Over the last 20 years, the digitalization of commerce has fundamentally changed the shopping experience for the better. People can get apparel, food, appliances, physical media, and electronics that spark their interest delivered to their homes regardless of their location.
Recently, several B2B online marketplaces have emerged and offered to bring the benefits of e-commerce to the business world. As a result, analysts expect B2B platforms to make $3.6 trillion in revenue by 2024. It’s currently on track to reach that goal.
However, for all their promise, digital e-commerce platforms are not without their risks. Specifically, businesses have run into a staggering amount of counterfeit merchandise when bringing online marketplaces into their supply chains. That is a severe problem for any business. But it is especially direr for OEMs that depend on electronic components to power their devices and equipment.
That said, companies can take advantage of the benefits digital providers offer once they become knowledgeable about the e-commerce landscape.
Most online marketplaces need to facilitate a high volume of transactions between buyers and third-party vendors to be profitable. For that reason, companies work hard to attract as many sellers as possible to present a wide variety of products. When functioning correctly, these platforms help buyers get their hands on quality merchandise at an appealing price regardless of location.
Unfortunately, the drive to provide the broadest range of choices makes trading hubs vulnerable to manipulation by criminals.
The United States Office of the Trade Representative’s (USTR) “2020 Review of Notorious Markets for Counterfeiting and Piracy” report detailed the link between online trading platform growth and fraudulent domestic goods importation. The Semiconductor Industry Association (SIA) estimates counterfeit electronics cost the semiconductor industry $7.5 billion annually. Worse still, an estimated 15% of spare or replacement semiconductors purchased by the U.S. Pentagon are counterfeit.
For instance, just one e-commerce site saw its third-party sales grow from $100 million in 1999 to $160 billion in 2019. Similarly, federal authorities found that the MSRP value of fake products rose from $45 million in 2000 to $1.4 billion in 2019.
The flood of shipments generated by various e-commerce platforms made it harder for law enforcement to detect fake goods. Moreover, the digitalization of society has given bad actors more tools to help them ply their trade.
Contemporary counterfeiters subvert social media services, domain registries, and payment networks to trick unsuspecting buyers into purchasing fake goods. As criminals have become more sophisticated in their methodologies, providers have started using big data tools to fight back.
In 2017, one large online marketplace provider used software to shut down 180,000 third-party stores for trafficking in fraudulent goods. It also supplied the authorities with information that helped them put 675 counterfeiting operations out of business. Two years later, the same corporation stopped 1,282 fake merchandise manufacturers and distributors from abusing its trading hubs.
As digital platforms grow larger, they attract greater numbers of criminal opportunists.
When compiling its “Notorious Markets” report, the USTR came to an unsettling conclusion. The agency determined that the “greatest risk” of counterfeit goods flowing into the U.S. is the “inadequate policies and inadequate action by e-commerce companies” that bring foreign goods into the country. It singled out a lack of sufficient seller validation and merchandise verification as a major problem.
The USTR flagged one American e-commerce giant for failing to collect enough information on third-party vendors that use its overseas platforms. Several businesses told the USTR the corporation’s insufficient vetting process enabled malicious sellers to misrepresent themselves as reputable enterprises. That verification issue and its onerous reporting process led to fake goods proliferating across its sizeable European marketplaces.
It also criticized an Indonesian firm for hosting numerous knockoff consumer electronics and vehicle parts sellers.
In another case, the organization chided a Chinese B2B vendor for its merchant vetting and product inspection processes. It learned from rights holders that fraudsters worked around its machine and human image recognition systems to sell bogus products. Even after being reported several times, some criminals even continued presenting their wares to the site’s 32 million registered buyers.
A Shanghai-based “social commerce” provider received praise for instituting a test buy program to crack down on fake products. But it was admonished for its inability to stop bad actors from repeatedly relisting their offerings under different names.
