Personal Finance

This Is How Amazon Fights Counterfeit Goods

Six different Nike shoes

Back before the internet, counterfeit goods were found mostly on city street corners, at flea markets, or in other places where sketchy providers could set up shop. In general, you had a sense you might be buying a fake because it's hard to get a genuine Rolex watch for $20 and the company almost always spells its name right on its products. In the digital era, however, it has become easier for counterfeiters to operate and trick people.

You may go to a credible website -- perhaps Amazon (NASDAQ: AMZN) or eBay (NASDAQ: EBAY) -- and buy something that looks legitimate for a reasonable price only to be sold a fake. You might not even know you've bought a counterfeit product.

Of course, digital sellers that have third-party markets that allow outside sellers on their platform remain particularly vulnerable to inadvertently enabling the sale of counterfeit merchandise. To fight that, Amazon has what it calls its Brand Registry and a Bloomberg report citing an unnamed "person familiar with the situation" says Nike (NYSE: NKE) will become the latest brand to join the platform, selling its products directly on Amazon.com. The deal, which has not been formally announced, would reportedly have the sneaker and fitness apparel company selling its products directly through the online retail leader, joining companies including Victoria's Secret, Toms, and Procter & Gamble .

Six different Nike shoes

Rumor has it Nike will be joining an Amazon program designed to stop counterfeits. Image source: Nike.

What is Amazon's Brand Registry?

Amazon does not want counterfeit merchandise sold on its platform largely because it creates a bad customer service experience. If someone thought they were getting a deal on a pair of vintage Jordans, but later noticed they were actually sold some less-than-valuable knockoffs, they could be very upset.

That could lead to Amazon investigating and issuing a refund. Even if the third-party seller was itself duped, the experience is still bad for the shopper.

Amazon polices its site, but it does more for manufacturers who sign up for the Brand Registry, which helps protect trademarks on the digital platform. The online retailer explains it as follows on its website :

Your enrollment in the Amazon Brand Registry provides access to powerful tools including proprietary text and image search, predictive automation based on your reports of suspected intellectual property rights violations, and increased authority over product listings with your brand name.

Enrolling in the service requires that a company have a registered trademark that matches the brand name printed on its products and its packaging (where applicable, since some products may not have anything printed on them). That's a pretty low bar for enrollment in the program through which Amazon uses both secret shoppers and company representatives to flag potentially counterfeit merchandise.

Eventually, Amazon hopes to use machine learning to stop counterfeits from ever being posted, according to a Consumerist article.

Why is this important?

Once Amazon, eBay, and other platforms decided to allow third-party sellers on their sites, they became exposed to a number of risks. That includes people selling unregulated supplements, stolen items, illegal items, counterfeits, and more.

To battle those, the retailers have policed their partners using staff or responding to consumer complaints, but problems still slip through. The Brand Registry isn't a full solution, but it adds another level of enforcement with the company who makes the goods becoming more involved.

That could be very important for Nike, which sells a product that has become highly collectible. The company makes money in some cases from demand created by scarcity. Counterfeit shoes can undermine that while also creating doubt with shoppers when it comes to buying in the category.

Joining the Brand Registry would give Nike more ability to police its merchandise being sold through third-party sellers, while buying from Nike selling directly through Amazon.com ensures a genuine product. That sounds like a win-win.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon, eBay, and Nike. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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