E-commerce Entrepreneurism: Best Option For 21st Century Employment?

can e-commerce save the rust beltIs ecommerce one of the best opportunities for entrepreneurs? Can it help save the “Rust Belt”?

Over the next ten minutes we’ll:

  1. Explore the current state of the E-commerce Union;
  2. Review recent news items that could affect the vertical; and
  3. Close with further reading links for people thinking of starting an online retail business.

E-commerce is the New Investment Banking: Growth Estimates Are Astounding

Pundits have posited: Brick-and-mortar stores are going the way of the horse-and-buggy; barring a catastrophic event, online retail will be with us forever, in some form or another.

Binny Bansal, co-founder of Flipkart.com, painted the prosperous picture, explaining, “Times have changed. Today, the biggest recruiters in the premier institutions aren’t consultancy or financial firms but the e-commerce companies.”

Sound like an exaggeration? Check out these facts and figures:

  1. Analysts predict that ecommerce will be a $523-billion-dollar market — in the U.S. alone— by 2020.
  2. In 2016, third-party sellers on Amazon shipped over 2 billion items to 185 countries.
  3. 71% of shoppers believe they will get a better deal online than in a store (which means more and more shoppers are flocking to online retail platforms).

Societal and Marketplace Shifts Effecting E-commerce

One Million Jobs?

Business luminary Jack Ma, Alibaba’s founder, tucked behind Trump’s doors during the transition. He emerged pledging to “create 1 million American jobs.”

Media outlets alit: Would Alibaba really hire a million Americans?

In a statement, Ma clarified:

“We specifically talked about … supporting 1 million small businesses, especially in the Midwest of America. Small businesses on the platform selling products — agriculture products and America services — to China and Asia, because we’re pretty big in Asia.”

In other words, Alibaba isn’t hiring a million U.S. workers in the heartland. Instead, the company wants American businesses to sell directly to Chinese citizens via Alibaba.

Debate: Is that really the same thing as “creating 1 million American jobs”? Furthermore, do you think it will work?

Arguments stack up on both sides.

China is home to over a billion people (compared to about 320 million in the U.S.), and its e-commerce market is expected to reach $840 billion by 2021 (almost double the estimates for the United States). Moreover, the Chinese middle class is growing — and they’re in the market for American goods. As such, the conditions are ripe for small American businesses looking to expand their markets. Theoretically, there’s enormous growth potential.

Of course, there’s a counter argument.

Several analysts scoffed at Ma’s economic seduction. For starters, China’s laws prevent  over-profiting by foreign entities. So, let’s say a small U.S. business takes off in China. At some point, when the profits surpassed a certain threshold (high, no doubt), that small U.S. business would be forced to partner with a Chinese entity — and relinquish a certain amount of control — to keep expanding in the region. (That said, many people think the trade off is worth it.)

Automation: The True Job Thief?

President Trump promised to reinvigorate the American heartland by reviving factory jobs previously lost overseas; and a lot of people voted for that promise.

But, (politics aside), the pink elephant in the room is braying: U.S. manufacturing output hasn’t rapidly decreased over the past 30 years; the number of U.S. manufacturing jobs has. And that loss isn’t solely the fault of offshore plants (they do play a small roll, but not enough to fix the decline). Over the past two decades, companies invested in technology. Because of automation, what once took 10 people, may now only take 2.

It’s a tough pill to swallow, but those factory jobs probably aren’t coming back — at least not the same way and in the same volume. So the question becomes: What can fill the gap? And right now, e-commerce looks like a profitable bet.

Starting An E-Commerce Business

Starting an e-commerce business may be easier than you think. It doesn’t require a trust fund’s worth of capital, nor copious amounts of official paperwork. Just create an account with an online retail platform that allows third-party sellers (Amazon, eBay, Etsy, Jet, Walmart, et cetera) and start selling.

Of course you’ll need procure and promote your wares, which takes times and skill — and yes, a bit of startup capital. Also, to avoid a liability disaster, it’s wise to create a business entity for your ecommerce business. But guess what? People regularly accomplish all these things on a $1,500 budget. In fact, one e-commerce legend started his company with $300; today it’s a multi-million dollar operation.

Further reading links

Questions For An E-commerce Business Attorney?

Our firm, Kelly / Warner, regularly works with online sellers and marketers. We assist with everything from account suspension to product counterfeiting to online payment processing issues. Additionally, our team performs marketing compliance audits and handles the business formation process, step-by-step. Whatever your e-commerce legal needs, we’re here to help.

Got A Product Idea? Start An FBA Business and Revive Your Local Economy!

Start an FBA businessWant to be the next Shark Tank millionaire, but unsure how? Four words: Start an FBA business. In this post, we’ll:

  • Outline the Fulfillment by Amazon (FBA) program;
  • Explain why the time is now to start an FBA business and how they’re helping to revive local economies; and
  • Review a few legal points all new FBA sellers should consider.

