The Amazon Effect   /   May 8, 2019

‘The problem is pervasive’: Inside PopSockets’ fight against Amazon fakes

This story has been updated to include a statement from Amazon.

A lawsuit filed by PopSockets in April is a good glimpse into just how far Amazon has to go when it comes to getting rid of counterfeit products on its platform.

In the suit, shared in full here, PopSockets, which sells adhesive grips that stick to the back of cell phones, claims that unauthorized sellers on online marketplaces, specifically Amazon, are damaging the brand’s reputation by selling faulty products. The suit is filed against a seller that makes PopSockets knockoffs, as well as a host of other defendants, including businesses, that it says are involved in the problem.

PopSockets details the problems with unauthorized online sellers: It’s impossible for PopSockets to control the quality of products sold online, the products don’t come with warranties despite being advertised as such, and customers associate the defective products with the PopSockets brand, not the seller. Negative reviews have piled up on Amazon in response.

PopSockets has had a tumultuous relationship with Amazon thanks to counterfeits and unauthorized sellers on the marketplace, as well as strong-arming from Amazon itself. In September, after selling on Amazon for more than two years, PopSockets pulled its business off Amazon. The decision came after the brand tried to shift its business from Vendor Central to Seller Central, through a partnership with a reseller called iServe so it could better control pricing and marketing spend, but Amazon wouldn’t let it.

Overall, Amazon has been exercising more control over how brands sell on the marketplace in an effort to boost its profits. Typically, brands doing high-volume sales on Amazon are kept on Vendor Central, where they sell wholesale to Amazon. Everyone else can fight it out on Seller Central. As part of this shift in strategy, sellers holding brand trademarks have been given more control: Through Brand Registry, these sellers can register their trademark ID numbers and then, through Amazon’s counterfeit-fighting initiative Project Zero, quash counterfeits independently and then report them to Amazon.

In addition, Amazon takes its own measures. “In order to detect bad actors and potentially counterfeit products, we make significant investments in machine learning and automated systems. Amazon’s systems automatically and continuously scan numerous data points related to selling partners, products, brands, and offers to detect activity that may indicate a potentially counterfeit product and immediately block or remove it from our store,” Amazon said in a statement.

PopSockets are now available on Amazon again through authorized sellers. It speaks to Amazon’s weight in the industry: Sitting out all together can hurt brands more. But its fight against fake products continues: CEO David Barnett has said that the company has spent $7 million defending its patent in the past year, and that seemingly “hundreds” of fake products pop up on Amazon and other marketplaces like eBay every day.

“PopSockets isn’t the only one — almost every brand we talk to has these problems. Once their products start getting traction, there are unauthorized sellers that follow, so you have to have foundational elements that protect your brand. That’s a have to have now,” said Fred Killingsworth, the CEO of the Amazon consultancy agency Hinge. Those elements include Brand Registry, a trademark, strict distribution contracts and third-party seller monitoring and enforcement.

Not all companies have the resources to spend so much on brand protection as PopSockets, which did $200 million in revenue in 2018, does, and Killingsworth said the brand’s need to both use Amazon’s anti-counterfeit tools as well as file a lawsuit demonstrates that Amazon’s own measures aren’t enough. As Amazon looks to win over brands that have resisted the platform, it’s a warning.

“The problem is so pervasive, and no one has a playbook,” said Killingsworth. “Amazon’s writing the rules.”

Amazon Go flips cash-free policy
Amazon opened one of its new cashier-free Amazon Go stores in New York City on Tuesday, but with a twist: It will be the first Amazon Go store to accept cash. Amazon still won’t be installing traditional registers in the store, but if a customer wants to pay with cash, they can flag down a store employee, pay and checkout with them.

The news comes a month after CNBC obtained an audio recording of an Amazon executive telling employees at a company meeting that its Go stores would soon start accepting cash. The move was in response to backlash Amazon faced from lawmakers and advocacy groups, who said that stores like Amazon Go would discriminate against patrons who don’t have a credit card. Philadelphia passed a law banning cashless stores in March; New Jersey followed suit that same month. San Francisco’s Board of Supervisors is expected to pass a law banning cashless stores on Tuesday.

Amazon’s not the only one who recently backtracked on the cashless movement — Sweetgreen announced in April that by year-end, all of its stores will accept cash after it stopped accepting it in 2016. But where Amazon goes, the rest of the retail industry follows. If the e-commerce giant has decided it can’t fight the cashless backlash, many other DTC brands just opening up their first storefronts are likely to decide that banning cash is not worth the risk. — Anna Hensel

DTC’s lack of ad spend diversity
We don’t call them Instagram brands for nothing. New data from BrandTotal breaks down where big DTC brands — Casper, Warby Parker, Brooklinen and Birchbox — were spending their social advertising dollars. It shouldn’t come as much of a surprise that for all four brands, Instagram and Facebook account for the lion’s share of budgets.

Casper

  • Instagram: 58%
  • Facebook: 40%
  • YouTube: 2%
  • Twitter: 0%

Warby Parker

  • Instagram: 43%
  • Facebook: 34%
  • Twitter: 22%
  • YouTube: 1%

Birchbox

  • Instagram: 58%
  • Facebook: 40%
  • YouTube: 2%
  • Twitter: 0%

Brooklinen

  • Instagram: 90%
  • Facebook: 8%
  • YouTube: 2%
  • Twitter: 0%

What we’ve covered

Instagram kicks. Adidas is attributing a spike in sales to Instagram checkout.

IRL e-commerce. Retailers are using their stores to promote their websites.

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