The USTR found similar issues plaguing other large online marketplaces based in East Asia, Latin America, South Asia, and Southeast Asia. According to the USTR’s 2022 “Notorious Markets” report many brick-and-mortar shops, even ones considered the “epicenter of the counterfeit electronics trade” have moved to online platforms. The only function of existing stores is more of a trial run to see how counterfeits perform before purchasing.
The bottom line is many firms left their platforms vulnerable to criminal subversion because of their insufficient verification and validation policies. And companies that use those services run the risk of unintentionally purchasing fraudulent goods.
In 2019, analysts estimated $169 billion in fraudulent components moved through the global marketplace. Since U.S. authorities found online platforms facilitate the distribution of counterfeit goods, OEMs might believe the benefits of supply chain digitalization are not worth the risks. But buyers can avoid the pitfalls pervading many online trading hubs by understanding their partners’ priorities.
As an example, numerous e-commerce B2B companies advertise their services on the strength of their massive reach.
The pitch purchasers can benefit from the pricing advantages baked into a service that hosts millions of competing third-party sellers. But the reality is that when firms focus on growth, they unintentionally create ecosystems that criminals can exploit. Then, after establishing a global footprint, they end up spending untold time and money weeding out a legion of fraudsters.
And the higher mounting costs associated with patching critical marketplace flaws get passed on to the users.
Conversely, digital service providers that make quality assurance an essential value do not have to grapple with that problem.
When online companies thoroughly evaluate their suppliers, track their delivery times, and log their product quality, they cultivate healthy ecosystems. By conducting rigorous seller validation, providers take the preemptive steps necessary to keep counterfeit goods off their marketplaces. They also let criminal organizations know their services will not be easily infiltrated and abused.
Maintaining a rigorous supplier vetting policy is the foundation of a trustworthy e-commerce platform.
In addition to better pricing and selection, digitalization allows for optimized product quality assurance. As previously noted, some large corporations are still working out how to keep counterfeit merchandise off their platforms. But Sourceability is different because it exists to serve the specific needs of the electronics industry while possessing certifications in both ISO 9001 and ANSI/ESD S20.20 for standardized quality management system requirements and electrostatic discharge training.
That means it employs a robust digitalized quality control process to ensure the quality of all components passing through its network.
Sourceability employs a highly skilled and comprehensive global quality team to verify product integrity. It utilizes a multi-step inspection process to uncover hidden flaws and microscopic signs of fraudulent imitation. Moreover, it possesses cutting-edge heated chemical, x-ray, acid decapsulation, solderability, and aging testing equipment to weed out any counterfeits that managed to slip through the stringent verification and validation process.
Its team members also adhere to a 3-tier inspection procedure to confirm full part traceability. Buyers and other procurement officials will know every step on their order’s journey as each step is thoroughly documented.
The explosive growth of counterfeiting in the e-commerce era suggests that today’s criminals thrive on lax quality assurance protocols. But Sourceability stops the flow of bogus parts from entering its network and its customers’ supply chains.
It maintains stringent standards and rigorous methods because it is the only way to truly assure component quality. Conducting random buy tests or cursory visual examinations simply does not cut it in the electronic components industry. Operating a marketplace without extensive inspection protocols creates unacceptable risks of subversion and abuse.
For over five years, Sourceability has distinguished itself by harnessing the power of digitalization to mitigate that risk.
Its robust backend infrastructure enables it to collect and disseminate mission-critical information to its global teams. And it continually updates its technological resources to keep one step ahead of the world’s professional counterfeiters.
Sourceability also uses big data tools to make its electronic component e-commerce platform, Sourcengine, transparent and secure. Professional buyers can use the marketplace without worrying if their suppliers are authentic and their part listings are legitimate.
The introduction of new technology into an existing industry always creates uncertainty. Especially when a revolutionary advancement completely transforms a familiar landscape. But with the right partners, OEMs can enjoy the full benefits of digitalized commerce without compromising their standards or risking their reputations.