Countless articles have been devoted in recent years to the plethora of counterfeit goods available for purchase online and the burden that the widespread availability of such goods places on brand owners (and trademark holders). There has been extensive coverage of the lawsuits that luxury conglomerates have filed against Chinese e-commerce giant, Alibaba. LVMH (parent to Louis Vuitton, Givenchy, Marc Jacobs, and Celine, among others) and Kering (which owns Gucci, YSL, Balenciaga, etc.) have both filed suits alleging willful and knowing sale of counterfeit goods by Alibaba on its platforms and Amazon’s own growing counterfeit problem, paired with its users’ abuse of the comment/rating section.
What has not been discussed at length, however, is what appears to be something of a silver lining that is at play, a positive aspect – for brand owners, at least. It has become extremely difficult for consumers to ensure that they are purchasing authentic goods online unless they are shopping on a brand’s own site or the sites of its authorized retailers – even the latter of which can prove tricky from time to time.
The practice of consumers inadvertently purchasing fakes, whether they be Gucci bags or Tovolo-brand ice-cube trays, now extends beyond sites like eBay and Alibaba’s TMall – notorious homes for counterfeit goods often posing as the real thing – to sites such as Amazon. For years, Amazon was almost exclusively home to authentic goods, but this became less of a guarantee when Amazon decided to allow Chinese sellers to list their products directly on its platform, rather than requiring them to go through domestic importers – a move that has been viewed largely as a defensive strategy against Alibaba, their deep-pocketed Chinese rival.
As Cory Doctrow noted in a recent article for BoingBoing, “The older model was less efficient at getting Chinese goods to western customers, but it was also an important filter for counterfeits, because the domestic importers were easier to track down and punish for the worst offenses.”
The influx of counterfeit sellers on various online marketplace platforms is exacerbated by the failure of these marketplaces to eliminate rampant sales of counterfeit goods, either due to willful negligence tied to the desire to profit from these sales or failed efforts to reduce them. This proliferation of counterfeits – many of which look exactly like and are priced quite similarly to the real things – has thus contributed to increased consumer uncertainty. Note: Doctrow identifies counterfeits fitting into any of the following categories: “A near-identical (or identical) knock-off, sometimes even made in the same factory as the original goods, and sold out the back door; Factory rejects that failed inspection; or Low-quality fakes that look like originals, but are made from inferior or defective materials or suffer from defective/shoddy manufacturing.” In short: the waters are murky and consumers are often rightfully misled.
But as indicated above, there is an upside to the widespread selling of fakes and the decline in consumer confidence. It comes in the form of consumer distrust. Because consumers cannot be sure that they are ordering (and thus, will receive) authentic goods from these sites, they are forced to go back to the source, thereby cutting out the middlemen – the Amazons, the Alibabas, the eBays – even if these sources are offering more competitive prices.
So, while there is certainly a Gresham's law-type argument at play here – that the bad (the counterfeits) will drive out the good (the authentic goods that are unable to compete with the low prices of the former) – consumers, at least those searching for authentic goods, may be driven out by the bad, as well. That is good news for brand owners, especially given the vast migration of consumers to online platforms, such as Amazon. As for whether this will make the original point of sale king again, that seems unlikely. But it certainly does present brands with an opportunity to woo back consumers, who are willing to pay a slightly higher price for the confidence that they are buying the “real thing.” It also presents Amazon and co. with a task: clean up your marketplaces or else you will be left with an army of low cost buyers seeking fakes.