At the end, we’ll hook you up with further reading links.

Comfortable? Ready to start? Great! Let’s do this.

What Is Fulfillment by Amazon (FBA)?

Billed as a “pick, pack, and ship” service, FBA members ship inventories to Amazon warehouses instead of their homes, offices, or private warehouses. What’s the benefit of sending directly to Amazon? You don’t have to worry about the logistical and administrative headaches associated with inventory and shipping.

When an order comes in, Amazon picks the item from the shelf, packs it, and then ships it. On their end, sellers get notifications, updated inventory reports, and, of course, proceeds from sales (minus FBA fees).

Customer isn’t satisfied? No problem, Amazon also handles the return process.

Why Is It A Great Time To Start An FBA Business?

Amazon has always cared about invention and long-term thinking — and its FBA program embodies these core values. Since its inception, the operation has grown exponentially and stands to become a major — and sustainable — economic niche.

Marketplace sages predict that, within a matter of years, online retail will be the new investment banking. In other words, ecommerce is where the money is (or, at least, where the money is going).

Check out these stats for 2016:

  • FBA sellers shipped over 2 billion items.
  • Amazon sellers, from over 130 countries, fulfilled orders for customers in 185 countries.
  • The number of FBA sellers that reached $100,000 in sales grew by 30 percent.

People Buy Online

Customers conquered their online shopping fears. Internet retailers are taking over. In the U.S. alone, experts expect the industry to reach $485 billion by 2021 — not to mention overseas opportunities.

So, if you want to be America’s next rags-to-riches story, go where the shoppers are — online.

FBA Growth = Local Growth

Not only are FBA sellers killing it online, but their efforts are spilling offline. According to analysts, over the past few years, Fulfillment by Amazon entrepreneurs have created approximately 600,000 small business jobs in their local communities.

Extra Credit Reading & Help

Are you leaping into the FBA Ocean? If you do give it a whirl, arm yourself with knowledge. To help out, we’ve compiled some links.

Get Answers To Your FBA Business Questions

Got questions about starting an FBA business or other online retail venture? Give us a call. Our team has assisted hundreds — if not thousands — of entrepreneurs and startups with various Internet law and online business matters, from minor governance issues to complex litigation support.

To learn more about Kelly / Warner, head over to the “About Us” section. Interested in reading more about e-commerce case studies and business tips? Digitally ambulate your way over to the e-commerce resource section.

Blacklisting Alibaba: What Does It Mean For Online Sellers?

Picture of Alibaba marketing material to accompany blog post about blacklisting Alibaba
The USTR finally got around to blacklisting Alibaba.

That’s right, Alibaba’s Taobao flea-market boomeranged back onto the U.S. Trade Representative’s Notorious Markets List, a Scarlet-A register of websites and marketplaces accused of cozying up to counterfeiters.

Is the news a shock? Not really. Capitol Hill has been grumbling — loudly — about the site’s perceived piracy problems for years. (Actually, this is the second time Alibaba made the list.)

Alibaba: We Do A Lot To Fight Counterfeiting

Predictably, Alibaba isn’t thrilled. A company president admonished:

“We are far more effective and advanced in [intellectual property rights] protection than when the USTR took us off the list four years ago. The decision ignores the real work Alibaba has done to protect IP rights holders and assist law enforcement to bring counterfeiters to justice.”

Last year, Alibaba did expand anti-counterfeit efforts. And as it happens, because of those efforts, people are questioning this latest development (which we’ll get to below). But, according to the USTR, the company hasn’t done enough, explaining:

“While recent steps set positive expectations for the future, current levels of reported counterfeiting and piracy are unacceptably high.”

Will Alibaba’s Spot on the Notorious Markets List Affect Online Sellers?

So, what does “blacklisting Alibaba” mean for FBA and other online sellers? Very little, actually.

Yes, the Notorious Markets List is a government production — and we use the word “production” purposefully, because it’s really just a political theater prop; listed parties don’t suffer sanctions. Essentially, the Notorious Markets List is the USTR’s version of Santa’s naughty list.

That said, it is a reputation blow. If customers grow leery of regional products, it could effect folks who manufacturer products in China, or buy from Alibaba vendors.

Blacklisting Alibaba: Fair or Shortsighted?

Not everyone is praising the USTR’s decision.

On Forbes.com, Michael Zakkour explained why the decision might have been wrong.

He reasons:

While the designation does not carry any official sanction or penalty[,] it does have the effect of muddying the truth about Alibaba’s marketplaces and the important role the company is playing in the evolution of cross-border commerce and the re-imagination of the retail model.

