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Old 07-08-2016
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Default CNBC: Amazon's Chinese counterfeit problem is getting worse

Per CNBC: Amazon's Chinese counterfeit problem is getting worse

"Amazon.com is hard at work promoting next week's Prime Day and the more than 100,000 deals available to subscribers. As with all things Amazon, it's intended to be a major party for consumers.

But longtime Amazon sellers like Jamie Whaley are in no mood to celebrate.

A licensed nurse, Whaley started a bedding business on Amazon that reached $700,000 in annual sales within three years. Her patented product called BedBand consists of a set of shock chords, clamps and locks designed to keep fitted bed sheets in place.

Whaley and her husband found quite an audience, selling up to 200 units a day for $13.99 a set. BedBand climbed into the top 200 selling products in the home and kitchen category. That was 2013.

By mid-2015, the business was in a tailspin. Revenue plummeted by half and Whaley was forced to lay off eight employees. Her sheet fastener had been copied by a legion of mostly Chinese knockoffs that undercut BedBand on price and jumped the seller ranks by obtaining scores of reviews that watchdog site ⊗⊗⊗⊗pot.com determined were inauthentic and "harmful for real consumers."

"Toe to toe we'll compete with anybody," said Whaley, who recently moved her family and a warehouse full of straps, clamps and chords from Texas to the mountains of Montana. "When you try to cheat or copy our products, it's a whole different story."
Whaley still counts on Amazon for 90 percent of her revenue but she's actively trying to drive traffic to her own website and partner with other retailers. She's lost all trust in Amazon.


Spend any time surveying Amazon sellers and Whaley's narrative will start sounding like the norm. In Amazon's quest to be the low-cost provider of everything on the planet, the website has morphed into the world's largest flea market — a chaotic, somewhat lawless, bazaar with unlimited inventory.

Always a problem, the counterfeiting issue has exploded this year, sellers say, following Amazon's effort to openly court Chinese manufacturers, weaving them intimately into the company's expansive logistics operation. Merchants are perpetually unsure of who or what may kill their sales on any given day and how much time they'll have to spend hunting down ⊗⊗⊗⊗rs.

Facebook and WhatsApp groups have formed for sellers to voice their complaints and strategize on potential fixes.

In May, CNBC.com reported on a Facebook group, now consisting of over 600 people, whose members have seen their designs for t-shirts, coffee mugs and iPhone cases show up on Amazon at a fraction of the price of the originals. The designers described it as a game of whack-a-mole, where ⊗⊗⊗⊗ pop up more quickly than they're taken down.

It's not a topic you'll likely hear CEO Jeff Bezos discuss. Especially ahead of the second annual Prime Day on Tuesday, when Amazon Prime members get access to new deals about every five minutes. During the inaugural event last year, consumers bought 398 items per second, even as social media blew up with jokes about the quality of the offers.
While Amazon's focus has always been on consumers, the company is plenty aware of emerging seller angst.
In early June, at an invitation-only event for about 300 of the top marketplace merchants, the company's senior vice president of seller services Sebastian Gunningham was grilled by frustrated store owners, according to people with knowledge of the meeting.

During a fireside chat at Amazon's Seattle headquarters, Gunningham was asked repeatedly how the company was going to deal with the many ways that Chinese manufacturers were gaming the system, said the sources, who asked not to be named because attendees had to sign non-disclosure agreements.

An Amazon spokesperson declined to comment.

Outside merchants are a large and growing piece of the Amazon pie.

More than 40 percent of Amazon's unit sales now come through its third-party marketplace. Much of the expansion has occurred since Amazon started opening the floodgates to Chinese manufacturers, who previously had to count on middlemen, brands and private labels to reach global consumers.

Sales from Chinese-based sellers more than doubled in 2015 on Amazon's marketplaces, while the company's total revenue increased 20 percent. And recently, Amazon even registered with the Federal Maritime Commission to provide ocean freight, simplifying the process for Chinese companies to ship goods directly to Amazon fulfillment centers, cutting out costs and inefficiencies.

That's why you can get a box full of Chinese kitchen goods from a variety of sellers delivered in two days from a warehouse in Kentucky.

