As described on Amazon’s own brand services site, Amazon Transparency is a program to fight counterfeit products on Amazon.com and give Amazon customers confidence that they are buying authentic products. The following blog post and video cover the following topics:
- The Amazon counterfeit problem and First Sale doctrine
- What is Amazon Transparency
- What Amazon Transparency 2D barcodes look like, and the Sticker vs “Design In” options for brands and Amazon sellers
- Amazon Transparency requirements: trademark, GTIN/UPC, production, Amazon Brand Registry, Transparency registration and quality control
- Amazon Transparency pros and cons
The Amazon counterfeit problem – why there are so many Amazon fakes
The media has reported for years the huge counterfeit problem on Amazon. At a basic level, Amazon mixes products from third-party sellers with manufacturers, which is perfectly OK in many cases thanks to first sale doctrine. This means that if you have purchased inventory to sell that has a trademark or contains copyrighted materials (maybe you got a discount from the manufacturer or you bought stock at a clearance sale) you can turn around and resell it on Amazon or elsewhere, and the trademark or copyright owner can’t stop you. That’s how thousands of third-party sellers got their start, finding closeout deals of new merchandise at local retailers or wholesalers and then turning around to sell it on Amazon.
But there’s a big problem with giving third-party sellers this option. It’s very easy and cheap for sketchy manufacturers, either overseas or in the U.S., to make a cheap copy of a legitimate product and then sell it as a new version of that product. In other words, some sellers are making and selling pirated goods. There are so many SKUs at Amazon right now, so it’s very difficult to police counterfeits coming in. A typical Amazon warehouse has thousands of shipments arriving each day, and the warehouse staff aren’t trained to spot fakes.
As a customer, it’s infuriating. This happened to me years ago when I got a Nintendo DS game for one of my kids, and it was clearly pirated – cheap photocopied sticker, no manufacturer’s seal, and it didn’t work. The jerk who sold it actually had the nerve to protest when we returned it! You can see many more complaints about Amazon fakes all over the Internet, even though Amazon swears it’s not a big problem.
In addition, Amazon has incentives for Amazon Sellers to keep lowering prices, and rewards the cheapest seller with the Amazon “buy box,” which is at the very top of the product page. So what’s happening is you have some sketchy third-party sellers and counterfeiters winning the buy box, because of course they can under undercut the manufacturer if they’re just using a lesser quality materials or cheap labor or some other loophole.
Amazon fakes are a huge problem. And actually it leads to a couple of other problems:
- Brand owners/legitimate manufacturers are really angry that someone is literally stealing money from them AND they’re getting punished with one-star reviews from customers who don’t know the difference.
- Customers are disappointed they are getting knockoffs or lower-quality items.
- Amazon gets negative media attention and lower sales, and have to deal with more angry calls from customers buying the goods as well as from manufacturers who are legitimately angry about pirates copying their products.
Amazon has taken notice, and is starting to tighten the rules on third-party sellers. For certain categories on Amazon (such as watches and video games), Amazon requires sellers to apply to sell goods in those categories. For certain large brands such as Nike or L’Oreal, you have to be an authorized reseller (with documentation) in order to sell them on Amazon. But some counterfeiters find ways around the restrictions, or target brands that aren’t restricted. For those brands, a potential option is Amazon Transparency.
Amazon Transparency: How it works
The following screenshot is from the Transparency website and explains how the program works.
If you are a brand or a manufacturer, the basic idea is you enroll your brand in Amazon Transparency, and then register branded products. You put the 2D Transparency barcodes on your products, which are unique for each unit. This unlike a UPC code, which is the same across all units of a single SKU that are produced at the factory. For the Amazon transparency codes, it’s a different Transparency barcode for each item of each SKU. That’s pretty important, because Amazon can scan these Transparency codes when they are shipped to the warehouse (for instance, via Amazon FBA) to make sure they are legitimate. If a unit is scanned and that barcode has already been scanned, Amazon will immediately know it’s a fake.
If the seller tries to fulfill an item as Amazon FBM (Fulfilled By Merchant), the seller will have to verify the Transparency code on Amazon Seller Central before the listing goes live.
Incidentally, as you can see from the screenshot from the Amazon Transparency website, Amazon wants to make Transparency a platform for ALL retailers. That is, it is encouraging transparency codes to be used not just at Amazon but also on goods sold by other retailers, whether online or brick or mortar. You can imagine what sorts of insights Amazon will get – not only will they know how many verified units Amazon is selling, but potentially how many units other retailers are selling (if they willingly participate) and gain insights into customers who are buying the goods from a source other than Amazon if they bother scanning the Transparency barcode using the official Amazon app to do so. I haven’t seen any retailers complaining about this yet, but it will be a titanic issue for retailers who already resent Amazon getting even more control over online and brick and mortar marketplaces.
On the bottom of the Amazon explanation, when customers buy a product that has the Transparency 2D code, they can use their Amazon app or Transparency app to scan it — not only make sure it’s legitimate, but also to see what Amazon calls “rich unit level information” — where it was produced, when it was produced, etc. In the accompanying video below I show what one of my own products looks like with the Transparency barcode.
Amazon Transparency Requirements
There are quite a few Amazon Transparency Requirements, many of which are not controlled by Amazon. They include:
- Trademarked product (principal register, not secondary)
- UPC Codes/GTIN (purchased from GS1; not cheap!)
- Ability to apply stickers or design-in packaging according to Amazon Transparency specifications
- Registered with Amazon Brand Registry
- Registered with Transparency program
- Quality control and other program requirements
If you already have a trademarked brand and UPC codes and your own production facilities or a trusted manufacturing partner, that’s great. Visit the Amazon Brand Registry and Amazon Transparency website to learn more about applying.
However, if you haven’t dealt with these issues before, you should know that some of them are very time-consuming and costly. For example, getting a trademark on the principal registry will cost at least $650 if you do it on your own, know what you are doing, and get approved without having to submit additional evidence or arguments to the USPTO. Many people use a trademark attorney to help with the application, which will set you back anywhere from $1000 to much more if there’s a problem. No matter how you do it. it will take months to get an answer, and maybe a year or more if you get rejected or have to submit additional evidence to the USPTO. GTINs and UPC codes from GS1 can be obtained very quickly, but there is a real cost involved. Amazon, from what I understand, will not accept transferred GTINs from other firms or resellers on the Internet.
But let’s say you get past these hurdles and get into the Amazon Transparency program. What’s the end result? Confidence that counterfeiters aren’t stealing your money and your customers are getting the real product. In other words, it brings peace of mind, and there is real value to that for brands and manufacturers trying to sell goods on Amazon.
One thing that’s important to remember: There is a cost to this, and Amazon wants BRANDS to pay for it. If you are a small brand and buy codes from Amazon (US$0.05 per code, no volume discounts) and stickers from one of their preferred printing partners (can be US$0.15 or more!), your margins will be squeezed. For some brands, it will be worth the peace of mind. For others, it’s not only an unacceptable cost, it’s an unfair cost considering Amazon created the problem.
NOTE: This is not an official Amazon Transparency video, nor do I represent Amazon. Please visit the official website to learn more about the Amazon Transparency program and its current requirements.