Big Commerce reports global internet usage surged by a staggering 18,650% since 1997, accompanied by an 18,233% surge in online sales. Reflecting this exponential growth, Amazon's stock price has grown from $20 in 2014, to $186 at the time of this writing. Forbes reported on April 11, 2024, "Amazon now sits less than 2% away from achieving a $2 trillion market capitalization for the first time ever, a far cry from the sub $900 billion valuation it ended 2022 with after its share price crashed during Amazon’s first year of negative profits since 2014."
Amazon's success stems from its' dedication to customer satisfaction, innovation, and strategic expansion into various sectors. By prioritizing the customer experience, Amazon has cultivated a loyal customer base worldwide. Its e-commerce dominance, fueled by an extensive product selection and convenient shopping experience, has solidified its position as the largest online retailer. Amazon Prime, with its array of benefits, further enhances customer loyalty and drives sales. Moreover, Amazon's investment in logistics and fulfillment infrastructure ensures fast and efficient delivery, setting it apart from competitors. Through diversification into cloud computing, digital streaming, and smart devices, Amazon continues to tap into new markets and revenue streams. This commitment, coupled with data-driven decision-making and strategic acquisitions, has propelled Amazon to unprecedented success in the digital age. With this success for Amazon, the question has to be asked, what is the cost to brands?
What is Amazon Brand Protection?
To protect your brand in today's landscape, it helps to realize that brand protection on Amazon has a different definition for Amazon than it does for your brand. Amazon, like you, care very much about eliminating counterfeit products from the platform. According to the 2023 Amazon Brand Protection Report, Amazon has invested $1.2B and employed over 15,000 people to combat counterfeit and fraud. It is the biggest risk to maintaining consumer trust on the platform.
Beyond the anti-counterfeit efforts, Amazon's Brand Registry is a program designed to empower brand owners by providing tools and features to protect their intellectual property (IP) and enhance their presence on Amazon. When you enroll in Brand Registry, you gain access to proactive protections against unauthorized or misleading listings, content management tools, real-time monitoring, and insights. It allows you to maintain accurate product information, report IP infringement, and receive support for technical issues. Overall, Brand Registry is intended to help you safeguard your brand, combat counterfeits, and improve customer trust on Amazon.
When Brand Registry was launched, every Amazon account manager was hoping that it would address the unauthorized listings of authentic goods. Those hopes were again present when Congress proposed and passed the Inform Consumer Act, which aims to enhance transparency in online retail marketplaces by requiring certain information from “high-volume third-party sellers” offering new or unused consumer products. The goal is to deter criminals from selling stolen, counterfeit, or unsafe items through online platforms and provide consumers with more clarity during transactions. While these efforts are important, both Brand Registry and the Inform Consumer Act, do little to help brands protect their product values and brand health. The First Sale Doctrine covers a lot, but for the purposes of this post, it enables the reselling of trademarked products after the trademark holder puts them on the market, and for patented products, the doctrine allows resale without control from the patent holder. Essentially, the first-sale doctrine ensures that once you’ve legally acquired a copyrighted or trademarked product, you have the right to dispose of it as you see fit, even if the copyright owner would prefer otherwise. This dichotomy constantly puts pressure on a brands product values, impacting brand health, and cannibalizes demand to authorized distribution, both on and off of the Amazon marketplace.
Translating legislation and Amazon policy to reality doesn't always check out. It's likely that if you have been an account manager calling on Amazon (1P) for a brand, some portion of your job has been to address unauthorized 3P sellers listing your product on the platform. Amazon Vendor Managers will talk about lost buy box sales, and you will likely get automated offerings through vendor central to discount your products to the 1P business, so they can help you race your products to the bottom. The result is migrating demand away from healthy and profitable distribution, who will likely come back to the brand at some point for mark down money or ask to return unsold inventory. The negative impact from this scenario is vast, and the downstream impact can be catastrophic.