First we must clarify that Alibaba has two major platforms for selling brands to Chinese consumers. Taobao is a platform for individuals and third party companies to sell merchandise on a C2C basis. The company’s B2C marketplace, Tmall, is the platform where global and Chinese brands create flagship stores to sell direct to consumers. Tmall, the more important platform to global retailers and brands, is virtually counterfeit-proof.

Zakkour also outlines his three arguments for why the USTR erred in blacklisting Alibaba.

  1. Online counterfeits are a global scourge that brands from all over the world have to combat on a daily basis.
  2. [Listing Alibaba on the Notorious Markets List is akin to] Cutting off the nose to spite the face.
  3. Alibaba has made a massive and sincere effort to eliminate fakes from Taobao.

Zakkour’s article is worth the read for anybody involved in cross-border e-commerce. For similar news, head to our online retail section.

***

Kelly / Warner’s e-commerce law attorneys have assisted hundreds of online businesses — of all sizes — with all manners or Internet retail issues. Get in touch to start solving.

Amazon Counterfeit: Online Retailer Finally Waging War On Knockoffs

Picture of knockoff McDonalds to accompany blog post about Amazon counterfeit plansThe Amazon counterfeit outbreak may improve! The online retailer has rallied the troops! After a whole lot of grumbling — and A-to-Z reporting — the online retailer is finally coordinating a campaign against counterfeiters. That’s right, e-commerce impresarios: Bezo’s behemoth has vowed to make “fighting phonies a major goal for 2017.” (And the crowd cheers, “HUZZAH!”)

The worldwide counterfeit crisis has hulked into a $500 billion epidemic, so Amazon’s efforts are welcome. But will it work? Can Amazon efficaciously fight product fraud? Moreover, what’s the attack plan? Is beefing up fraud departments — and vowing “zero tolerance for the sale of counterfeit items” — really going to work? Or is Amazon just tossing around PR platitudes to placate the people?

Why Is The Amazon Counterfeit Problem Growing?

Before we analyze Amazon’s counterfeit situation, let’s look at why the platform is morphing into a knockoff bonanza.

  • Easy Signup: Online retail is fertile entrepreneurial soil, in part because the low barrier to entry. You don’t need a round of VC funding to start a private label e-commerce company. All it takes is hard work, a minimal cash outlay, and, in most cases, an Amazon account. (I say “in most cases” because Amazon is the largest online retailer in the country, but other platforms do exist. Amazon just happens to be the most popular.) Consequently, easy signup also attracts ne’er-do-wells. And since fraudsters tend to hop from account to account, catching counterfeiters can become a frustrating game of whack-a-mole.
  • Where The Shoppers Are: Counterfeiters don’t make money unless people actually buy what they’re hawking. In other words, they need to be where people are shopping. Right now, that’s Amazon.com, Alibaba.com, Jet.com, eBay, Etsy, (and yes, we see you Walmart.com, climbing up the third-party online retail ranks).

Analysis: Will Amazon Be Able To Effectively Tackle Its Counterfeit Problem?

Vowing to war with fraudsters is fine — encouraging, even. But will the talk give way to tangible results? Will Amazon be able to shoo counterfeiters off its platform?

As we mentioned above, Amazon’s platform is both a blessing and a curse. Though startup costs are low, which is ideal for honest entrepreneurs, rakes are also drawn to the platform’s open borders — because evading capture becomes that much easier when you can duck and run without much monitoring.

Now, does that mean Amazon’s open platform is prohibitive when it comes to a counterfeit crackdown? No. If the company appropriately directs resources to account monitoring, inquiry research, user education, and customer service, change is possible. And, according to reports, it appears the online retailer is doing just that. Amazon announced plans to bolster its fraud departments and develop better ways to process counterfeit complaints and inquiries.

The Importance of Educating Consumers

Educating users about counterfeit issues is imperative. Studies have proven it time and again: When people know better, they do better. In other words, if it’s drilled into the public discourse that a) knockoffs weaken the economy and b) counterfeit products are more dangerous, then people will stay away. Educate consumers on the tell-tale signs of knockoff artists (sketchy return policies, rock bottom price, etc.).

Did A Failed Sport Merch Deal Spawn The Knockoff Task Force?

The chat on the street is that failed negotiations between Amazon and a pair of professional sports leagues kicked the online retailer into anti-counterfeit gear. Apparently, knockoff concerns stalled merchandise deals with the NFL and MLB.

Are We In The Midst Of An Amazon Exodus? Not Quite Yet.

Are brands leaving Amazon is droves? No. Not in droves. But the troops are growing restless, and some brands have jumped ship. To wit: Hippie footwear favorite, Birkenstock, recently peaced-out of Amazon, citing counterfeit concerns. Another example? At the end of 2016 — after a well-executed sting operation — Apple sued third-party sellers over branded power supply knockoffs.

Amazon Counterfeit: Tips for Fending Off Thieves

Since catching counterfeiters can prove taxing, are sellers struck by scammers automatically screwed? Not at all. Brands have successfully litigated against — and shut down — fake product purveyors.

