There’s a joke in China which says, “everything is fake but your mother,” or “we can copy everything except your mother.” When it comes to counterfeit goods, no one can beat China. There’s nothing that would escape the scope of China’s counterfeiting factories. From luxury items like Gucci handbags, and Rolex watches, to daily necessities like Duracell batteries, Head & Shoulder shampoo, and so on. This month, Chinese authorities destroyed $69 billion worth of counterfeit products in an operation conducted across 17 provinces and cities.
According to Rouse International’s analysis, approximately 12.5% of China’s total exports and more than 1.5% of its GDP come from counterfeit items. And this hurts everyone, especially the U.S. Earlier this year, a report from the Office of the United States Trade Representative (USTR) pointed out that the country suffers a yearly loss of over $29 billion from global counterfeiting. The USTR also accused China of being “the number one source of counterfeit products in the world.”
Thanks to the rise of e-commerce platforms, counterfeiting businesses have expanded worldwide. In the U.S., Amazon thus becomes the one that takes a direct and brutal hit.
Recently, Amazon announced that it helped China’s local Public Security Bureaus to identify and dismantle three major counterfeiting operations in Guangdong and Jiangxi provinces. The world’s largest e-commerce company reported that law enforcement confiscated 240,000 fake products, including luxury, sports, and automotive brands. In April, the company and Italy’s Salvatore Ferragamo cooperated with Chinese police to crack down on a warehouse in Zheijang province. Hundreds of counterfeits of Ferragamo’s iconic Gancini belt and buckles were seized in this operation. These imitations were supposed to sell on the Amazon platform as authentic goods.
Amazon entered the Chinese market in 2012. The company aggressively recruited sellers onto its platform. Amazon didn’t take long to become a favorite partner to Chinese merchants and the Chinese Communist Party (CCP). According to Chinese financial consultant Rui Ma, Amazon appeared to be very tempting to Chinese sellers in two ways. First, entry is accessible without any barriers. Second, Chinese sellers can obtain mind-blogging high-profit margins because they can set the price however they want. For example, a product can be sold for 0.70 to 0.85 cents (5-6 yuan) on the Chinese e-commerce platform Taobao, but on Amazon, they can sell it for 20-30 times more. Dave Bryant from Ecomcrew has more insights on this aspect. [footage 6:53 – 8:02] To the CCP, cross-border e-commerce means export. It helped China scrape through the trade war with the U.S. under the Trump administration.
This way, Amazon’s business took off in China within just a few years. Sales from Chinese sellers on Amazon increased between 2014 and 2015. By 2017, China accounted for one-third of all foreign vendors on Amazon. But during this time, mentions of the words “fake” or “counterfeit” increased. ReviewMeta’s analysis indicates that the show-up frequency of these words jumped from over 1.7% in 2015 to more than 4.2% in 2019. [image – Source: Wirecutter FEBRUARY 11, 2020]
Now, this has left a terrible impact on Amazon. In the comment section of one of CNBC’s videos about Amazon, thousands of people lamented the counterfeit products. They also pointed out that the Chinese sellers manipulated the reviews on the platform to mislead buyers, which is, sadly, the fact. People seem to have lost trust in Amazon. On a larger scale, brands are leaving Amazon too. [footage 5:28 – 5:50] Birkenstock stopped selling on the platform, denouncing that the e-commerce giant didn’t help the brand deal with fake products. Nike also announced its withdrawal from the platform.
The counterfeiting problem was so severe that in the 2018 report, Amazon admitted, “We also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies. In addition, we could face civil or criminal liability for unlawful activities by our sellers.”
Despite the negative outlook back then, the e-commerce giant has been putting in much effort to deal with the issue. The company heavily invested in setting up its own Counterfeit Crimes Unit. Amazon also improved its legal system and carried out a wipe-out campaign on fake review brokers. It even removed some top Chinese sellers from the platform. Most recently, the company announced that it’s been working with renowned international brands on lawsuits against counterfeiting.
So how do the counterfeit sellers feel when giving honest sellers and big businesses like Amazon such a headache?
Chan, a Chinese replica sneaker seller, appeared on ViceTV in a short documentary in 2018. Chan started his business while studying in a medical school in the UK. Shortly afterward, his business took off, bringing him over a hundred thousand dollars of monthly income. He showed ViceTV’s reporter his apartment, which he rented to stock his replica sneakers. With a British accent and somewhat of a sense of humility, Chan is much favored by Youtube users in the comment section. People deem him a dignified fake shoe seller.
Chen is one person out of possibly millions of Chinese who make money from selling fakes. He’s probably one of the most educated and well-mannered sellers in China. Chan’s standpoint might not speak for all sellers. However, suppose that Chan is one the most dignified sellers out there. Then what Amazon and the U.S. deal with is not all about counterfeiting. They’re facing an issue that no legal action can eliminate— moral decay. They will never be able to control what people want to do. Especially for people who live in the communist atmosphere, driven by materialism, profits and personal interest have become the sole motivation for living.