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Amazon inventory management causes authentic vendors to sell fakes

Posted by Ryan Williams on Tuesday, May 21, 2019

Amazon commingled inventory management 

Amazon's commingled inventory system has led to authentic brands being accused of selling counterfeits, and with it, their reputations ruined

Summary

  • The sale of counterfeit products are facilitated on Amazon by commingled inventory.
  • One seller of fakes can mean lots of authentic sellers take the blame. 
  • Amazon has clear steps to protect brands against these harms, including Amazon barcodes and Project Zero.

This may be a story familiar to many readers who sell on Amazon.

You have a legitimate product, either from your own brand or one you are permitted to sell. One day, you start to receive complaints from your customers that you are selling counterfeits. You don’t sell fakes, and you only sell through channels you believe to be secure, i.e. Amazon. Yet the claims of counterfeits continue, and not only are you forced to pay these customers back, but you’re left with a slew of highly critical, one-star reviews, crushing your seller account.

So, what exactly went wrong?

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Amazon’s commingled inventory

For many sellers, the answer to their seemingly cursed account lies in the commingled bins within Amazon’s inventory management system.

It works like this: Amazon has a single listing on its marketplace for each unique item. Different vendors may sell the same product, which all use this shared listing.

However, these products are not simply lumped together on the website. In fact, the items from each seller using Fulfilled By Amazon (FBA) are stored together physically in commingled containers.

So, a customer goes to Amazon, and places an order through one store. But when the actual item is taken to be shipped to the customer, it could be picked from inventory provided by anyone also selling the product.

So if nine vendors are each selling an authentic product, and one vendor is selling an counterfeit version of that product, then all ten of them will suffer the consequences if the counterfeiter is not stopped. Even Amazon has troubled determining where the product came from, once the customer sends it back.


Fulfilled by Amazon (FBA)

For those not in the know, here’s a quick explanation of FBA.

FBA is a program on Amazon offered to vendors of all types. The vendor sends the products over to Amazon’s warehouses, at which point Amazon takes over every other part of the process. That includes sales, storing the products, and shipping them out to the customer. In theory, it’s a good way for brands and other vendors to sell their products from a trustworthy source quickly and reliably. As we’re seeing today, however, the program isn’t as trustworthy as it could be, and can become a double-edge sword for vendors.

What can brands do?

Don’t worry, it’s not all doom and gloom. There are measures brands can take to prevent commingled inventory ruining their standing on Amazon.

Use Amazon barcodes

The best solution is to use Amazon barcodes instead of manufacturer’s barcodes.

Amazon uses the manufacturer barcode by default for tracking inventory through FBA. This is a big part of the commingling issue, as when a customer places an order, it chooses an item with the same manufacturer barcode from the closest Amazon warehouse.

But vendors can change this setting, which may offset the risk of products being commingled with fakes. By using an Amazon barcode, orders made through your channel will exclusively send items from the inventory you have provided.

In Fulfillment by Amazon settings, there is a section for “FBA Product Barcode Preference”. If Manufacturer barcode is selected, which it will be for the vast majority of vendors, choose Amazon Barcode instead. This won’t apply to current items, only for ones provided in the future. So there will be some time before the change is really implemented, unless you create new offers or change over the existing barcode for each item.

Vendors can print Amazon barcodes themselves and stick them to the products themselves. Alternatively, they can pay to have Amazon do this for each of their items.

Amazon Project Zero

Another solution is for brands to sign up for Amazon Project Zero. One of the three new features, along with “automated protections” and “self-service counterfeit removal”, is “product serialization”. With this, Amazon adds a unique code to each item sold, and checks each product for authenticity before it's sent to the customer.

However, there’s a waiting list to sign up to Project Zero, and only a small handful of brands have signed up so far. Furthermore, brands using product serialization don’t get it for free, as with the two other features. Brands will be required to pay from $0.01 to $0.05 per item, so it’ll likely come down to the type and the price of the products sold.

Reporting fakes on Amazon

Finally, brands seeing fake products being sold, or finding accounts that are selling fakes, can report trademark infringements to Amazon. With commingling in mind, however, brands should make sure they are reporting the correct seller, so as not to punish legitimate, legal sellers for the actions of counterfeiters.

How to report counterfeit items on Amazon

About the author

Ryan Williams

Post Written by Ryan Williams

Ryan is a content writer and researcher at Red Points, focusing on topics surrounding intellectual property law, global affairs, new technology and cultural developments. He graduated with a B.A., Hons in Criminology and Sociology from The University of York in 2014.