But what’s better than winning an Amazon counterfeit lawsuit? Avoiding one altogether.

Certain tactics repel counterfeiters like citronella repels mosquitoes — (in other words, yeah, they mostly work; but a determined fraudster / mosquito will find a way).

Four Anti-Counterfeit Tactics

So, what’s the trick to shooing scammers? Well, counterfeiters prey on easy targets; so, become unattractive to crooks. How? Some suggestions:

  • Vet the supply chain like your business depends on it, because it does! Find reliable manufacturing, design, and shipping partners. This is one of those times, in life, when paying a little more for a reputable manufacturer, will, in the long run, be more cost effective than the cheaper option (which will inevitably devolve into costly headaches).
  • Use Amazon’s brand registry, even if you don’t sell on Amazon. Since it’s the world’s largest retailer, Amazon has its own brand registry program. Businesses can register brands directly with the site, which better allows Amazon to recognize and handle product hijacking issues if they arise. Moreover, brand registry gives sellers considerable control over the product page — another counterfeit deterrent.
  • Customize the product packaging. Not only do people notice and appreciate a special “wrapping” effort, but the differentiation comes in handy for A-to-Z claims and counterfeit lawsuits. Moreover, customized packaging also works as a deterrent. Fraudsters prefer vulnerable targets, and it’s easier to copy something basic and nonspecific. (Hey, counterfeiters consider costs, too!) This is not to say that packaging must be expensive, just unique.
  • Educate buyers. On websites and product pages, list the legitimate re-sellers and extol the dangers of cheap knockoffs. Heck, if you’re so inclined, point out counterfeiter’s slagging effect on the economy. Also, remind buyers that going cheap can be costly in the long run — because knockoffs are more likely to break or not work as advertised — (and try getting a refund from a fraudster).

Our Team Is Here To Help Your Team

The online retail market is exploding, which is fantastic. But with expansion comes new schemes, frauds, and business challenges.

That’s where we come in.

Our team — Aaron, Daniel, Raees, Hansen, and Rachel (a.k.a., Kelly / Warner Law) — help online sellers (both individuals and brands) overcome business impediments. In the past, we’ve successfully helped clients:

  • Establish business entities for e-commerce ventures;
  • Revive suspended merchant accounts;
  • Remove defamatory reviews;
  • Rectify payment processing issues; and
  • Shutdown counterfeiters;

In addition to Amazon counterfeit matters, Kelly / Warner also handle issues related to online marketing, payment processing, intellectual property, and false advertising.

And yes, we’re priced with the online entrepreneur in mind. Give us a call. We may know the exact move to solve your problem quickly.

eBay Defamation Case Study: Jeweler v. Buyer

picture of eBay signage to accompany a blog post about eBay defamationThis post is about an eBay defamation case currently making its way through the courts. Our firm, Kelly / Warner, doesn’t represent either side. We do, however, help folks in similar situations.

If you’re here to read about a customer review defamation case, keep scrolling. If you’re struggling with an online reputation issue, Kelly / Warner can help. Get in touch today; let’s start weighing your legal options.

Introductions and self-shout-outs aside, without further ado, we present The Case of the eBay Ring Refund

eBay Defamation Case Study: Unsatisfied Client v. Jeweler

Refund Confusion Results In Legal Tussle

Several months ago, a woman (whom we’ll call “Alice”) bought a ring from an eBay store; she split the purchase between two credit cards.

Unfortunately, Alice decided the ring wasn’t for her and initiated the return process. At first, the jeweler didn’t realize that Alice had used two cards and only refunded one.

That’s when things supposedly took a vengeful turn.

Business Owner Said…

Allegedly, the refund confusion compelled Alice to create a phony Yelp page. But Alice didn’t use her own information. Instead, she purportedly created a fake Yelp page under the jeweler’s name — and for the coup de grâce, littered it with negative reviews, including an accusation of “[stealing] thousands of dollars through this diamond scam.”

Customer Said…

No way, insists Alice, who swears she is not the one. In a statement, Alice shared her side of the story:

“[T]here were two other people involved in this dispute with the eBay seller and they were the ones who posted on Yelp and other online sites. I have email evidence that I did not write any of the comments. The plaintiff’s eBay account was shut down due to her misconduct based on eBay’s investigation.”

Reviews Lead To Job Insecurity For Plaintiff and Defendant

The jeweler suffered serious setbacks because of the reviews. Customers canceled orders; eBay removed listings; Intuit even canceled her payment processing account.

Alice didn’t fare any better. You see, for the past decade, she reportedly had worked for the Chamber of Commerce, but lost her job soon after this defamation debacle. Her former employer refused to comment on Alice’s departure, but when asked about the situation, she said, “I am considering filing a countersuit for defamation of character leading to loss of income.”