Critics say Amazon hasn't put the necessary checks in place to manage the influx of counterfeits.

To unsuspecting consumers, ⊗⊗⊗⊗ products can appear legitimate because of the Fulfillment by Amazon program, which lets manufacturers send their goods to Amazon's fulfillment centers and hand over a bigger commission, gaining the stamp of approval that comes with an FBA tag.

Furthermore, Amazon's commingled inventory option bundles together products from different sellers, meaning that a counterfeit jacket could be sent to an Amazon facility by one merchant and actually sold by another.

"Amazon is making money hand over fist from counterfeiters, and they've done about as little as possible for as long as possible to address the issue," said Chris Johnson, an attorney at Johnson & Pham LLP, which focuses on intellectual property and brand enforcement and represents clients including Forever 21, Adobe and OtterBox. "Word is out in the counterfeit community that it's open season on Amazon."

It's not just niche brands like BedBand feeling the pain.
Birkenstock has seen dozens of stores at a time hawking its Arizona Sandal for $79.99, a full $20 below the retail price. The names of the online storefronts change all the time, one day including the monikers Silver Peak Wine Cellar and Ryan Hollifield and the next Keila*Knightley and Bking sewing.

The only way to contact the sellers is by going to their storefront and clicking the "Ask a question" button. On a single day in mid-June, CNBC sent notes to seven sellers on the list, asking how they're able to price the product so cheaply. Every response was the same: "It is a secret."
Red flags are everywhere. Michael Kors has a signature tote bag listed as low as $101 by multiple stores, compared to its $198 retail price. Canada Goose's highly popular Expedition parka sells for $1,000 on its own site and is available for under $650 on Amazon, a price that sellers of the brand say is too good to be true.

"As long as the logo looks legit, people assume you have that item," said a Canada Goose seller, who asked not to be named so as not to cause strain with Amazon.
Representatives from Birkenstock, Michael Kors and Canada Goose declined to comment.

Counterfeiting online is nothing new of course, particularly when it comes to commerce. Alibaba, the Chinese e-retail giant, has been dealing with it since launching in 1999.

Some form of the word counterfeit shows up 30 times in Alibaba's latest annual report, and founder Jack Ma said at a Bloomberg conference in San Francisco last month that cracking down has gotten more difficult because the ⊗⊗⊗⊗ are of "better quality, better prices than the real products, the real names."

Amazon, by contrast, has tried to maintain its image as a clean venue and the trusted place for online buying. There's not a single use of the word counterfeit in its 2015 annual report, and only the last of its two dozen risk factors mentions potential liabilities associated with "fraudulent or unlawful activities of sellers."

Investors certainly haven't expressed concern, bidding the stock up 69 percent in the past year. Amazon's market value of $348 billion is equal to Walgreens, Lowe's, Costco, Target and Macy's combined, after you tack on another $66 billion. It's the sixth most valuable company in the U.S.
The Amazon story has always hinged on giving customers what they want and with top-notch service and speed. Walter Price, a portfolio manager at Allianz Global Investors, said it's no different with counterfeiting.

"If customers can verify that they've bought counterfeit goods, Amazon will push sellers to refund the purchase or they kick the sellers off the site," said Price, who also owns a stake in Alibaba. "Amazon does stick up for the consumer. They put the consumer first, not the merchant."

Sellers that want to cheat have any number of tools at their disposal. One issue that's enraged merchants is the proliferation of hijacked listings, where sellers suddenly see random names jump into their product page and start promoting the item for a cheaper price.

Judah Bergman has been selling on Amazon for two and a half years and his products include a jewelry line under the brand Steeltime. Other merchants have regularly showed up in listings for his double-sided pearl earrings, offering them for under $10, compared to the $17.99 he charges.

"If you want to fight them, you won't have time to do anything else."

While he's able to eventually get the hijackers removed, he loses sales in the process as customers opt for the lower priced option, and he's spent valuable time sending in takedown notices to Amazon.

Making matters worse, when buyers unhappy with the cheaper alternatives leave a bad review, it drags down Bergman's standing because the reviews are all thrown together.

"The next thing you know you've lost sales plus your good star rating," said Bergman. "If you want to fight them, you won't have time to do anything else."

