• Swatch talks with Amazon break down over anti-counterfeiting efforts
  • The watchmaker reportedly requested a commitment to proactive policing
  • For many luxury brands, online distribution decisions are tied to exclusivity

This week the Wall Street Journal reported that luxury brands are demanding a firmer commitment from Amazon to police counterfeits on the platform, with talks between the e-commerce giant and Swatch breaking down over Amazon's unwillingness to do more. While the call for increased brand protection mechanisms is persistent, for some luxury brands the decision not to utilise the platform is a wider strategic one, rather than specifically tied to anti-counterfeiting programmes.

In an article headlined Amazon has a luxury problem, reporters Matthew Dalton and Laura Stevens point to the stalemate that resulted in discussions between the Swatch Group – which planned to sell some of its higher end watches on the site but wanted a commitment that Amazon proactively police its site for counterfeits and unauthorised retailers – and the e-commerce giant (which has declined to comment on the Swatch reports). Unable to secure the desired commitment, and therefore putting the collaboration on ice, Swatch chief executive Nick Hayek is quoted as stating: “We add value to them but they should also add value to the brand.”

This breakdown of talks is used by the authors as a springboard to discuss the decision of a number of players to stay off the platform, Drilling down, the piece notes that “the absence of high-end products has hampered Amazon’s push to be a force in the fashion industry, despite years of working to expand the merchandise it sells officially though its website”, while on the flip side “Amazon’s massive customer base makes it difficult for the luxury industry to ignore”.

There are two aspects to this story – the anti-counterfeiting policing dimension and the wider strategic positioning of luxury brands. In terms of the former, while Amazon has seemingly declined to commit to Swatch’s request for enhanced policing, detail on what that entailed is not included in the piece. What is known is that Amazon has been keen to bolster its anti-counterfeiting credentials in the face of criticism and negative media coverage (for example, the coverage sparked by a lawsuit against an Amazon seller that claimed that as much as 90% of items being sold as genuine Apple products by the e-tailer are fakes).

As we noted previously, the company is reported to be staffing up to handle IP complaint investigations and it recently expanded its anti-counterfeiting programme to allow rights holders to register their logos and intellectual property to expedite the removal of counterfeit listings. The Amazon brand registry enables participating brands to benefit from a ‘brand gating’ scheme that identifies authorised sellers and enables rights holders access to action on complaints within hours. Such efforts have resulted in increased brand collaboration – as we reported in June, a high profile coup saw Nike move to make product available through Amazon for the first time.

That the talks with Swatch stalled suggests that the company was looking for efforts which went above and beyond the brand registry offering, specifically proactive policing of listings. The concept is not without precedent. Alibaba has been keen to press its use of big data to proactively scan product listings, and just last week announced that its Taobao.com platform had proactively taken down 28 times more listings than were removed reactively in response to complaints from rights holders (98% of these before a single sale took place).

In the Wall Street Journal piece, an Amazon spokeswoman said the company does have automated systems in place that constantly scan for and block potential counterfeiters, yet Swatch’s complaint is that Amazon’s approach tends to be reactive, so based on rights holder complaints rather than proactive policing. It is likely, then, that such calls will continue going forward.

In reality, the issue of counterfeits is not just a luxury brand issue and there are other factors at play that may also contribute to Amazon’s ‘luxury problem’. First, it is worth noting that it is far from the case that luxury brands are shunning the platform. A number of luxury brands have proactively embraced the distribution channels offered by Amazon – most recently Swarovski, which partnered with Amazon Fashion to establish online brand stores to market its jewellery.

For some that have opted to stay off the Amazon platform, it may be a case of ‘it’s us, not you’. Specifically, in a bid to preserve the allure of luxury goods, in some instances a conscious decision is taken not to sell via mass distribution channels. This is the case with, for example, Coty which recently received a favourable Advocate General opinion, stating that suppliers of luxury goods may prohibit authorised retailers from selling their products on third-party platforms. In this case, Coty is seeking to prohibit a retailer from selling its goods via Amazon, the company allowing partners to market goods online only their own websites as long as they preserve the luxury image of the brand. Meanwhile, last year LVMH Chief Financial Officer Jean-Jacques Guiony told investors in a conference call: “We believe the business of Amazon does not fit with LVMH full stop and it does not fit with our brands.” For LVMH it similarly appears to be about distribution strategy rather than anti-counterfeiting concerns. That is arguably a bigger obstacle to overcome than meeting demand for enhanced anti-counterfeiting efforts.

So, does Amazon have a luxury problem? Perhaps, in terms of attracting a wider universe of high end companies to utilise the platform. But this is not necessarily solely due to anti-counterfeiting issues. Of course, all luxury brands will be concerned with counterfeiting wherever it appears (and will likely support calls for more to be done). However, for some the decision not to utilise the platform is a strategic one, tied up with the preservation of allure and a sense of exclusivity amongst brand loyalists. As the Wall Street Journal report notes, an open marketplace can undermine the strict control luxury brands say is key to maintaining a sense of exclusivity. It could be that even truly counterfeit-free online marketplaces will struggle to attract certain luxury brands.