OpSec Study Shows the Effectiveness of Integrating Social Media and E-Commerce Monitoring in Combating Unauthorized Online Sales

Internet intelligence delivers strategic insights to guide product launch and distribution of consumer electronics

BOSTON--OpSec Security, Inc., the global leader in anti-counterfeiting and brand protection, conducted a study to identify the impact of Internet trading platforms and social media web forums on the market launch and distribution of consumer electronics products. By monitoring popular B2C auctions, B2B trade boards, blogs and forums, significant intelligence is gained about the emergence of grey and counterfeit markets surrounding the introduction of a product into the global marketplace.

The study focused on Kindle e-readers and the market launch of Amazon’s DX model introduced on June 10, 2009.

* On launch day, Kindle DXs were already available for purchase on a major B2B trade board from a company located in China
* A sample of 8 seller listings on a popular trade board had an estimated 40,000 Kindles available within a few weeks after the DX launch
* Suspect Kindle knockoffs were found for sale on trade boards and auctions in colors and languages not sold by Amazon
* Consumers used social media forums to share tips on circumventing Amazon’s U.S. only shipping restrictions, including the use of package forwarding companies
* From June through September, an almost three-fold increase of Kindles (1, 2, and DX models) was offered on eBay auctions, with many sellers offering to ship outside the U.S.

Assess Trade Boards and Auctions for Emergence of Counterfeit and Grey Market Activity

The product launch of a highly anticipated consumer electronics product, such as the Kindle DX, presents a challenge to manufacturers desiring to maintain supply chain control in the global market. Even on the day of launch, Kindle DXs were offered for sale on a B2B trade board raising questions on how the product was acquired.

Thousands of Kindle e-readers were available on trade boards from sellers, many offering significant quantities at deeply discounted prices. One seller offered 2,500 Kindle 2 e-readers per week at a unit price of $65, well below the list price of $299. Of 33 B2B listings offering Kindles when the DX launched, 75% of the sellers were located in Indonesia and China.

A grey market quickly grew of auction sellers offering the Kindle DX at premium prices to meet the demands of consumers in regions who could not buy from Amazon. In the four months since the launch, the quantity of Kindles (all models) available on eBay increased almost three-fold from 1,776 units to 5,092 units, including a ten-fold increase for the DX version from 268 units to 2,970 units. In addition, black and Japanese language Kindle knockoffs were found, neither of which are offered by Amazon.

These findings give impetus to the need to monitor e-commerce platforms to identify black and gray market goods entering the supply chain. As shown with the Kindle, B2B and B2C sites can offer counterfeit and diverted products online.

Monitor Social Media for Insights on Product Availability and Consumer Sentiments

The study monitored social media blogs and forums for comments on how to circumvent Amazon’s shipping restrictions for the Kindle. Until the recent announcement of the international Kindle 2 version, Amazon did not ship Kindles outside the U.S.

Consumers shared information about online sellers, recommended vendors, and ways of obtaining Kindles in countries where they were not intended to be sold. Other than the obvious method of ordering through family and friends, a popular strategy was to find an e-Bay seller that shipped internationally. Another popular approach was the use of a forwarding company. This service circumvented Amazon’s restrictions by shipping the product to a U.S. address, and then forwarding it to the buyer’s international address. In addition, the large majority of DX listings were posted at premium prices indicating the willingness of buyers to pay extra. Consumer demand has been fueled by Amazon’s announcement of stock outs and delayed shipments just weeks after launch, and also by interest for the new DX model in other parts of the world.

The findings from social media supported insights gained from e-commerce monitoring on product availability and distribution. For the Kindle e-reader, Internet intelligence provided strategic insights on demand from international buyers and the growth of the grey market.

Use Internet Intelligence to Understand Product Distribution in the Global Supply Chain

The growth of the Internet as a global marketplace and a worldwide user community means that future product launches of consumer electronics will be accompanied by the rapid emergence of grey and counterfeit markets. Buyers and sellers use the Internet to purchase and promote products, thereby establishing a market for distributing unauthorized and counterfeit goods. Combining market intelligence from e-commerce platforms and social media enables companies to more quickly and effectively respond to emerging threats of counterfeit and gray market goods in the global supply chain.

About OpSec

OpSec Security, Inc. is a wholly-owned division of OpSec Security Group plc (London AIM: OSG). OpSec Security is the global leader in providing anti-counterfeiting technologies, as well as solutions and services for physical and online brand protection, to over 300 brand owners and over 50 governments worldwide. The Group operates manufacturing facilities and laboratories in the USA and the UK, and has sales operations in the Americas, Europe, and Asia. For more information, please see www.opsecsecurity.com, or contact Terri Mock, +1-617-226-3000, or tmock@opsecsecurity.com.