Amazon rolled out a new feature last week called “brand gating” in an effort to protect big brands against Chinese counterfeit sellers. But sellers are the people left feeling like they need the protecting. Counterfeiting has made an unsettling spike this year, often leaving the consumer unaware and the seller always frustrated.
This new process of brand gating could potentially impact sellers who fall below a certain level of sales each year that still want to sell brands. The process to list branded products under this new feature is rigorous. Sellers must abide by two regulations: submit invoices from manufacturers or distributors to prove the purchase of 30 items in the last 90 days all before paying a one-time non-refundable fee up to $1,500 per brand. As you can see, sellers relying on Amazon for income and those under a certain profit level will suffer to sell brands like Nike, Adidas, and Hasbro.
Amazon sellers have been quick to air their grievances.
Jason Bobb, president and lead designer at EGO Tactical, took to an online forum to discuss his recent troubles with Amazon. EGO Tactical creates custom designed phone cases for an American-made product called Magpul Industries. Within the last two weeks, Chinese sellers have begun making knockoffs of his phone cases at 1/10 of the price, phone cases that have their own patents and IPs. Like other Amazon sellers, Jason didn’t receive the help he was looking for from Amazon.
“We were told by Amazon to purchase from these vendors and prove to them that the products were counterfeit,” he told us via email. “We did so, and three to four weeks later when the package came from China and we attempted to show them the difference between our product and the counterfeit product, the seller was already shut down on Amazon because of multiple complaints by customers who had purchased their products expecting them to be authentic just like the listing says they are.”
Although consumers look to Amazon for cheaper products than they may find in stores, that doesn’t mean they should receive false products that happen to be cheap, if not cheaper, as well. Jason says it’s insulting when these counterfeiters release his product on Amazon in much poorer condition than his original, welcoming bad and misconstrued product reviews.
“Amazon will not remove these product reviews leaving us as the only consistent seller of an ever-degraded product, while these ‘just listed’ sellers carousel in and out every week,” he said.
Chinese sellers may be relentless, but their details are not consistent. Jason told us in the last 90 days he has had 30 sellers list his products fraudulently. And although they always come from the same vendor using the same ASINs, the names and addresses are always different, which makes their trickery not so hard to figure out. It’s easy to understand a seller’s frustration when their own product is believed to be the same when it is in fact a knockoff. This is especially detrimental because Amazon can cut listings from search rankings on a whim or suspend your account if they believe your product is counterfeit. And this can all happen after paying the non-refundable $1,500 fee.
Jason Bobb's warehouse with boxes of Magpul Cases in stock. Each box is 100 units. "We are highly invested in the brand as you can see."
Counterfeit frustration is equally magnified among brands, sellers, and customers. Some brands are going so far as to quit allowing third-party merchants to sell their products on Amazon, as Birkenstock did just a month ago. A sizeable action such as this could be a sign for other large brands to mimic if counterfeiting continues.
In lieu of the long-term effects of brand gating, speculation of its repercussions are still merely that, speculations. Could Amazon be introducing this feature as a way to dilute the oversaturated number of sellers? Is it really to protect the consumers? Or is Amazon trying to negotiate their own deals with big whips like Nike so that they make the money instead of sellers? Whatever the case, Jason believes brand gating will raise prices for customer, driving them to look on other sites for products they seek in abundance. He also thinks this won’t affect small lines who do not sell through retail store channels and discounted wholesalers.
Amazon has definitely taken a stance against counterfeiting, but the fight continues.
Editor's note:
After the story was published Amazon spokesman Erik Fairleigh said in an e-mailed statement to CNBC.com:
"If a seller is already selling brands on Amazon that are now subject to a fee, they are not required to pay the fee to continue selling those brands. The fee only applies to new sellers of particular brands. Sellers can see whether a product requires a fee to sell when they search for that product using the "Add a Product" tool on Seller Central."
