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Amazon.com (AMZN)’s Fake Merchandise War: Sellers in the Crosshairs

Amazon.com Inc (NASDAQ:AMZN)

Amazon.com Inc. is in an all out war against counterfeiters. Unfortunately for private sellers, Amazon will required them to take additional steps to assure authenticity of the merchandise they sell. Amazon is the global online market place where you can buy just about everything – the site is only a step away from selling cars online. However, the massive scale of the business means that the firm is unable to hold inventory for all the product it sells. It doesn’t make sense logistically and economically for the firm to hold that much inventory across so many product categories.

Hence, to meet the shopping needs of hundreds of millions of customers globally, the retail giant has a network of private sellers who list their products on its site. Of course, FBA (Fulfilled by Amazon) allows the firm to sell everything without holding inventory and it allows sellers to reach a bigger pool of potential buyers without worrying about the headaches of running an ecommerce platform.

Amazon.com Inc (NASDAQ:AMZN)

Amazon must kill fake products or lose buyer confidence

However, the fact that anyone could literally set up shop on the firm’s ecommerce platform to sell goods has given birth to a set of unscrupulous business people. In the last couple of months, Amazon.com, Inc has had to deal with complaints about sellers who sell fake products on its platform. In a bid to stop the sale of counterfeit products, the firm has insisted that sellers who want to sell high-profile brands such as Hasbro, Adidas, and Nike must satisfy some minimum requirements to confirm the originality of their products.

To start with, sellers must upload a copy of invoices from a manufacturer or its licensed distributor to show that you actually bought the real deal and not some fake knock offs from China. More so, the invoices must not be more than 90 days old and it must show the purchase of at least 30 items across five different product categories. More so, sellers are required to pay a non-refundable fee of $1,500 per brand to show their commitment to selling original products.

Amazon says, “We want customers to be able to shop with confidence on Amazon… For certain products and categories, Amazon requires additional performance checks, other qualification requirements, and fees.”

Many sellers have opined that Amazon’s war on fakes will do their business more harm than good. For one, many of them can’t afford the bulk orders that Amazon wants to see on the invoice. More so, many of them can’t afford to pay the $1500 non-refundable security deposit that the ecommerce giant requires. Jennifer Orr, who sells beauty products on the site says, “The rules aren’t clear and they change them as they go along… They created a monster.”

Amazon and the hydra-headed problem with fakes

Amazon has been trying hard to maintain its reputation because it is losing credibility (and fast) with buyers. In fact, the firm had serious issues with the product reviews on its site last year. When people want to buy stuff online, they are buying blindly because they are not able to examine the product physically before placing their orders. Hence, most online shoppers have grown to rely on the reviews left by previous buyers of the same product in order to have an inkling of what to expect if they purchase the product.

Interestingly, those unscrupulous businessmen were quick to find ways to pay people to drop reviews for their products. In most cases, those reviews are not objective and they often mislead potential buyers about what to expect from the product. Amazon was quick to wage a war on fake reviews and it even charged as many as 1,114 people involved in the paid review scam last year.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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