Amazon has an anti-counterfeiting policy in place and responds to infringement notices, investigating and kicking off sellers who break the rules. But the fraudsters move fast, changing the names of their stores and relaunching as quickly as they're removed.

As a marketplace, Amazon isn't legally responsible for keeping counterfeit material off the site as long as it responds to complaints and takes action when it's brought to the company's attention.

Chris McCabe worked as an Amazon merchant account investigator for five years. Since 2014 he's been operating independently on the other side, helping third-party sellers navigate Amazon's rules and processes for staying compliant. He's often hired to help suspended sellers get reinstated.

McCabe said that Amazon's investment in preventing marketplace abuse, a task assigned to the transaction risk management team, is dwarfed by its focus on growth at the AWS division and other projects like the kindle and Amazon Studios.

"They've been reactive, not proactive," said McCabe, who's now based in the Boston area. "Amazon can't watch everyone all the time, and they don't pretend they can."
For Whaley and BedBand, the past 18 months have been a whirlwind since she discovered that copycats were all over her product.

Initially, knockoffs were using her patented shock chord functionality and ripping off her design, she said. Those blatant counterfeits have gone away, with most rival products now using generic elastic straps.

But there are plenty of other ways for competitors to game the system, such as manipulating product reviews.

BedBand, which now sells for $12.99, has over 3,750 reviews and a 4.5-star rating. In the sheet fastener category, it was the most popular item until late 2014, when a number of like products that Whaley had never seen started gathering hundreds of positive reviews, leapfrogging her in the ranking.
Today, after spending five years and $60,000 on patents, BedBand is the number two seller in the category, behind a brand called Nyche Designs, whose top-selling product is priced at $8.99. Nyche is based in China and registered a U.S. trademark in February, according to Trademarkia.

Based on the quality of reviews, Whaley has good reason to be upset. ⊗⊗⊗⊗pot, an independent site that judges the validity of reviews, gives Nyche an F because it "detected product exchange for reviews." In other words, it paid for positive feedback.

Bed Band has an A rating, according to ⊗⊗⊗⊗pot.

"We've never bought a review, and we've never taken the route to give products away for reviews," said Whaley.
Amazon has filed multiple lawsuits in the past year against sites that sell reviews, but Nyche's reviews still include language like this: "I received this item at discount in exchange for an honest and unbiased review."
Nyche did not respond to multiple requests for comment sent to the email address on its website.

Make no mistake, Amazon's business is humming along. Prime is adding members by the truckload, more products are available with faster delivery rates, the Amazon Echo smart speaker is looking like the next killer product and there's even some profit to show investors, thanks largely to the fat margins at AWS

But for a brand built on trust, there are an awful lot of loopholes, and sellers are wondering if their gripes will ever become so problematic that Amazon can no longer sweep them under the rug.

"Amazon is setting up an environment where people feel like they have to shortcut and cheat," said Whaley. "The whole system is being manipulated, and people don't know it."
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The complete step-by-step guide to get back to selling today!

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Old 07-08-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

Everything is ⊗⊗⊗⊗ in this world...
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Old 07-10-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

Boo hoo, we sell in a Laissez-faire and capitalistic economy.

That stuffs made in China in the first place.

But honestly, the quality of the same product branded vs copied is not too different, as it all comes out from the same factory anyway. But brands do what brands do, which is mark up by 300%. Now does the product quality really differ by 300%?

Not that I support copied products, but its just economics...if branded products weren't gunning for 300% markups, the room for copies will be much less. But if you cant sustain your own brand in a open marketplace, and see such drops in sales due to copy-cat (cheaper price products), your obviously not putting the revenue from your 300% markup back into building your brand.

Guess most ppl dont understand what it means to build a brand and business, and rather think their entitled to the entire market just because their "first" somehow.

Last edited by wooha; 07-10-2016 at 03:16 PM.
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Old 07-10-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

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Originally Posted by wooha View Post
But honestly, the quality of the same product branded vs copied is not too different, as it all comes out from the same factory anyway. But brands do what brands do, which is mark up by 300%. Now does the product quality really differ by 300%?
That does not take into account the cost of design and then the months that would go into refining that design as well as all the brand associated advertising.

