Amazon spends $400 million to counter fake goods but doesn’t work

Amazon’s website is now awash with fakes, including high-profile Hermes bracelets, which have drawn repeated complaints from consumers. The home appliance giant spent $400m last year to crack down on fraud and counterfeiting, but the task of expanding the size of sellers is still a priority over counterfeiting, former executives said. Amazon executives have publicly complained about the proliferation of fakes, saying they have spent hundreds of millions of dollars and hired thousands of employees to oversee the vast market for third-party sellers. But just as fake Hermes bracelets appear on the site, Amazon’s system has failed to stem the flow of counterfeit goods.

Sellers soar, Amazon spends $400million to fake but doesn't work

According to former Amazon executives and outside consultants, fakes continue to appear on the site because of Amazon’s decision to prioritize product sizes and lower product prices, rather than adoptaggressive technologies and policies that could curb the problem.

Amazon relies on brand companies to identify counterfeit goods, but even if it gets fakes, it doesn’t necessarily take action. Many counterfeit products go into Amazon’s warehouses before they are shipped to consumers. But Amazon rarely checks products.

Amazon takes about 15 percent of its sales from third-party sellers, regardless of whether the product is fake or not. But it’s not just luxury brands that are losing money, and according to recent testimony from the U.S. Commerce Department, there are plenty of fakes in categories such as safety products, baby food and cosmetics.

A former Amazon executive says consumer complaints fell when the company stepped up its crackdown on counterfeits two years ago. But Amazon also expects to expand its product, the person said. So in early 2018, Amazon began aggressively adding merchants, whether they were licensed or not.

“Because they allow too many things to get into the site, they can’t cope with things that need to be followed up manually. The former executive said. “Amazon told me they just didn’t want to find it. They want more product options. “

Cecilia Fan, a spokeswoman for Amazon, said the company’s practice of eliminating counterfeits was “far beyond legal obligations.” In addition to the employees investigating fraud allegations, she said, the company also develops algorithms that screen more than 5 billion changes to its global catalog every day. For every case reported, she said, the company actively blocks or removes more than 100 items.

That means more than 99.9 percent of the cases where users log on to pages without relevant fake information, Fan said. But had 17.6 billion page views in October alone, according to SimilarWeb, a web analytics firm, and according to Amazon’s calculations, there were 17.6 million suspicious items on the same month.

Brian Huuseman, Amazon’s vice president of public policy, said in a filing with the Commerce Department in July that the company spent $400 million on personnel last year to combat fraud and abuse, employing more than 5,000 people.

Counterfeit products are not just Amazon’s problems. Counterfeit goods account for 3.3 per cent of global trade, it is estimated.

But the problem is so serious for Amazon, which estimates that by adding 2.5 million third-party sellers, the company has quickly increased its options to more than 500 million. Competition tends to drive down the price of the entire site, attracting large numbers of shoppers.

Allowing so many sellers to enter the market without restrictions also creates a market for counterfeits, making it easy for sellers to sign up for an account.

Juozas Kaziukenas, chief executive of Marketplace Pulse, said allowing all too many sellers to open Pandora’s Box, making it impossible for Amazon to regulate every corner of the site. “Fundamentally, problems can never be solved, because the root cause of these problems is scale. “

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