The Difference Between Bad Reviews and Defamatory Reviews

Judging from online discussions, many people seem to think businesses can sue over negative reviews on sites like (but not limited to) Yelp, eBay, Ripoff Report, and Amazon.

Not true.

Free Speech is an American solemnity. Since the Founding Fathers distributed The Federalists Papers, our nation has enjoyed a long and storied history of public criticism. Every person on U.S. soil can shout their opinions from the top of Denali or a digital pedestal.

But we can’t publicly lie about a person or business, to the point of material hardship. Ask yourself: What would you do if a customer or colleague spread rumors about your circumstances or business? Would you shrug it off, citing free speech, even if the fib destroyed your livelihood?

Winning an eBay Defamation Case

How can plaintiffs win online review lawsuits? Every case is different, but at the very least, claimants must convince a judge or jury that the defendants:

  • Made false statements of fact, which caused material harm to befall the plaintiffs; and
  • Acted negligently — or with actual malice — in publishing or broadcasting the declaration.

Considering An eBay Defamation Lawsuit?

Are you weathering a reputation storm? Wondering whether or not you can sue for defamation? Our team regularly assists people overcome reputation challenges.

Get in touch to talk about your situation.

Will Trump’s Presidency Crush The Ecommerce Market?

picture of word TAX on computer to accompany a blog post about possible ecommerce tariff from TrumpA 45% tariff on all Chinese imports; that’s what Donald Trump promised supporters. Subsequently, U.S. ecommerce entrepreneurs who use Chinese manufacturers may be wondering: Are we about to be thumped by Trump?

What’s the answer? Will the ecommerce sector suffer under Trump’s administration?

(Can we be blunt? Good. Thanks.) Look, if you voted for the Republican candidate, you’re probably thinking, “Everything will be great, including ecommerce markets! Sellers have nothing to worry about!” If you didn’t cast your ballot for the real estate scion, your thoughts probably veer somewhere near, “It’s the end of the world as we know it, especially for ecommerce entrepreneurs!”

The truth, history consistently proves, likely rests between the two extremes. So, in that spirit, let’s chuck partisan rhetoric into the recycling bin and take a few minutes to dispassionately assess whether or not a Trump presidency will have a destabilizing effect on ecommerce businesses.

First things First: What’s A Tariff?

Are tariffs the same as taxes? Technically, a tariff is a type of tax; specifically, a tax on imported goods and services (in rare instances). According to Investopedia:

“Tariffs are used to restrict trade, as they increase the price of imported goods and services, making them more expensive to consumers. They are one of several tools available to shape trade policy.”

Tariffs are typically a per unit charge, remitted during international custom inspections, and have three primary purposes:

  • Increase the cost of imports, to stimulate domestic demand for the same product;
  • Shift currency appreciation values; and
  • Create government revenue.

Tariffs are not one-size-fits-all measures and have far-reaching financial effects.

(Housekeeping Note: Since we’re talking about the possible effects of Trump’s presidency on ecommerce businesses, the discussion will focus on issues related to imported goods.)

Second things Second: The Current State of the Ecommerce Scene

According to the U.S. Commerce Department, for the sixth year in a row, the ecommerce sector is skyrocketing. 2015 figures show that online product sales accounted for a third of the country’s retail growth — and that number jumps significantly if fuel and automobile acquisitions (which aren’t readily available to buy online) are struck from the calculation.

Last year, online sales totaled $341.7 billion, a 14.6% increase from the previous year.

In 2015, alone, Fulfillment by Amazon sellers shipped over a billion items to more than 185 countries. As such, traditional big-box retailers, like Wal-Mart, are beefing up their ecommerce offerings to compete with established third-party retail platforms like Amazon and Jet.

Ecommerce Exploding

Why is the online retail sector growing like bamboo? In a word: globalization. Anybody who is willing to roll up their sleeves, do the research, pick the right product, and exert some elbow grease can build an online retail operation.

Some people may ask, “But how? Doesn’t it cost a fortune to get products manufactured? Isn’t significant startup capital required?”

Not anymore, thanks to websites like Alibaba.com.

Alibaba.com: The Chinese Ecommerce Site Loved By U.S. Sellers

What’s Alibaba.com?

An online marketplace of out China, Alibaba is a popular supply chain stop used by throngs of U.S. ecommerce businesses. Think of Alibaba as an online Costco; users can purchase products, in bulk, for less.

Even more enticing? People with product invention ideas can shop for Chinese manufacturing services on Alibaba. Why use overseas fabricators? Cost. Items commissioned from Asian manufacturers are significantly less expensive than stateside alternatives.

The Catch-22 of Today’s Ecommerce Environment

So, as you’ve probably already surmised, the current ecommerce setup is a classic catch-22.

Globalization, technology, and the implementation of free trade principals have fueled entrepreneurism by lowering startup costs — which, in turn, has bolstered the economy.

