Amazon Briefing: Inside Amazon’s complicated counterfeit fighting service

A separate program for Amazon sellers — called Transparency — sent out a message announcing that it, too, was going to provide tools to help customers more directly engage with brands on Amazon. In the email, Transparency said the new feature would let sellers “offer customers marketing promotions” and “encourage repeat purchases” when customers scanned a barcode.

Amazon didn’t comment to me on the Transparency announcement, except to say that the Transparency tool was distinct from the more generalized “Manage Your Customer Engagement” tool it recently introduced. But the addition of a customer engagement feature to Transparency seems to be a way to rebrand — and potentially increase the value proposition for — what has been a largely neglected feature within the company’s counterfeit-fighting umbrella.

The promise of Transparency
In 2017, Amazon rolled out Transparency as a way to help sellers crack down on counterfeits. The pitch was simple: sellers who sign up for Transparency can pay for QR codes to be added to their products. Those codes help ensure every product is authentic. If a product is enrolled in Transparency, Amazon will only accept that product into its warehouse if the Transparency code is there. The codes are hard to fake, which means that counterfeiters who rely on Fulfillment by Amazon are fully locked out. (This of course leaves holes if a counterfeiter were to do their own fulfillment.)

Transparency was also supposed to increase customer comfort with Amazon. When a product arrives, customers can scan the code to verify its authenticity.

But the program appears to have stagnated since its launch. Darren Saul, chief executive officer at the marketplace agency Vendo, said that, in his experience, few sellers — and even fewer customers — seem to know what it is. “It hasn’t been as widely adopted as Amazon would like or was hoping for,” he said.

That isn’t to say Transparency doesn’t work. In a narrow sense, the program can be an effective way to curb counterfeits. “I think it’s very helpful for larger-scale brands,” said Nicolas Martinez, vp of marketing at Vendo. He noted that although few of his clients have enrolled in Transparency, and of those some have dropped out, “one of our clients found it incredibly helpful just purely from a counterfeit measure.”

An arduous — and expensive — process
Sellers buy a Transparency bar code from Amazon for $0.05 apiece, generally purchasing a spreadsheet of thousands of QR codes at a time. Sellers then send off that spreadsheet of logos to one of Amazon’s approved list of printers, who ship them off to the product’s manufacturer.

One seller enrolled in Transparency, who preferred to remain anonymous, said that, factoring in printing costs, he spends $0.15 to $0.20 adding logos for every single unit of product. “Some people might say, oh that doesn’t sound like much, but when you’re talking about thousands of these things, it really adds up,” said the seller. “And of course Amazon never wants you to raise prices accordingly.”

Transparency also has some stringent requirements. If a product is enrolled in Transparency, every single time that product is manufactured and sold, it needs to have a Transparency logo on it — whether or not Amazon is involved in the transaction.

Say someone is selling a dog toy — if they enroll that toy in Amazon Transparency, they have to pay Amazon for labels everywhere they sell the toy, whether it’s on Target.com or on a Shopify site or even at a physical grocery store. That means, because of the way the program works, even units sold on sites or in stores with no relationship to Amazon may come bearing Amazon’s QR codes — and each time, Amazon will get a small profit. (According to Saul, Amazon does sometimes conduct audits of products in Transparency to make sure they always have the logo, even when sold off of Amazon.)

For big brands, the extra fees and logistical challenges that brings are not really a concern, said Martinez, but he said, “we wouldn’t advise too many smaller sellers to enroll,” especially because “it is cumbersome from a supply chain standpoint” to meet those off-Amazon requirements.

Amazon’s Transparency pivot
Although the details remain thin, the added ability for sellers to send promotions to customers when they scan the Transparency codes seems to be a step toward reintroducing the program to skeptical or unaware sellers.

Saul said that, in recent weeks, Amazon has sent other emails encouraging sellers who want to avoid counterfeits to sign up for Transparency. He also noted that Amazon has continued to launch Transparency in new markets overseas.

It’s still an obscure program, and one that lacks real appeal to smaller sellers. Amazon seems to be working to reframe the program and “enhance those tools by adding value in the app,” Saul said. For now, the focus seems to be on getting merchants on board. “I think they’re still attacking it from the brand or seller awareness,” he said.

The next step would be introduce customers to the service, which is likely a long way off. “I don’t think consumers are aware of it at all,” Saul said.

TV is Amazon’s next advertising frontier

At the NewFronts digital advertising conference on Monday, Amazon announced that its over-the-top (OTT) ads — a segment of advertising that refers to streaming services offered over the internet, and which in Amazon’s case spans Twitch, Fire TV, IMDb TV and more — now reach 120 monthly active viewers.

That is about six times higher than in early 2020, the last time Amazon disclosed the reach of its OTT ads, when together all of those services reached just 20 million people.

Adam Epstein, vp of growth at Perpetua, told me that “without question OTT is the number one priority for all of Amazon’s ad teams” this year. The rise of OTT is important because it represents one of the first Amazon ad units that doesn’t target people close to the point of purchase. Instead, OTT offers a much broader set of customers, who aren’t necessarily already in a shopping mindset.

Amazon’s main pitch is that its offerings are more targeted than traditional TV advertisements. Amazon has a ton of first-party data on its shoppers, plus a unique ability to directly measure whether an ad converted into a purchase. That way, people who view, say, Thursday Night Football can be served different OTT ads targeted to their specific demographic.

That not only allows for more sophisticated placements, but it also makes TV advertising accessible even to sellers without huge pockets to pay for a traditional linear TV ad. “Some of these smaller brands that wouldn’t even think about doing a linear TV ad can now leverage Amazon OTT,” said Epstein.

It’s also all part of Amazon’s growing ad division, whose profits the company has been using to subsidize its fulfillment side. In the first quarter of 2021, Amazon’s “Other” revenue category — a large share of which is advertising — jumped 73% year over year, up to $6.905 billion. And Amazon’s overall ad revenue hit $14.63 billion last year, making it a distant but rapidly surging third-place challenger in the digital ad world, after Facebook ($35.22 billion) and Google ($67.21 billion). OTT might end up carrying it even further this year.

The Amazon seller rollup boom continues:

• A German company called Razor Group just brought in a massive fundraising haul of $400 million to acquire and scale smaller Amazon-native brands.
• The rollup phenomenon is moving to India: Global Bees, a spinoff of the retailer FirstCry, just raised $75 million to become that company’s Thrasio — including boasting an investment from SoftBank.

What we covered:

• Amazon more than tripled its profits in the last year, according to the company’s first-quarter earnings report — driven, in part, by a big year for the company’s ads business. But even as its marketplace booms, other new-to-e-commerce competitors, like Facebook, are growing fast.
• Instagram is rewriting its affiliate link system — and one expert who I spoke to predicted that, depending on what those changes look like, they could potentially turn Instagram into one of Amazon’s “top five” traffic sources.
• Right on schedule with Amazon’s embrace of TV advertising, retailers and DTC brands are shifting more of their ad budgets to connected TV.