Dark Side of Ecommerce: The Rise of Counterfeiting

The Covid-19 pandemic has resulted in a shift of consumer buying pattern from traditional retail channels to more of digital dependency and increased use of ecommerce platforms. For many merchants, having the ability to trade online has been the difference between sinking and swimming, particularly for those who have seen widespread store closures. This provides an opportunity for Ecommerce platforms to offer innovative, value-based and integrated products to meet customer needs.

Amazon.com has maintained a buyer-friendly reputation, and for that reason has become the biggest online store globally with numerous fulfillment centers and a widespread supply chain network. Even after having a number of checks and balances for monitoring operations, the top two complaints regarding Ecommerce platforms are usually about Non-delivery and Counterfeit goods sold via the online platform. In addition, several brands are also complaining against e-commerce companies for allegedly selling fake products under original brand names. For instance, in 2019, Amway, Modicare, and Oriflame complained about the unauthorized sale of their products on some of the leading e-commerce platforms such as Amazon, Flipkart, Healthkart and Snapdeal. The value of the counterfeit market through Ecommerce channels is expected to grow by USD 105.86 billion during 2020-2024 globally as per Business Wire.

According to trade body FICCI’s ‘Committee Against Smuggling and Counterfeiting Activities Destroying the Economy’ 2019 report, counterfeiting costs the Indian economy a loss of INR 1.17 lakh crore in 2017-18. The report titled ‘Invisible Enemy: Impact of Smuggling on Indian Economy and Employment’ surveyed five industries – textiles, readymade garments, consumer durables (electronics), capital goods (machinery and parts) and tobacco products – and found that capital goods suffered the highest loss at INR 52,511 crore followed by consumer durables at INR 21,452 crore during the year.

Does it affect you as a consumer too? Are you sure the recent purchase made by your family was for an authentic product or just a very good look alike?

It hurts when its personal and is a cause for loss to you directly which is precisely why tackling these problems have become the priority.

As technology becomes more sophisticated every year, many ecommerce sites have launched various campaigns to curb the challenge of counterfeiting.

Amazon has launched its Project Zero program in India to tackle the menace of fake products listed on its site. Initially rolled out in the US, Europe and Japan, the ecommerce behemoth has launched this initiative in the country at a time when the government has reinforced the Consumer Protection Act 2019 to reflect the contemporary retail business where ecommerce plays a significant role. The Act imposes a penalty on the manufacturing, selling, storing, distributing or importing of any fake goods.

The first is ‘Automated protections’ which is powered by Amazon’s machine learning algorithm. It continuously scans over 5 billion daily listings on its online sites and proactively removes suspected counterfeits. Brands to apply a unique code on every unit they manufacture for an enrolled product, allowing Amazon to scan and confirm the authenticity of every one of those products purchased in Amazon’s stores. With the ‘Product serialization’ option, the site can detect and stop counterfeiting of the SKU before it reaches a customer. Brands wanting to enroll in the Project Zero should be part of the Amazon Brand Registry with a government-registered trademark. They also need to submit reports of potential infringements with an acceptance rate of at least 90% in the last six months. Does this system eliminate the problem completely?

• This system has been able to reduce the problem by minimum as many of the counterfeit products are not caught in the visual counterfeit identification as many times even brands themselves fail to detect the differences due to the identical packaging.
• This also does not allow consumers to build faith in the purchase since the serialized ID’s work only till the point of sale and consumers cannot verify the authenticity of a product.
• The brands who don’t qualify for project zero have no assistance in the supply chain network to tackle any such problems.
• Project Zero is currently the top ecommerce solution against counterfeit which has some kind of a positive output against the other ecommerce portals. Any brand listed on multiple portals is not going to be able to benefit from this system irrespective of being a part of Amazons brand registry.

Hence, the best way to currently tackle counterfeiting problems is to implement smart packaging solutions. Smart or Intelligent Packaging by each brand will help with anti-counterfeit and anti-infiltration problems. Smart Packaging can also help consumers confirm the authenticity of the product received since they can now simply scan the product label and verify. They can also measure the quality of the product present inside and report its condition. Also, smart packaging uses RFID chips/serialized ID’s to track packages throughout the distribution process, which further limits the possibility of counterfeiting. This trend is expected to positively impact the growth of the global anti-counterfeit packaging market. In summary, Smart packaging can solve:

• Counterfeit identification and consumer crowd sourcing of data for legal actions.
• Identify hotspots of counterfeit activity online and offline and can often reach to the source easily without the need for tips and whistle blowers.
• Return management becomes easy with smart packaging as the data of the product journey is recorded against every individual SKU.

Smart packaging implementation does not require complicated changes to the existing setup and can generate results within few months of implementation. If you are keen to understand more about smart packaging or wish to implement it for your brand, connect with Sepio Solution by mailing at [email protected]