But then there’s the flip side.

All those manufacturing jobs, which were once manna for a stable middle class, sailed overseas, leaving economically devastated regions in their wake.

So now, as a nation, we find ourselves saddled with a Sophie’s choice: Do we hamstring the aborning ecommerce market — and subsequently small business growth — by keeping import fees to an absolute minimum? Or do we hike tariff prices in an attempt to save traditional manufacturing jobs, in an increasingly competitive global market?

The President’s Tariff Power

What’s the next piece of this puzzle? Presidential privilege. Does the U.S. President have the power to impose tariffs without legislative oversight or approval?

If this were a shock jock podcast, we’d ominously answer, “Yes.” Because technically, yes, both the 1965 Trade Expansion Act and the 1974 Trade Act give POTUS significant leeway to negotiate import-export agreements, including tariff rate hikes.

But what, exactly, constitutes “significant leeway?”

How The Trans-Pacific Partnership Plays A Role

Enter the TPP, or Trans-Pacific Partnership. During the campaign we heard it mentioned — a lot — though typically in passing.

And it’s no wonder that the candidates didn’t dig deep into TPP on the trail.

An excruciatingly complex treaty, the agreement particulars don’t lend themselves well to stump speeches. But for this discussion, let’s turn our attention to the Trade Preferences Extension Act — a provision tucked away in the TPP. Passed in 2015, the statute allows sitting Presidents to draft and present trade bills to Congress. According to the edict, Congress can then either approve or disapprove the President’s measure, but not amend or filibuster it.

Which Way Will Representatives Role?

With a majority Republican Congress, the likelihood of legislators waving through a tariff increase, in the name of job stimulation, is high.

HOWEVER — and it’s a big however — representatives of both the Republican and Democratic persuasions are beholden to donors — donors with serious commerce interests. And a sizable portion of corporate America is more concerned about keeping free trade avenues open than bringing manufacturing jobs back to the U.S.

But at this point, all we can do is speculate. It’ll certainly be interesting to see how the Congressional vote breaks if the new administration does present a trade agreement early on.

War, Emergencies, and National Security Issues Give POTUS More Tariff Negotiating Powers

Section 122 of the 1974 Trade Act also allows for a 150-day (5 month) window wherein the sitting President can enact an “across-the-board” tariff, on all imported goods, for national security purposes. After the 150 days, however, Congress must approve the measure or it becomes unenforceable.

The ’64 trade act is also teeming with executive trade privilege. Under the statute, presidents can:

  • Unilaterally impose any tariffs “during time of war.” And no, “war,” in this context, doesn’t mean a widely recognized world war. In fact, in 1971, nearly 20 years after the Korean conflict had ended, Richard Nixon evoked the privilege, on a flimsy administrative thread, to enact a blanket 10% tariff hike. Pundits seem confident that Trump could cite U.S. Special Forces in Lybia and Syria to warrant the “war tariff.”

 

  • Levy tariffs, on specific goods, during a “national emergency.” And again, in this context, an issue of national security could be something as simple as “we’re losing jobs.” These types of tariffs usually target specific goods. For example, President Obama enacted a 35% tariff on Chinese tire imports after taking office, and China countered with its own tariffs.

So while Trump’s ability to impose economic measures, unilaterally, may be limited, circumstances allowing, he could impose tariffs (as high as 45%) by arguing that China’s actions were causing economic harm in the U.S.

But if Trump did do that, would the impact be disastrous?

Trump’s Potential Tariffs: Possible Impact

So now that we know what can and can’t happen, let’s look at the potential impact.

If Trump imposed a 45% tariff on certain goods, like electronics or steel, then the price of imported electronics or steel from China would likely rise.  Importers would then be faced with a choice: produce the goods domestically or look elsewhere. And depending on the product’s makeup, reproducing it domestically may not be possible.

Regardless, if the cost of any given product rises, consumers will be forced to choose between a) spending more on the product and less on other things, b) not buying the product at all, or c) finding an alternative.

But remember, it works both ways; if the U.S. imposes levies on a product from a specific country, and said country responds with their own tariffs, their citizens will also be faced with the same dilemma as stateside consumers. It’s the ultimate game of chicken.

It All Depends On Your Product

Bottom line: for ecommerce sellers, the potential impact of a Trump tariff really depends on the product and where its manufactured.  Targeted goods could see a hike in customs fees, which would likely be passed on to customers in the form of a price increase, and depending on the good, could lead to a drop in demand.  The scenario may be a bit nerve wracking for Amazon sellers that have private label products produced overseas and imported from China.

Diversify To Survive

In the event of a tariff hike on goods imported from China, Sellers in countries not saddled with the tariff (for arguments sake, let’s choose Malaysia) could — and would — swoop in and undercut American sellers.  Because of this, we always recommend having back up manufacturing plans in other countries (or at least get the balls rolling).

