The worldwide trade in counterfeit products adds up to more than $500 billion each year on average. This global black market of knock-offs has crept into e-commerce sites and even physical stores, causing retailers to look for new ways to detect fake items. Online marketplaces are leading the way with innovative approaches, including:
- Use of advanced artificial intelligence and machine learning detection tools to rigorously vet sellers;
- Partnerships with brands and law enforcement to penalize criminals and deter future counterfeiting before they can offer their products in marketplaces; and
- Spearheading marketing campaigns that help teach consumers how to shop safely and find authentic products.
These efforts help to protect brand integrity and, most importantly, the safety of consumers.
The Problem of Counterfeits for Retailers and Consumers
Counterfeit products pose issues for businesses and consumers alike. The Organisation for Economic Co-operation and Development’s 2021 report found that trade in counterfeit and pirated goods made up 2.5% of total world trade in 2019 — and that number may increase.
Counterfeiters often make money off of legitimate companies’ reputations while simultaneously hurting those same businesses financially through lost sales. Brands must worry about counterfeiters who undermine their credibility in an open marketplace.
Shoppers can be exposed to quality and safety issues when unintentionally buying fake goods. They may end up with a product that is not only poorly made but potentially unreliable or dangerous.
A 2019 report from IncoPro — an intellectual property and brand protection firm — found that 52% of consumers lost trust in a brand after purchasing a fake good online, while 64% lost trust in online marketplaces as a whole.
And while reports have shown counterfeits have become more acceptable and sought out among young shoppers, they are also more susceptible to counterfeit scams on social media. According to IncoPro, millennials ages 25 to 34 — the dominant users of social media — are most at risk for these scams, being much more likely to buy fake goods unknowingly (41%) than those over 55 (18%).
How Retailers Are Taking Action
Online marketplaces are spearheading efforts to detect fake goods, which is helpful for retail brands’ reputations and a big win for consumers
Amazon’s recent Brand Protection Report, released in April 2023, highlights the steps the company has taken to address the sale of counterfeit items. For example, its seller verification process now includes “connecting one-on-one with prospective sellers through video chat.” Investments in “machine learning-based detection” have helped to deter bad actors from creating Amazon selling accounts, too. As a result, the number of bad actor attempts to create new selling accounts decreased by nearly a third (32%) in 2022, dropping from 2.5 million attempts in 2021 to 800,000.
Amazon also partnered with the U.S. Chamber of Commerce and U.S. Customs and Border Protection to help educate consumers about how to shop safely. The campaigns reached more than 70 million American consumers.
Other online retailers and marketplaces are also intensifying and updating their anti-counterfeit strategies. Etsy stepped up efforts to eliminate fake goods from its site by releasing a transparency report and adding a portal to report alleged copyright violations. And eBay recently purchased 3PM Shield, a provider of AI marketplace tools, which will “enhance its ability to address suspicious or harmful seller behavior, and potentially problematic items.”
Retailers in general are utilizing anti-counterfeit solutions such as RFID (radio frequency identification) tags embedded in labels, NFC (near field communication) tags that can be scanned to confirm legitimacy and QR (quick response) codes on product tags.
How Anti-Counterfeit Efforts Benefit Shoppers
With the trade of counterfeits potentially on the rise and the emergence of “superfake” items —much harder to distinguish from the real thing — posing new challenges, there is significant potential for consumers to unintentionally end up with knock-off products. Retailers’ progress in detecting fake goods will help reduce this probability along with risks to consumers’ health and safety.
Reports have shown that items like counterfeit car seats and helmets may fail standard safety tests; knock-off batteries can cause fires; and fake cosmetics often contain arsenic, mercury, lead or other harmful substances. In 2020, the Los Angeles Police Department raided the city’s Fashion District and seized $700,000 worth of counterfeit cosmetics. Tests later revealed that the fake products contained high levels of animal waste and bacteria.
Being able to verify a product’s origin can also help with after-sales services, such as warranties, guarantees or refunds. This goes hand-in-hand with retailers’ ability to identify counterfeit merchants as it allows shoppers who unintentionally receive fake goods to have the issue addressed appropriately. For instance, IncoPro’s 2019 survey found that over a quarter (27%) of respondents said they “never received a refund from an online marketplace despite reporting a seller of counterfeit goods.” Fortunately, many major online retailers like eBay, Newegg, Amazon and Walmart have refund policies that guarantee shoppers can get their money back in most cases.
Overall, the counterfeit market is difficult to track and mitigate, but retailers are making great strides to better identify fake goods. Online marketplaces like eBay, Etsy and Amazon, for example, have taken proactive steps to put a stop to counterfeit sellers and protect consumers. Through rigorous vetting and innovative detection tools, retailers are prioritizing shoppers’ safety and trust.