As Amazon’s growth continues to explode, the retail giant is increasingly relying on third-party sellers to meet its demand. In its most recent quarter, the company revealed that third-party products accounted for 52 percent of all items sold. But the lack of control over these smaller merchants has given rise to a serious and worsening problem: counterfeits. Knockoffs continue to plague Amazon’s marketplace, drawing the ire of brands and consumers alike.
While Amazon has said publicly that it has a zero-tolerance policy on counterfeit products, the retailer addressed the problem directly for the first time in its annual report with a strong warning to investors. Under the “risk factors” section, the retailer inserted a new statement referencing the counterfeit situation.
“We also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others or otherwise violating our policies,” the filing said.
Amazon’s acknowledgement (albeit slow to come) of its counterfeit troubles is good news for the footwear industry, which has been very vocal about its frustrations that Amazon isn’t doing more to combat the problem. Legally, Amazon is not responsible for third-party counterfeits, but this new disclosure seems to signal the company’s desire to take the issue more seriously.
Among Amazon’s outspoken critics, Birkenstock CEO Oliver Reichert slammed the retailer in December 2017 for failing to crack down on the sale of knockoffs on its site.
“The truth is that Amazon makes money with these fakes,” Reichert told the German newspaper Spiegel News Weekly. “As far we’re concerned, Amazon is an accomplice. If you sell dodgy merchandise on your marketplace, you have to answer for that.” That same year, Birkenstock Americas CEO David Kahan cut all ties with Amazon, pulling the direct sale of Birkenstock products — as well as all sales from third parties — from the U.S. site.
Last year, the American Apparel & Footwear Association also took on Amazon, recommending to the Office of the United States Trade Representative that some Amazon sites should be added to its “Notorious Markets” list because of counterfeits. “We focus on marketplaces that put our members at a significant disadvantage by selling a substantial amount of counterfeit goods that may not meet safety regulations and contribute to damaging intellectual property,” said Rick Helfenbein, president and CEO. “Amazon has been a leader of and has made valuable contributions to the future of retail. We believe Amazon can and should be a leader in the fight against counterfeits.”
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