The Problem With Retailer Marketplaces

Traditional brick-and-mortar giants like Walmart, Macy’s, and Bed Bath & Beyond are expanding their business model into open marketplaces, allowing third-party sellers to sign up and sell through the branded online platforms.

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While these changes present huge growth opportunities for the retailers themselves, as well as the third-party sellers on the platforms, it also brings major risks in the form of IP infringement against legitimate brands. 

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Vulnerabilities of Emerging Marketplaces

What makes these new marketplaces so susceptible? Inexperience in brand protection plays a big part of it. While they’re compliant with basic regulations—especially the ones based in the US and the EU—there’s a risk that they lack the proactive measures that come with years of battling counterfeiters.

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Unlike seasoned players such as Amazon, which have had years to develop a plethora of in-house anti-counterfeiting strategies, these brands may pose a greater risk as they open their doors to new selling partners. 

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That’s not to say these marketplaces are a complete hotbed for IP infringement. Many of these retailers have opened their marketplaces with quite stringent vetting processes. Some are already set up with a more cautious approach to inviting new sellers, compared to certain marketplaces based in China, for example, which have long functioned as a smooth selling portal for counterfeiters. 

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The threat to brands posed by these new retailers-turned-marketplaces is not that they turn a total blind eye to IP infringements, but that the sudden, swift growth in external sellers on the platform may allow bad actors to enter the supply stream unnoticed. 

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Even the marketplaces with stronger vetting processes—which we cover in the next section below—do present a new risk to brands. 

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While they may not let unknown people sign up and sell immediately, coordinated brand impersonation could see counterfeiters sneaking into these retailers’ supply stream and passing themselves off as the authentic brand. With the retailers unable to present a 100% guarantee to catch impersonators, the responsibility to catch fraudsters ultimately falls on the actual brands themselves.

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Brand Risks on New Retailer Marketplaces

Long-established retailers like Walmart, Bed Bath & Beyond, and Macy’s carry immense consumer trust. Shoppers have decades of experience buying from these retailers, but may not fully understand the nature of their third-party marketplace, trusting that the retailer itself provides the items it sells. 

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This is perhaps the biggest challenge with these new marketplaces. No one would expect to shop at a brick-and-mortar store and leave with a counterfeit product. So, when these retailers open up online marketplaces, the same assumptions are made by consumers. Without fully understanding the third-party nature of some of the products for sale, shoppers let their guard down.

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The idea that a counterfeit product could slip into the supply stream and arrive at their doorstep is not considered at all. So, when a counterfeit product is purchased unknowingly, the experience can be highly negative for all parties involved—except the counterfeiter, of course.

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The customer suffers with their bad experience of a subpar, or even dangerous product. This negative experience is then put squarely onto the retailer for selling the item, and onto the brand being ripped off. 

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This experience leads to a number of direct harms against the brand:

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• Brand trust and loyalty are stripped away immediately. If the customer’s final belief is that the product came from the brand itself, they will simply never buy from them again.
• Handling returned items can quickly become unmanageable. Between accepting the wave of products coming back, reviewing the authenticity of the products, and dealing with customers, the process causes havoc with the customer service workers.
• One-star reviews and negative social media comments flooding in are a common reaction to targeted counterfeiting. As customers feel robbed from their experience by a brand that seemingly won’t take responsibility, they often seek to warn others. 

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Which Retailers Opened Third-Party Marketplaces?

Here's a look at some of these retailers and their approaches to third-party marketplaces:

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Walmart

Walmart has created an extensive online marketplace with one of the fastest sign-ups on the list, promising vendors to “Start selling in minutes”, while using fulfillment centers similar to Amazon’s FBA to store products.

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Bed Bath & Beyond

Bed Bath & Beyond has a more selective process for accepting third-party sellers. They partner with vendors that align with their brand and product standards, with a vetting process that takes weeks to complete, with the aim of cutting out low-quality or IP-infringing sellers. 

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Sears & Kmart

Sears, along with its subsidiary Kmart, has opened the doors to third-party sellers on Sears Marketplace. They provide a platform for mostly US-based sellers at a monthly cost, along with sellers’ fees, following an application and vetting process.

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Macy’s

Macy's marketplace also has a more curated approach, allowing only selected vendors who meet their quality and brand criteria to join their marketplace, with the intent to maintain the brand's integrity and customer trust.

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Michaels

Michaels, known for its arts and crafts supplies, has opened a marketplace for third-party sellers. There's an application and review process, after which they offer a no-fee marketplace, relying on commissions from third-party sellers. 

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Target

Target has launched Target Plus, an invitation-only marketplace for American businesses to sell through its platform. The information required to become a Target Plus seller is extensive, which is likely to deter or catch many sellers who would infringe on brands’ IP.

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Chinese Marketplace Accounts on American Marketplaces

Beyond the individual sellers who now have access to these up-and-coming marketplaces, there’s also the interesting phenomenon of marketplaces opening seller channels on other marketplaces. 

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One big example is Joybuy, selling on Walmart’s marketplace as well as others. Joybuy is owned by JD.com, a Chinese-owned online marketplace with its own extensive history of selling products that infringe on legitimate brands’ IP. 

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This adds an additional layer of “need to know” for customers. While shopping on Walmart, they now have to understand that the products they’re buying aren’t necessarily produced or sourced by Walmart itself, and that the seller they are buying from is a subsidiary of a larger risky marketplace. 

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Best Practices for Brand Owners

First, keep a close eye on your product listings on these newer marketplaces. This is essential in staying aware of how your brand appears to customs in different online spaces, and in preventing counterfeiters from exploiting gaps in your information. 

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Second, leverage every tool the marketplace provides. Many platforms offer brand protection features, such as reporting tools and monitoring services. Make sure you’re familiar with these resources and use them to their full potential. These tools are your first line of defense against counterfeit products and fraudulent sellers.

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Third, build a relationship with the marketplace’s support team. Ensure they know that you’re the true brand owner early on, so you have the initiative if an impersonator comes along and sells on the marketplace. When any suspicious activity appears, report it as soon as you spot it, and then work with the marketplace to avoid it happening again.

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