Counterfeit. A word that strikes fear into the heart of any brand. It means someone is out there selling shoddy copies of your product, decreasing consumer trust in your brand, and stealing your profits. Counterfeiters have been a problem for as long as brands have existed. In recent years, many have thrived on retail sites like Amazon. Now, Amazon is fighting back with its item-level tracing service, Transparency.
The Transparency program has been around since 2017, but Amazon enrolled new brands slowly, to work through the kinks. In the last few months, they’ve been ramping up adoption, and many brands have received invitations to the program. Amazon’s motivation is simple: provide a better customer experience by making sure that consumers get the item they ordered and not a cheap knock-off. The happy side-effect for brands is that they get rid of counterfeiters who are hurting their business.
How Transparency works
When brands enroll in Transparency, they are issued with a series of Transparency codes – technically speaking, a Data Matrix 2D barcode. Brands are then responsible for placing a Transparency code on each unit that they intend to sell, whether on Amazon or any other channel. Each unit gets its own unique code. Each code is tracked and traced back to a single brand, so Amazon knows which code belongs to which brand. If a shipment of products that are enrolled in Transparency comes to Amazon without the codes, the associated seller will be investigated, then the inventory will be rejected or destroyed. Today In: Consumer
Sellers pay for Transparency codes based on quantity, ranging from one cent to five cents per code. Amazon has sweetened the deal for early adopters to get the program off the ground.
Brands can choose to individually sticker products if they like, but many instead are working with their in-house or third-party labeling partners to print codes directly onto their packaging, thereby avoiding any additional stickering costs and increasing efficiency.
It’s important to note that Transparency is not a vendor management program. Using it to cut out resellers on Amazon is a direct violation of the terms of the program, and Amazon has promised stiff penalties for brands that violate the guidelines. Brands are required to put Transparency codes on every unit for every SKU that’s enrolled, whether it’s sold on Amazon or through another channel.
For consumers, their experience is also geared around the unique codes attached to each item. Customers can scan the Transparency code from the Amazon app (which they may already have) or download the Transparency app to verify authenticity, understand when the item was manufactured, and more. However, the power of Transparency for counterfeit prevention is that Amazon scans and verifies the authenticity of the product before it reaches a customer, so customers don’t need to.
Screenshot from Amazon’s Transparency app. AMAZON.COM
Who is enrolling
Some brands are joining Transparency to address devastating counterfeit problems. Before Transparency, Hairgenics faced multiple counterfeit listings from overseas sellers that undercut their pricing. They lost more than $700,000 in sales in less than a year, a brand representative said. Multiple requests to Amazon for help yielded no results.
Then they were invited into the Transparency program. Amazon issued them Transparency codes. With a code on each unit, it’s become significantly more difficult for counterfeiters to pass off their products as legitimate.
Hairgenics is now 100% counterfeit free, a spokesperson for the brand said. The brand is able to reassure customers that any product they purchase is legitimate and came directly from their warehouse. Sales have gone up and so has customer satisfaction.
Other brands are using Transparency as a preventative measure. David Stankunas, owner of Beard Head said he sees Transparency as an insurance policy. Stankunas says the cost of implementing Transparency is worth the cost to protect his products and listings into the future. He believes that changes in tariff laws and the general popularity of the Amazon platform will make Transparency a smart investment.
“The cost to me is inconsequential just because of the potential,” Stankunas said. “I think it’s 100% worth it and I would never stop using it.”
Of course, no program is foolproof. Soo-Haeng Cho, Associate Professor of Operations Management from the Tepper School of Business at Carnegie Mellon University, thinks that the program will be somewhat effective but may not reduce counterfeiting dramatically.
He points out that the technology Amazon is using focuses mostly on packaging. The package may be real, but buyers can’t know whether the products inside have been tampered with. This is particularly true for items purchased from third party sellers or those that have not gone through FBA.
Cho also thinks it’s possible that the labels could eventually be mimicked by some counterfeiters. However, the fact that stickers are serialized to the individual unit level makes that difficult.
Finally, cost could be a factor for some brands with narrow profit margins. Most brands will have no problem paying an extra one to five cents per unit for Transparency, but if prices rise, the program could become cost prohibitive. It also represents a large one-time cost to brands who sell in large volumes: even a one cent fee on ten million items is still $100,000.
Amazon declined to comment on the Transparency program for this post.
The future of Transparency
The Transparency program represents a big step forward in Amazon’s ability to police counterfeiting. But it would be most effective if they could get other retailers on board – something that Amazon is planning to do. Cooperation would benefit everyone by strengthening the protections against counterfeit products entering the supply chain through major retailers. The problem is that other major retailers may be unlikely to cooperate with Amazon, who in many cases is a retailer’s ultimate nemesis.
Without the cooperation of other retailers, Amazon will have an uphill battle to educate consumers on Transparency. To effectively eliminate counterfeiting, Amazon needs to tell everyone on the street what Transparency is and show them how to scan Transparency codes with an app to verify that what they’re buying is legitimate. With other retailers and consumers both on board, Amazon could effectively eliminate counterfeiting. Right now, that sounds like a pie in the sky dream, but Amazon has done the seemingly impossible before.Follow me on Twitter or LinkedIn. Check out my website or some of my other work here.
To read the full article written by Kiri Masters please click here