Amazon” could be counterfeits.

The inside job. It turns out that employee corruption at e-commerce companies can also make counterfeit products a persistent nuisance. Stories of Amazon employees accepting bribes from merchants in China, and leaking confidential information in return, have done the rounds in mainstream media. This leaked data and corruption in the ranks could include sales metrics, proprietary software to delete negative reviews, and even restoring accounts of sellers that have been banned due to violations.  The Wall Street Journal reports that the going rate for a bribe for deleting a negative review is about $300. Merchants selling counterfeit products have also been known to contact consumers who submitted negative reviews and offer them discounts and freebies to change their review to a positive one.

How can consumers spot fake products online?  It is, without a doubt, difficult for consumers to spot fake products, image theft and whitewashing is used by counterfeiters. Business Insider provides tips on how to avoid buying fake products on Amazon. In a nutshell, it is always best to purchase directly from the manufacturer when in doubt. For purchases that you really want to be sure and avoid any kind of risk? Well, head to a brick-and-mortar store.

Are AI and Blockchain the answers to this menace? There are new technologies which can detect marginal variations between a broad range of images and product descriptions to identify a counterfeit product. Forbes tested this technology at DataWeave with huge success. This technology has the potential to make a dent in the counterfeit business by aiding e-commerce platforms to better identify fake products and weed them out quickly. 

What exacerbates the problem of counterfeit products online is that they typically have a large number of positive reviews which appear realistic at first glance. Forbes profiles a technology which creates a secure online-ID that is able to track whether the person leaving a five-star review on Amazon actually bought the product in the first place (a “Verified Purchase” of sorts). By using such an algorithm Amazon could potentially reduce the number of fake reviews on their platform. 

A problem that exploded because of technology (the rise of e-commerce) may indeed have to find its solution in technology.

Sources:  The Wall Street Journal a, The Wall Street Journal b, The Atlantic, Business Insider, Forbes a, Forbes b, Mondaq, Medium