To further gird against potential fee hikes, ecommerce sellers should consider stocking up on products before the tariff lands or finding a tariff-free substitute.  Unfortunately, predicting replacement goods may require swami-like skills.

Lastly, look to expand sales in other countries.  If Brits and Canadians aren’t burdened with tariff cost concerns, they may just prove to be the perfect new sales stream.

Tying It All Together

Let’s recap.

  • Trump vowed to slap a 45% tariff on all Chinese imports as part of an economic stimulus plan.
  • Many U.S.-based ecommerce businesses use Chinese suppliers for cost-saving reasons.
  • The Executive Branch does enjoy significant trade privileges, which Trump could, conceivably, use to make good on campaign promises.
  • The only obstacle to a White House imposed tariff hike is Congress. And at this point, it’s anybody’s guess as to which way it will swing. Lest we not forget, Trump’s road to the Oval Office involved a lot of anti-establishment threats; rank and file representatives could prove to be less than enthusiastic about flying the Executive Branch’s banner.
  • Politicians must also answer to donors. And in many cases, those donors have a vested interest in keeping Sino-American trade avenues wide open.

Will Trump’s administration likely brandish its trade privileges during negotiations? Sure. They’re bargaining chips. In a way, he’d be a fool not to. But at some point, restraint will probably prevail, because neither the Executive or Legislative bodies want to be responsible for hurling the country into a Great Recession on account of an ill-considered, quickly implemented tariff hike.

Final Thoughts: Best Tactics

So, what’s the best tact for ecommerce entrepreneurs at this juncture? If you want to play it safe, consider moving monies to your shipping / import budget, regionally diversify your production, and start targeting buyers in other countries.

In the short term, the worst case scenario is a 45% tariff on specific goods from specific countries. In the coming months, as Trump continues to build his transition team and Cabinet, we’ll all have a clearer picture of the administration’s ethos and its likely impact on the ecommerce industry.

Ebook Business Update: Discount-For-Review Exemptions and Pricing Wars

Graphics of books on a laptop screen to accompany a blog post about the ebook business

Ebook Business Legal News: Authors Can Still Give Out Free Advanced Copies Of Books, In Exchange For Honest Reviews

Did you hear about the changes in Amazon’s online review policy? Basically, sellers can no longer offer free or discounted products in exchange for fair and honest reviews.

Alas, dear writers, there is an exception: ebooks!

Since Gutenberg first pimped his press to the public, authors have given out free advanced copies in exchange for reviews; the practice is the publishing industry’s primary marketing artery. (Think about it: Who would’ve plunked down dimes for the then unknown Thoreau’s Walden, if it didn’t include a forward by his bud, the popular Ralph Emerson?)

How can sellers leverage the ebook exemption in Amazon’s discount-for-review policy? It depends on the product. For example, service providers reliably attract new clients by developing niche ebooks. Ask yourself: Can you do the same for your product?

Ebook Business Performance News: Digital v. Paper Pricing Wars Lumber On

For years, paper publishers and Amazon have unwittingly found themselves in a polygamous marriage. Sure, certain benefits keep them happily bound (Amazon is the country’s largest book distributor), but the relationship is also plagued with heaps of jealousy, resentment, suspicion, and, of course, power struggling.

The Brinkmanship Of Book Pricing

It all started when Amazon successfully hooked readers on ebooks, and the paper-book market took the bullet; bookstores were lined up in front of a firing squad.

But traditionalists fought back. In an arguably injudicious move — which perhaps revealed the old-industry-guard’s detrimental and intractable shortsightedness — the paper publishers sued for the right to set ebook pricing…and won.

But it was a Pyrrhic Victory, of sorts.

Why?

Because Amazon buys books at wholesale and still controls paperback / hardback pricing on the site. So, when the publishers hiked ebook costs, Amazon started pushing paper books at a lower-than-retail cost. And now, according to a recent article in Tech Crunch, ebook sales are down 22.7% compared to 2015. (Ay, Dios libro! Can’t the publishers all just get along!?)

Nice To Meet You

Self-published authors regularly become entangled in intellectual property confrontations; plagiarism is also a big problem — as are writers who deploy phony defamatory reviews to disparage competitors.

We help authors overcome these obstacles. If you’re grappling with an online publishing business or legal problem, we’re here to help. Get in touch; we’ll chat and come up with solutions to your ebook business challenges.

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Holiday FBA Legal News: Projections, Prime, and Pirates

computer festooned in garland to accompany blog post about holiday FBA sellers newsHoliday shopping season is upon us. So, let’s take a minute to dissect a bit of ecommerce industry news…using a lawyer’s scalpel.

Holiday Prognosis For FBA Sellers = Less Than Ideal

Unfortunately, this holiday season may be a rocky one for some FBA sellers — especially neophytes.

