Preventing Counterfeits And Verifying Authenticity In e commerce Marketplaces-Pankaj Ukey

A November 2018 Local Circles survey highlights that 1 in 5 products bought on ecommerce portals is fake.  Recently, US Trade Representative’s (USTR) 2020 list of the ‘Notorious Markets’ for facilitating the sale of pirated and counterfeit products on their marketplace platforms include Amazon India & Snapdeal plus 4 offline markets – Millennium Centre (Aizawl), Heera Panna (Mumbai), Tank Road (Delhi) and Kidderpore (Kolkata). While Amazon India & Snapdeal have refuted those charges- challenge remains with millions of listings on each platform and more than a few hundred thousand sellers on each platform.

E-commerce or online shopping sites are growing at an unprecedented rate across the globe. The Indian eCommerce Sector has already become a heavyweight segment with a market size of $50 billion. In the coming five years, this figure is estimated to further grow more than three times to reach a market size of $188 billion. Also, with online shopping becoming the new normal amid coronavirus lockdown, more and more consumers are taking the online route for fulfilling their daily needs. 

Interestingly most established marketplaces have a strong anti-counterfeiting programs aimed at protecting IP right of brand owners/their representatives. While Amazon has “Zero”, eBay has “VeRO” and Snapdeal has “Brand Shield”. With millions of products being retailed by thousands of sellers across online shopping portals, these programs are critical for online marketplaces to segregate authorized sellers and brand owners from the unauthorized ones. 

This is majorly because online marketplaces are playing at the front, taking guarantees of what they are selling but, in the backend, they need a structured mechanism to authenticate the products that are being listed on their portals by sellers from across the country. Additionally, consumers are not well versed enough to differentiate between the original products vs. replicas, and hence, creates a negative impression of the brand and company. All this leads to increasing consumer complaints against the products sold by online marketplaces. 

So what should online ecommerce players do? 

1. Seller Onboarding: Firstly, marketplaces need to have strong onboarding processes for new sellers, focusing on due diligence of the listings, including authenticating barcode (GTIN) numbers and product attribute information as provided by sellers, and also a physical verification of the product (where ever possible). In the US, Amazon started the process of verifying the identity of third-party sellers over video-conferencing — a shift from its in-person verifications, post COVID. Interestingly this week Amazon made an announcement that they will start displaying names & addresses of sellers on from 1st September 2020. This should surely help reduce frauds & help buyers take legal action against sellers over counterfeit goods.

2. Top Selling Items: Fraudulent sellers are looking for the quick buck. They will always focus on the top selling items on the platform. Seller policies should focus on strong “audits” for top selling sellers.

3. Warranty: Most fakes will carry “Seller Warranty” and not “Manufacturer Warranty”. The best way is to ensure that sellers have the requisite customer support infrastructure including service centers to take care of customer queries and returns/replacements (especially during the term of the Warranty). It might make sense to have different commission structures based on warranty types. Also, manufacturer/OEM warranties could be linked to the product code (GTINs) and its serial number, for better customer service.

4. Chinese Knockoffs: Due to difficulty of enforcing NDA’s and non-competes, there is very low barrier of entry to copy a product and sell it on marketplaces. “Country of Origin” identifiers would help identify counterfeits- especially for brands if they do not have manufacturing facilities in those countries. Here, national product data repository that is populated directly by brand owners can help in sourcing this information.

5. Enforcing Standards: A good example would be using GS1 standards. GS1 allocated barcode numbers for products to manufacturers and brand owners all over world, it is also in the position to validate those barcode numbers. Serializing products and placing a test buy from unknown sellers can help identify holes in your distribution system. 

Interestingly, GS1’s Global Registry is a service, offered in each country through its representative member organization. This registry has information on products from all over world. If you are in India, this service is offered by GS1 India, with the name GTIN Validation. It enables retailers and online marketplaces to validate the barcode numbers listed with them, and receive information on the authorized brand owner against which the barcode number is registered. Besides, using this service, brands can get information on the basic product attributes, including image, and whether the product is active or not.

From a customer perspective to authenticate products, brand data can be leveraged to communicate unit-level product information, including manufacturing date, manufacturing place, enhanced product information (e.g., ingredients). Through the use of GS1 barcodes, users can use their mobile phones to scan the barcode printed on a product to access an online database to compare the information they see on the printed on the packaging. Check: Transparency Program from Amazon

To conclude, reducing counterfeiting is a joint effort across multiple stakeholders in the supply chain. The answer lies in greater visibility, traceability and transparency across supply chains from raw material to point of sale/use.