Benefits | Brand with Control Over Unauthorized Listings | Brand without Control Over Unauthorized Listings |
Brand Reputation | Enhanced reputation due to consistent product quality and customer experience. | Risk of tarnished reputation due to counterfeit products, price fluctuations, and inconsistent customer service. |
Customer Trust | Increased trust from customers who can rely on the authenticity and reliability of the products. | Decreased trust as customers may question the authenticity and consistency of products sold through unauthorized channels. |
Brand Equity | Stronger brand equity as the brand maintains exclusivity and perceived value. | Weakened brand equity due to the proliferation of unauthorized sellers and inconsistent brand representation. |
Control Over Pricing | Ability to maintain consistent pricing strategies and prevent price erosion. | Risk of price erosion and loss of control over pricing due to unauthorized sellers engaging in price wars or undercutting. |
Channel Harmony | Better cooperation and relationships with authorized distributors and retailers. | Increased channel conflict and strained relationships with authorized partners due to unfair competition from unauthorized sellers. |
Legal Compliance | Reduced legal risks associated with unauthorized resale, such as trademark infringement. | Higher legal risks and potential lawsuits due to unauthorized sellers violating brand protection policies and intellectual property rights. |
Market Stability | Enhanced market stability with controlled supply and demand dynamics. | Risk of market instability due to unpredictable pricing, supply shortages, and counterfeit products flooding the market. |
Customer Experience | Consistently positive customer experiences with reliable shipping, customer service, and warranty support. | Inconsistent customer experiences, including delayed shipping, poor customer service, and lack of warranty support from unauthorized sellers. |
Revenue Protection | Protection of revenue streams by directing sales through authorized channels. | Risk of revenue loss due to unauthorized sellers undercutting prices and cannibalizing sales from authorized partners. |
We set up Counter Diversion to be the clearing house for unauthorized listings of authentic products by identifying the source of product. Our solution sits in the space between the monitoring service provider and the brand. Answering the question of what are you doing with the information you're provided from your tracking investment? This unique position has allowed us to collaborate with some amazing people and companies that offer different approaches and tools to combat the grey market and protect your brand. Counter Diversion may not be the best option for you, but if we're not, it's highly likely we know who is.
5 steps to drive a successful Amazon Brand Protection strategy.
1. Get Organized and Take Control of your Brand Narrative.
Step one, know what you want to accomplish. Visualize the ideal state of your products on Amazon and compare that to where your brand is now. Take that vision and accept that your brand is going to have to achieve that on its own. As much as brands want Amazon to help solve the unauthorized 3P problem, there are some legal ramifications prohibiting their ability to do help you, even if they want to.
The US government and 17 states have filed a landmark monopoly case against Amazon, alleging that the e-commerce giant abused its economic dominance and harmed fair competition. The complaint asserts that Amazon unfairly promotes its own platform and services at the expense of third-party sellers who rely on the company’s e-commerce marketplace for distribution. Here are some key points from the lawsuit:
Prime Eligibility Requirement:
Amazon allegedly harms competition by requiring sellers on its platform to purchase Amazon’s in-house logistics services to secure the best seller benefits, known as “Prime” eligibility.
This practice gives Amazon an advantage over third-party sellers and restricts their ability to compete fairly.
Pricing Constraints:
The complaint claims that Amazon anticompetitively forces sellers to list their products on Amazon at the lowest prices anywhere on the web.
Sellers are allegedly prevented from offering their products at competing marketplaces for a lower price.
Ongoing Legal Challenges:
The issue of Amazon controlling distribution and favoring its own services has led to multiple legal challenges.
For instance, California’s attorney general filed a separate lawsuit targeting Amazon over similar practices.
Monopolization Concerns:
The lawsuit reflects growing concerns about Amazon’s dominance in various sectors, including e-commerce, logistics, and cloud computing.
The government aims to address potential antitrust violations and promote fair competition.
All of which point back to the brands need to control their own brand protection journey.
2. Know the resources available.
One of the things that you need to know when you deal with Amazon, is to look at everything through Amazon's perspective. It's good advice for every customer you deal with, but there is no other customer that you deal with that also profits from running the world's largest marketplace and has to take the points from the previous section into consideration.
Recent reports estimate U.S. counterfeit costs of $600B (3% of the U.S. GDP) and $2 Trillion globally. The impact of counterfeit products is crippling, putting consumers safety at risk, and destroying the trust of the retailer and brand of the product knocked off. As mentioned in this article, Amazon gets this and recognizes this issue as the biggest threat to their business. Their investment to combat counterfeiting shows their commitment to addressing this issue. Employing former federal prosecutors and data scientists, Amazon created an in-house counterfeit crime in 2020 to take on this problem. There are other marketplaces where counterfeit products could be sold, and every brand will have to constantly analyze how many additional resources should be set aside to address this.
