After the dramatic exit of Birkenstock from Amazon last month, the online retailer is making dramatic changes to its processes in an effort to protect big brand names. Brands have become increasingly concerned by the prevalence of Chinese counterfeits and unauthorised sellers on the site.
In an effort to reduce this, Amazon have created a process called "brand gating". The purpose of brand gating is to make it much more difficult for counterfeit sellers to succeed on their platform. An Amazon spokesperson, Erik Fairleigh stated:
"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."
How does this brand gating work
This process means that online sellers who want to sell certain brands will be asked to provide invoices from manufacturers or distributors that are valid within 90 days and have to detail the purchase of at least 30 items or more. Brand gating also requires sellers who want to sell big brands such as Adidas or Nike to pay a one off non-refundable fee of $1500 per brand, although some reports state that this fee depends on the brand. An official list of prices has yet to be released but some sellers have stated that to sell Hasbro, Lego or Pokémon products it will cost $1000, per brand. It should be noted that this fee will only apply to new sellers, and already-established sellers can continue to sell without any fee.
Amazon generated 60% of all U.S. online sales growth in 2015 and made more than 23 billion in ecommerce sales in the same year, they claim key to their success has been focusing on the user and not the seller. Huge brands such as Adidas, LG and Guess have been voicing their concern over the rising number of fake sellers for years, and since the company began wooing Chinese sellers onto the platform, even partnering with the Maritime Commission to ease distribution, the problem has been spiralling out of control. It's only now that some brands have threatened to withdraw their business that the company has been forced to take drastic steps.
Requirements to sell these branded products
It has been argued that this will disproportionately affect smaller sellers and it has been a shock to the Amazon eco-system. Many small business owners have stated that this will cut deeply into their profits and jeopardise their future on Amazon. CNBC reported that an anonymous seller released the requirements to sell Samsung products. The required documents include: evidence of 5 different products bought within 90 days, a minimum of 30 units purchased, order forms from a recognised manufacturer and a letter of authorisation from Samsung. The seller stated that for businesses that generate less than $1 million dollars a year this could put them out of operation.
Amazon believes that this will strengthen trust within the big brands and consumers. However many believe that mid-level sellers will bear the brunt of the cost and that counterfeiters will likely find a work around quickly - only time will tell for now. With Aliexpress and Alibaba encroaching on the Western Market, this may be Amazon trying to position itself as a comparably trusted online retailer as Alibaba is well known for selling counterfeits. Jack Ma, the founder of Alibaba, caused controversy earlier this year when he stated that sometimes fakes are better than the real products, in an apparent support of counterfeiting. The company has since rowed back on this and have put in place stricter rules to discourage counterfeiting.
Amazon now have the most robust anti-counterfeit process of the two although some suspect this will reduce the customer experience and that Amazon will become a place for only large-scale sellers. A seller told CNBC that frustration is palpable and there is a fear of getting banned even though products were purchased legally. She said of the company: "They created a monster...The rules aren't clear and they change them as they go along."