The Market for Counterfeits on Amazon
As international companies have begun to take advantage of online markets to more easily reach consumers abroad, businesses and consumers alike have had to deal with some negative effects that have arisen from this new, connected economy. Counterfeit items, which most people associate with seedy street vendors or cheap ebay listings, have surged in popularity on Amazon. This article by Ari Levy of CNBC describes how Amazon’s third party seller system allows sellers of counterfeit goods to sell their items on Amazon under the guise of genuine products, and consumers get duped while legitimate businesses lose revenue. Customers purchase, for example, a fake Canada Goose jacket for a fraction of the price of the original. This hurts the revenue of legitimate sellers who have lost a sale to the counterfeiting competitors. Then, the customer may be highly unsatisfied with the counterfeit item and leave a negative review, which also hurts all sellers of the product, genuine and fake. In many cases, customers incorrectly leave negative reviews for items they know they are fake, instead of leaving a negative review for the seller instead which is more appropriate. This can also be seen in designer fragrances that sell for prices too good to be true on Amazon. The low scores being posted by customers who recieved fake fragrances hurt the image and brand of an item that is of good quality when genuine.
These counterfeiting issues relate closely to the concepts outline in the “Market for Lemons” chapter that we discussed in class, how consumer expectations and a mixing of quality and poor quality goods can exclude quality goods from the market and lead to a marketplace dominated by customers buying only low quality goods because their budget only allows them to do so. In the case of Amazon and its counterfeit item issue, companies like BedBand have been forced to leave the Amazon marketplace because consumers are not willing to pay so much and take a chance with third party sellers also masquerading products as genuine BedBands. The price of genuine products exceeds the price consumers are willing to pay, and low quality fakes end up taking up a significant portion of consumer purchases.
http://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-problem-is-getting-worse.html