Counterfeiting is terrible for everyone, there are and should be significant resources in place to battle this. Where there are fewer resources and what we believe is the bigger problem is the unauthorized sale of authentic goods. Again, "the everything store," was setup to have everything, and marketplaces by nature offer prices based on supply and demand. All of this is fine if you're selling a commodity and not investing in driving demand through other channels intended to create a relationship between the consumer and your brand. There are a lot of great people and companies that are committed to protecting your product values and brand health. Not taking advantage of their expertise and some of the tools out there is like going fishing with massive holes in your net.
3. Automate & Simplify Brand Protection
The path to brand health starts with the first step. For many the path seems long and daunting, but knowing where to start and having a plan to achieve your Amazon brand protection goal is important when implementing an Amazon brand protection plan.
You have to have a tracking service provider. We've written about this on numerous occasions, you have to have a source of information on which to act. There are several great tracking service providers that we work with and would be happy to recommend based on your unique situation.
This journey will feel like a chess match with the grey market, which we highlighted in a post titled, "The Grey Market Game." Knowing which move to make will become vital to protecting your brand and driving profitability. Every brand that has ever given up on tracking has been due to their inability to act on the information that the tracking companies have provided. Yes, that is a bold statement, but it is also true. No brand that knows how to action the information that the tracking companies provide abandon the effort. This is the piece of the puzzle that Counter Diversion provides. The process combines data that every brand has and can acquire through tracking.
Seller Centric Process
Identifies the source of product to Grey Market sellers.
Organized Enforcement
Determine which brand policy is applicable to which sellers. Your MAP (Minimum Advertised Price) Policy is not appropriate for every listing. Your brands terms & conditions are likely a more useful tool for most unauthorized listings.
Identify business practices contributing to grey market inventory.
The growth of direct-to-consumer channels have created the possibility that a seller is not beholden to your sales policies.
Understand the volume of sales going to the grey market for every situation.
Often the size of the problem can and should prioritize action. The Counter Diversion solution will identify specific actions needed at the seller level, as well as summarize the size of every grey market problem.
4. Build Trust & Boost Sales
In today's retail landscape brand trust is critical to profitability. Forbes article "Why a Strong Brand Reputation Starts with Trust," is a great read outlining the risk and opportunity of what can happen when you have negative or positive brand trust. Consumers connect with brands they trust, and that trust leads to dollars at higher average sales prices, a.k.a. profitability. Higher profitability leads to all kinds of possibilities, and all of it reinforces your brand health.
5. Gain Valuable Brand Insights
When brands take steps to protect their product values, eliminate the gray market, and drive profitable sales, they can gain several valuable insights:
Preserving Brand Reputation and Value:
By preventing unauthorized sales in markets where products were not intended to be sold, brands maintain their reputation as premium or exclusive. Consumers associate the brand with quality and authenticity, which enhances its overall value.
Reducing Margin Erosion:
The gray market often involves selling products at prices significantly below the manufacturer’s intended retail price. By controlling the distribution channels and preventing unauthorized sales, brands can maintain higher margins and profitability.
Understanding Market Demand and Consumer Behavior:
Brands that actively manage their distribution channels gain insights into consumer preferences, demand patterns, and regional variations. This information helps them tailor marketing strategies, product launches, and inventory management more effectively.
Identifying Supply Chain Weaknesses:
Analyzing gray-market activities reveals vulnerabilities in the supply chain. Brands can identify areas where products leak into unauthorized channels and take corrective actions to secure their distribution network.
Enhancing Channel Partner Relationships:
Brands that collaborate closely with authorized resellers and distributors build stronger relationships. By enforcing contractual agreements and ensuring compliance, brands foster trust and loyalty among their partners.
Optimizing Pricing Strategies:
Brands can adjust pricing based on market-specific factors, such as local purchasing power, competition, and consumer behavior. By eliminating unauthorized sales, they can implement consistent pricing strategies across regions.
With that I have hopefully laid out the how and the why creating a brand protection strategy and more urgently an Amazon brand protection strategy is so important for long term brand health. No brand is the same and solutions should be tailored to your specific situation. As mentioned above, Counter Diversion prides itself on being a micro vertical, focusing on one aspect of this puzzle, which has allowed us to collaborate with some brilliant people in the brand protection space.
I wrote the paragraph that concludes every blog post when I started at Counter D, stating our commitment to helping you put together the best brand protection solution for your brand.
Counter Diversion is a boutique SaaS company - we don't have marketing and we don't use high-pressure sales tactics. Our goal is to have solid, honest conversations about the issues at hand and then either recommend our service or another one that is a better fit for your needs. If you'd like to engage in that type of discussion, please schedule a free consultation.
