Nike pulled out of Amazon. That news is so (week of 10th Nov) 2019. The real news is that Amazon will not fight counterfeit products.
What are “genuine fakes”?
Being the earth’s most customer-centric company means pandering to all kinds of customers, even the ones like me who wears Armani suits sold for $25 bought from a shop called “Dollars & Pounds”. It’s a habit I picked up from my university days. Short of money but with an insatiable appetite to dress differently, I dote the shop which is famous for importing “genuine fakes” from Thailand. Genuine fakes are high-quality fakes crafted by renegade designers in Asia who are proud of their ability to imitate luxury brands.
Some of these shops are so good at their sourcing and have such a loyal base of customers that they have launched their private brands. My ethics, thankfully, have not stagnated. I still visit these shops and buy their private labels. They are as good as Ralph Laurens. I wore one design heavily inspired by Ralph Lauren for a meeting with Ralph Lauren in NYC in September.
Amazon has customers like me. We buy their private labels which are knock-offs of luxury brands. But there are others like me who are not as woke as I am. They prefer fakes (genuine fakes, if possible). Amazon gives them what they want. Don’t believe me? Sample this sentence (unironically, from WaPo): “Counterfeit complaints fell, but selection did not grow as quickly as planned…”, the former executive said.
Amazon needs fakes, and fakes need Amazon:
Are you reading it the way I am reading? It literally says “If we stop fake products, we cannot offer more fake products. We want to offer (fake) selection. So we offer (fake) selection”. Let’s deconstruct ‘selection’. If you can afford a $10,000 watch you should be able to ‘select’ it. If you cannot, you should filter results by ‘under $1000 watches’. You should not expect ‘Tag Heuer’ level luxury brands there. But ‘selection’ for a ‘customer-centric’ company means making that Tag Heuer-like products appear as a result for that price filter. Ergo, fakes!
I think there are more people like me (semi-woke who have made peace with ripped-off design, as long as it is a private label brand) and others (unwashed masses wearing Armani suits) that Amazon cannot ignore. Turns out that the population is 228 million people (roughly 70% of the US population). Yes, 2 in 3 of us are ok with buying fake products to signal our vices!
3.3% of the world’s GDP is made of counterfeit products. Applying the same % to Amazon’s GMV and applying an approximate AOV of $40, counterfeits are sold across 228M transactions. I take a little artistic liberty to paint all ye upholders of pristine morality who lack the basic economic sense to realize that you cannot buy Hermes for $25 as willful connoisseurs of genuine fakes.
Need more proof that Amazon cares little? Amazon canceled a pilot with Chicago based 3PM solutions that helped discover fake luxury brand products from billions of pages. In the words of 3PM (who in the goodness of their hearts, won’t be biased at all), Amazon had to act if the data is presented and they didn’t want to. 3PM is, incidentally, founded by Amazon and Walmart alumni. They also have a former investment banker as a founder. So maybe, they aren’t all saints. Maybe, their product was as good as collateralized debt obligations. But let’s just stay on topic and bash Amazon here!
Counterfeits in Amazon are a product of their business model. Friction-free merchant onboarding, friction-free selling and customer-centricity even for moral-less bottom-feeders is their business model. Preventing counterfeits is a problem of scale that doesn’t align with their business model. Even modern platforms like TheRealReal seem more and more like TheFakeFake. All their PR-trained executives could not explain why professional “quality checkers” could not stop fakes. They literally have the bags they sell in their hands. They literally have those big magnifying glasses. Amazon has an even bigger problem. Not all goods it sells goes through its warehouses.
But if anyone can solve it it is Amazon. It can solve the problem in its own backyard if not everywhere. Jeff Bezos once famously said that the job of his executives is not to prevent the death or irrelevance of Amazon. It is to delay it for as long as possible. After Nike’s departure, it just feels like Amazon will have to put up a better show to win the trust of brands or start a slow descent towards irrelevance. As economists say, in the long term we are all dead!