When Amazon starts fighting counterfeiting, you know it’s time to pay attention.

While counterfeiting has long been a controversial – and often undiscussed (at least in public) – subject among brands, Amazon’s recent efforts to identify and stop counterfeiting on its platform are bringing it to the forefront.

Especially in the midst of COVID-19, Amazon has exploded in popularity as a go-to, one-stop-shop for many consumers looking to get the products they need quickly and safely. The rising popularity of Amazon has also made it even more of a prime target for counterfeiters, and the mega-retailer is facing notable scrutiny and multiple lawsuits over the struggle to stop them. For example:

-Nike recently made the decision to stop selling direct products through Amazon, citing “unlicensed and imposter sellers as a contributing factor,” according to The Verge.

-3M instigated multiple lawsuits against sellers for selling counterfeit 3M masks on Amazon.

-Five foreign Amazon markets were put on the White House’s annual “notorious markets” list in 2020.

Even prior to the explosion of e-commerce during the pandemic, Amazon was already attempting to contain rampant counterfeiting on the platform. The Verge reports that, in 2019, Amazon spent $500 million to fight fraud, abuse and counterfeit products; shut down 2.5 million suspected bad actor accounts; and removed 6 billion suspected bad listings.

And it’s not limited to Amazon: Counterfeits are a global problem, and e-commerce retailers are especially at risk. Inc. states that global sales of counterfeits are growing by 15% each year and are projected to reach $1.32 trillion in 2020; e-commerce makes up more than a quarter of this figure. E-commerce sites like eBay, Newegg and Walmart have also been accused of selling counterfeits, although they claim they have strict procedures to fight counterfeiting, according to The Atlantic.

Product fakes and knockoffs hurt brand reputation, top-line revenue and profitability for companies, ultimately leading to lasting and sometimes irreparable damage. Counterfeiting isn’t just a small-time business, either, with organized crime beginning to play a bigger role. As counterfeiters become more sophisticated, brands also need to become more sophisticated in their efforts to stop it.

Conquering Counterfeiting with Innovation

E-commerce platforms like Amazon are taking some steps in recognizing the problems and establishing anti-counterfeiting programs, but these efforts may not go far enough for brands. All too often, despite their efforts, most consumers are left to fend themselves as marketplaces declare “caveat emptor” – buyer beware.  Authentication solutions should not only be able to prove the legitimacy of the product to the consumer, but also provide opportunities for the consumer to engage directly with the brand in new ways.

To create an effective authentication strategy, manufacturers need:

Holistic solutions that can provide visibility across all their products.

Amazon’s smart labels offer a way for customers to verify that products sold on its platform are real – but what about the products manufacturers sell on other sites or in brick-and-mortar stores? Protecting just one part of the supply chain isn’t enough. Investing in a configurable solution allows your company to provide a safety net to all consumers, whether they buy your product on an e-commerce platform like Amazon or at a local retailer.

For manufacturers selling through multiple channels, using an overarching smart label system across all products provides a single, traceable solution for verification – and a common way to interact with customers regardless of the channel they choose. By assigning a unique smart label to each product in their inventory – not just those sold on a single retail site – brands are more likely to spot counterfeiters who steal and attempt to copy the same smart label onto a batch of faked goods.

Authentication solutions that tackle counterfeiting while also growing customer engagement and loyalty.

While some smart labels, like Amazon’s, only exist to prove the legitimacy of a product, brands can leverage custom smart labels to provide a wide array of information, resources and lines of communication for customers. These codes can link customers to important product information like nutritional facts and recipes, how-to guides, allergen information, drug information, support and FAQs, return processing, warranties, and product registrations. When a customer engages with the label, they’re not just getting the assurance that the product is legitimate – they’re building a stronger relationship with the brand with every scan of their mobile device.

One Tool Manufacturer’s Approach to Anti-counterfeiting

For one LocatorX customer, a maker of home remodeling tools, the urgency of the counterfeiting issue became all too real in the wake of the pandemic. With more people spending their time at home taking on remodeling projects, the company saw its sales spike in 2020 through home improvement retailers like Lowe’s, Home Depot and Ace Hardware. To keep up with demand, the company expanded sales to online retailers this year – including Amazon – and because of their brand’s popularity, immediately began to see knockoffs, copies and counterfeits of its products in the marketplace.

These fakes became a problem—they would be just close enough that the customer wouldn’t know it wasn’t the exact product until it was actually in their hand. Not only was the company’s brand reputation problem at risk, but the counterfeits opened up a safety issue–what if the fake tool literally doesn’t work?

The company is now fighting the fakes successfully with anti-counterfeiting smart labels, which will be affixed to all of its products moving forward. Customers can simply scan these labels with their smartphones to verify the product’s legitimacy on the spot. Beyond protecting customers against counterfeits, the smart labels also provide access to how-to videos to help customers make the most of their new products, enabling the company to build customer trust and earn loyalty over the long term.

Tracking Legitimacy and Success

It’s clear that counterfeiting is a global e-commerce problem, and one that will only continue to grow in the wake of the pandemic. Companies like Amazon are taking steps to address this growing threat, but a custom authentication solution offers distinct advantages to manufacturers.

The capabilities of today’s smart labels enable brands to avoid operational headaches and even potential lawsuits by keeping counterfeiters at bay, while also offering opportunities to engage with customers in ways that might have not been possible otherwise. It costs mere cents to place unique, traceable smart labels on each product – an investment that will pay off in dividends down the road.

As more consumers turn to online shopping for safety and convenience, brands need to be vigilant about ensuring product legitimacy, no matter where they sell their products. Organizations that make moves now to protect products across both brick and mortar and e-commerce can stay ahead of would-be criminals and unlock new ways to build a loyal customer base.

__________________________________________________________________

Steve Maul is the Chief Revenue Officer for LocatorX. LocatorX technology enables brands and consumers to access an item’s current location and audit trail from its origin, protecting against theft, counterfeiting, and product diversion while increasing consumer engagement with manufacturers.