The raw materials to make something are only a small part of the cost

A lot of high end brands are also not made in China and the quality is very very different.
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  #5  
Old 07-10-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

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Originally Posted by wooha View Post
But brands do what brands do, which is mark up by 300%. Now does the product quality really differ by 300%?
There are about a million holes in your arguments. If a product has 300% margins and customers are willing to pay for it, who cares what the markup is? Obviously that is a great product with huge demand. But, according to you, any product that makes great profit deserves to be coun/terf/eited.

And the original product in main topic of this post sold for $13.99. Super expensive stuff here, lookout everybody.
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Old 07-11-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

Like the article says, Amazon is making too much money to really do something about it.
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Old 07-12-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

Surprised its' taken them this long for anyone to realise, and yes Amazon themselves are most of the problem, it's their marketplace but they rarely deal with the real problems instead they kick off people for minor issues and let the counterfeiters run free. You can easily sell for example disney little mermaid iphone cases and frozen cases and have Amazon themselves dispatch your orders if you ship this stuff to them, they're obviously not checking it's all counterfeit.

...the other main problem would be gangs of chinese sellers creating generic products that ANYONE should be able to list against, and instead anyone not shipping from China (or anyone that's part of the usual chinese seller names) they message creating bogus legal letters to intimidate, failing that they then start to order from you and leave you negative feedbacks in an attempt to kick you off, or get others to do it for them, it's getting to be like a Mafia on there.
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Old 07-12-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

That is an open market. Only strongest persons survive. If you created successful product but can't protect it - it is solely your own fault. As we all know, VeRO agents can kill anyone in a blink of an eye. Counterfeits are there only because these agents are dong their job bad. Ebay and Amazon are trying to filter it, but they can't be 100% sure about authenticity of the items being sold, so the only way to remove ⊗⊗⊗⊗ effectively is to follow VerO agent requests... which are sometimes incorrect, sometimes just not coming. So... protect your brand, or be copied.
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Old 07-13-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

Quote:
Originally Posted by JamesNorth101 View Post
That does not take into account the cost of design and then the months that would go into refining that design as well as all the brand associated advertising.

The raw materials to make something are only a small part of the cost

A lot of high end brands are also not made in China and the quality is very very different.
Exactly. ^^^^^ I am buying less and less from Amazon because they don't easily tell you where the item is shipping from and although I don't mind Chinese the clothes a microscopic to ours and if I wanted to wait 20-30 days for delivery I could purchase from Chinese seller on ebay and for less than on Amazon.
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Old 07-13-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

BTW, nice job Glacier I like reading articles like this. Thank you!
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Old 07-13-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

No problem, glad to be a contributor here :-)
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Old 07-19-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

I bought few aids to grab stuff. All from Amazon was cheap Chinese junk broke same day whereas ones buy at Walmart cost alot more and made in USA. Last years so I could not find in stores so bought at walmart.com instead of thousand ⊗⊗⊗⊗ listing were only two and both were of good quality. When first used Amazon was not like this but last few years gone down hill. So I buy electronics at best buy and limit what buy at amazon. Other things tried buy hard get on Amazon as shows tons of junk go walmart.com there site might not be as easy buy easier find what looking for.
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Old 07-19-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

I spoke on the phone with the author of that CNBC article for 45 minutes the end of last week.

About 10-14% of my orders are from customers doing online arbitrage between the same item, but different asins on Amz.

Amazon is basically getting two sales for north of 10% of all their orders from low intelligence, unsuspecting customers.

I am afraid of biting the hand that feeds me. I advised him that if anyone would like to speak with him I would send them his way. PM me if you would like an introduction.
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Old 07-20-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

It seems the only companies that can really combat this are the ones big enough to have a department of people who do nothing but remove phakes all day long. I can really feel for that lady who made that bedsheet product. She spent over $60k on patents, but how does a small company with limited resources fight these things? You would probably have to sue the infringing company located in China IN CHINA. Most small companies do not have the resources to do that.

