Automate Retail Loss Prevention: How to trace the fakes

In 2014, Walmart started a unique pricing strategy to take on Amazon — they offered to price match any product sold cheaper by Amazon, in a…

Semantics3    6 mins

Automate Retail Loss Prevention: How to trace the fakes

In 2014, Walmart started a unique pricing strategy to take on Amazon — they offered to price match any product sold cheaper by Amazon, in a bid to grab market share from the e-commerce giant.

Naturally, the internet got wind of this and soon enough exploits started happening. The most famous one happened in 2014, when scammers got Walmart to price drop the $300 PS4 to just $90 by creating fake listings on Amazon, printing a screenshot and bringing it into the Walmart store to get the price match offer.

Quite a number of scammers got away with the deal before the practice was stopped.

This scam isn’t new though. As the volume of online shopping keeps growing the counterfeit industry keeps on scaling as well.

Upto 90% of business have reported losses upto 10% due to fake goods. In 2015 an EU observatory report found that the fashion sector lost $28.5 billion in profits and 363,600 jobs due to counterfeiting of goods. And that’s just in the European Union.

So why hasn’t technology caught up to the fake goods industry and how is it that nearly 10% of revenue for the retail industry is lost to them?

First let’s recap on the ‘lay of the land’ as they say. Why is it all so complicated?

UPCs and Barcodes

Barcodes are like your signature. Brands get barcodes which will contain specific information about your company and brand. These can be easily scanned to provide a link back to you.

Barcodes and UPCs were initially aimed at solving everyones woes and giving every brand and product a unique traceable ID. Like any other system this turned out to be perfect — on paper. In one of our earlier blogposts we talk about the issues relating to Unique Products Codes (UPCs) not being that unique. As we mentioned then,

GS1, the global non-profit for UPCs, itself doesn’t maintain a product inventory of every UPC issued, making it difficult to cross-reference. While most companies initially come to GS1 to get a bar code number for their products, they do not provide GS1 with a list of their products. Most references are checked against private inventory systems, or on retail websites.

UPCs and barcodes are vital though and all legitimate companies rely on UPCs for product inventory management (PIM). However, confusion and fraud still reigns supreme. New sellers on Amazon sometimes try to make up random number instead of buying UPC codes from an authorized body.

The other common issue is resold codes — codes that were originally purchased by one party but have now been sold to a third party. In such a scenario the information might not have been updated. That in turn gives rise to the issue of duplicate listings with the same UPCs and product names on ecommerce websites such as Amazon, Alibaba and more.

Add to this already crazy mix, there are the cut-throat counterfeiters.

Who it affects & what they are trying to do about it.

It affects EVERYONE. Literally everyone.

It affects everyday people who end up with counterfeit products, companies who lose billions of dollars in revenue and even charitable foundations and the UN aid programs that end up with fake and often fatal fake medicines.

1. How it affects the small fry

Counterfeiting has always been a problem for retail industry but it might never have been such a well-oiled machine until this era. The age of ecommerce and accessible product information has also ushered in the era of faster knockoffs. It doesn’t take long for someone to steal pictures and product description and set up an authentic digital rip-off of your product.

And it’s not just a problem for the big store anymore. Shopify and other small business owners are seeing their stores and products being just as bad and it can be devastating and frustrating.

Even the small guys aren’t safe anymore.

In fact, people in China are so sick of counterfeiters that there is a huge market for freelance personal shoppers called daigou who shop for things like baby products and milk formula from Australia and take them back to sell in China. It is estimated there are 40,000 daigou in Australia facilitating a multi-million dollar export industry.

Basically, the counterfeit industry is so huge that there are now multi-million dollar industries that exist JUST to help people counter the deluge of knock-off goods.

2. How it affects the big fry

It’s a huge enough problem that Facebook spent a signification amount of time trying to combat ads for knock-off products within Facebook and there are whole groups on Facebook dedicated to discussing and warning people about this such as this one about Dresslilly and Rosegal Scam Victims.

Amazon threads that talk about Alibaba counterfeiters are endless. Recently the U.S. Office of the Trade Representative even added Alibaba’s small sellers platfrom Taobao.com to its “Notorious Markets” blacklist.

Concurrently Alibaba has been suing Taobao over fakes.

Not only that there is extensive efforts on Alibaba’s part to use Big Data to pinpoint and throttle counterfeiters. And Amazon started checking their listings’ UPCs against the GS1 database early last year.

It’s insane out there. And everyone is scrambling.

3. How it affects Physical Retailers

Now if you are thinking that the online market is complicated a look at offline retail will likely make you want to do cartwheels.

In 2007, Davidoff sued CVS because it was selling grey-market versions of it’s Cool Water products. As defined on the Fashion & Apparel Law Blog,

Gray-market goods are goods manufactured abroad by the owner of a United States trademark, legally purchased abroad from authorized distributors and then imported by persons other than the trademark holder and without the trademark holder’s permission.

Products displayed in CVS stored had had their UPCs removed via various methods like cutting portions of the box or label or, using chemicals to wipe off codes. Davidoff conducted inspections of CVS’s inventory and found thousands of counterfeit and grey market goods.

Davidoff won the case and in 2009, the U.S. Court of Appeals upheld the judgement and declared that tampering with a company’s UPCs is a form of trademark infringement.

One would think that is obvious, but apparently not to CVS.

POINT BEING: Store retail has a much more difficult route to trace and in Davidoff’s case they had to do manual store inspections to catch CVS in the act. Not every company has the resources to do this but in comparison almost every company CAN afford to monitor their online sales.

How to fight the fakes

Online retail might have helped counterfeiters thrive but there are a couple of developments that are now helping to shrink their playing field.

Firstly, HUGE strides have been made in capturing and indexing product metadata. It is now easy to leverage data solutions and monitor all your products via UPC databases.

Different ways the counterfeits can enter the system, from Infosys

Secondly, the thing about online retail is that despite the myriad ways that counterfeits can enter the system (as shown in the sketch above) there is only one way to exit the system — through a website that is retailing publicly.

And that exit is being constantly monitored and indexed by us.

What loss preventions solutions need is access to a disambiguated database that allows UPC lookups and monitors products across a comprehensive list of online retailers. And that exactly what we do — index, disambiguate, monitor & repeat.

Catching brands or resellers that are imitating you

It’s straightforward — using the list of UPC codes that you own then query our UPC API. You will instantly get a listing of the products across multiple retailers. You can also choose to query just one website.

Use our product data feeds to run queries on Amazon (or other websites) to see if other sellers are selling products with the same extension as your brand. Once caught Amazon is very unforgiving with these sellers and they get banned without even an appeal process.

Easily look up your company and brand codes using our UPC API. The defaulters won’t know what hit them.

Liked what you read? Sign-up for a demo or schedule a call.

Written by Anjali Krishnan and the Semantics3 Team in Singapore, Bengaluru, and San Francisco

Semantics3 operates the world’s largest Ecommerce product database. We’re a trusted and reliable provider of ready-to-use structured Ecommerce product pricing and metadata, with coverage on all of the top 800 internet retailers.

Published at: February 16, 2017

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