I have no sympathy for companies that sell $5,000 purses. Those are ridiculously overpriced. But I can see the arguments made by movie studios - counterfeiters claim it only costs 10 cents to make a DVD and that is probably true, but the value of the DVD, the costs incurred are not in the manufacturing of the DVD itself, but the cost of getting the images onto that DVD in the first place. The last Harry Potter movie cost over $200 million. If everyone starts pirating movies, then no investors are going to pony up that kind of cash to make a movie. And I feel terrible for the small guys, because they are always the ones that get hurt the most and can least afford it.

And yes, Amazon DOES bear some responsibility. Nobody expects them to catch everything, but when a problem is identified, they could afford to create a unit of people who would watch for infringing products.

So it is not that I am on the side of the big companies here, but I DO feel bad for the little guys.
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Old 07-21-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

I had an old business on Amazon and for my niche, I was in the top 100 ranking. Once my item became popular, I noticed a few Chinese knock-offs pop-up. I went the route of contacting the sellers and having them remove the item. I would kill one roach and 3-4 more would spawn in the same week. It got to the point to where they undercut my original price down 80% and I couldn't compete. I reported it to Amazon and they did nothing. Even today, I can still see my old product being sold by 100+ Chinese sellers. I had to drop the product all together. =/
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Old 07-21-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

True analogy about the cockroaches doL - very difficult to slay all once 1 comes out of the woodwork, it's flood gates open time
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Old 10-16-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

About two months ago Amazon started to demand from all sellers to apply for a Brand approval. Doesn't matter what you are selling, if the product is a well known brand, the seller has to present either an authorization letter from the brand owner or from three invoices from authorized distributors. We used to sell Polo Ralph Lauren products, in big volumes, purchasing them at Polo Outlet Store on sales and clearances and even at ralhlauen.com, when they had deep discounted sales.
Now Amazon does not accept those sources - no online invoices, no receipts from the brick and stone stores.
Same is with electronics, shoes, etc. The brand owner will never give such authorization to anyone for sales on smacin or eBay. Amazon is basically eliminating the "small"'guy. Brand owners can sell now only on their own sites or from their stores, including places like Macy's, Best Buy... you see the problem.
Does anyone have the same issue and what's the solution here?
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Old 10-17-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

Good I stop buying from Amazon as tired getting garbage. I only buy stuff I been buying for years. Amazon easiest to use but on alot no point looking for real stuff I go to harder to use stuff that blocks ⊗⊗⊗⊗ sellers. Best Buy probably happy I did it as they got all business used send to Amazon. Its not for fact there site easy to use. No point rewarding site ok with selling awful ⊗⊗⊗⊗ Chinese garbage. Fact amazon crashed last Cyber Monday just speed up my process. I spent fraction at Amazon this year what spend last year. Best Buy beats Amazon on new release movies almost 99% of time. Amazon seems get greedy not as good a deal as was in past. Another point for Best Buy I get free 2 day shipping via UPS. Amazon sends bulk packages via USPS. Just wish best Buy was better on saying when arrive most orders arrive one day later. I hate USPS as UPS much better. Get emails day before delivered and right as delivered automatically. Than can see online all packages for few months back. Only plus USPS is get before lunch usually in same 2 hour time frame. Mail always there before I get up. I hate mornings.

If others stopped buying they might of been forced to take action.

Last edited by jjohnson777; 10-17-2016 at 01:40 AM.
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Old 10-21-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

The chinese have it that as soon as you match their price, their price automatically lowers by a dollar so you can never beat them. They are willing to go down to a penny. I want them off! They are ruining my sales profit!
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Old 10-22-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

The simple solution is to ban Chinese sellers.

Amazon would lose some revenue, but it would clean up the marketplace big time in the process.

The only way it would happen is if consumers become aware and start to make a stink. Unfortunately customers seem to believe Amazon has this halo over their heads and its a clean marketplace. Ebay has the stink on them now, and so will amazon eventually.

Lastly, it's absolutely hilarious to me that sellers can now easily mix their ⊗⊗⊗⊗ in with real products... they're getting exactly what they deserve with their model.
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Old 10-25-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

https://www.yahoo.com/finance/news/a...140007731.html
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Old 10-25-2016
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Default Re: CNBC: Amazon's Chinese counterfeit problem is getting worse

Amazon counterfeiters wreak havoc on artists and small businesses
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