Why?

Amazon is restricting warehouse services until December 19th. In past years, the online retailer implemented a handful of category-specific cutoffs to ensure sufficient processing time for the holidays, but this year’s blanket mandate is a first.

Why is Amazon doing it? The online retailer explained:

We are restricting shipments from new-to-FBA sellers to ensure we have the capacity necessary to quickly receive and store inventory and ship products to customers. If new FBA sellers have not completed their first shipment to Amazon before October 10, 2016, we encourage them to start shipping to Amazon after December 19, 2016. If the situation changes before December 19, we will notify them by email. We encourage sellers to continue selling on Amazon and fulfilling orders directly to customers.

In short, it’s all about warehouse capacity; unpopular products clog floors and hamstring the distribution process, which has the potential to create a perfect customer service storm, and ultimately cause a complaint tsunami to crash down on Amazon.

The announcement shocked some folks. But should it have? Perhaps not. Earlier in the year, Amazon began forcing certain sellers to reclaim unsold inventory. Hindsight being 20/20, pundits are now wondering: Did we all ignore an important bellwether?

A market analyst further explained:

Looking at the last couple holiday seasons, Amazon realized one thing that can help is better management or optimization of inventory on hand for holiday purchases. They’re looking at available capacity in terms of both third-party and first-party inventory, and clearly being more aggressive in managing what additional products are going to be sent to those DCs before the end of the year.

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Amazon Prime In China

Prime finally arrived in a giant country obsessed with overseas products — China. The expansion could be an opportunity boon for savvy U.S. sellers.

Cheaper than its stateside counterpart, China’s Prime costs $57. Amazon cut the price to lure users in an already saturated market. But some pundits are skeptical because regional e-commerce competitors already offer free shipping packages, for less.

So, why push Prime onto an already crowded pitch? Ben Cavender, a senior analyst at China Market Research Group in Shanghai, explained:

If they can offer products and brands the other guys aren’t, this could really work for them. They have so much data about what goods are popular overseas, they may be able to anticipate what products will be popular … in China.

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Alibaba Is Still Fighting To Avoid The Infamous Pirates List

Dubbed “the bad boys of retail” by a U.S. executive, trade groups, like the AAFA, are practically begging officials to slap Alibaba back on the “notorious markets list” — an index of online and offline piracy souks. The threat has been lingering for several months, and Alibaba made the latest move by sending a statement to the U.S. Trade Representative, which, in part, read:

We routinely collaborate with brands, associations, and regulators to maintain the integrity of our marketplaces. Our recent USTR [United States Trade Representative] submissions describe our steadfast efforts to fight counterfeiters online and the sources of such production offline. It also reflects our very strong commitment towards intellectual property rights protection.

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Need Help With An E-commerce Business Issue?

Our firm, Kelly / Warner, regularly assists ecommerce entrepreneurs with routine business issues and aberrant legal matters. What do we do? Things like (but not limited to):

  1. Help people form asset-protecting businesses to avoid personal liability.
  2. Negotiate with websites, like Amazon, on account reinstatement issues.
  3. Act as counsel for enterprises involved in overseas shipping and marketing.
  4. Perform advertising and marketing compliance reviews.
  5. Handle payment processing setbacks and setups.

To learn more about us, click here. If you’re ready to talk, schedule a conversation.

Amazon Sues Over Fake Reviews: FBA News

Picture of fake dollar bill to accompany a blog post about Amazon sues over fake reviews

Amazon Does Not Suffer Fools Fake Reviews

Amazon sues over fake reviews, and actively engages courts to enforce its “zero tolerance” stance. Recently, the company filed yet another lawsuit against several phony feedback facilitators.

Amazon Sues Over Fake Reviews

In the past year alone, the online retailer has already sued hundreds of businesses and individuals who create and deploy fake reviews. (You can read about other instances here, here, and here.)

Why Does Amazon Hate Fake Reviews?

Amazon — (and the Federal Trade Commission, for that matter) — views fake reviews as an act of unfair competition. Or, in legalese, buying fake reviews violates Section 5 of the FTC Act because the practice qualifies as an intentional attempt to mislead consumers.

Amazon explained its position to TechCrunch

“Our goal is to eliminate the incentives for sellers to engage in review abuse and shut down this ecosystem around fraudulent reviews in exchange for compensation. As long as this type of abuse exists, we will continue to take enforcement and legal action against sellers participating in fraudulent reviews.”

Discount-For-Review Programs Are Also Against Amazon Policy

The news comes in the wake of Amazon’s announcement to purge the site of incentivized reviews (exception: books).

What does this mean for e-commerce entrepreneurs? In all probability, traditional advertising will make a triumphant comeback.

Is Amazon Hamstringing Startups?

In addition to investor cynicism, Amazon’s recent crackdowns have sparked a concern flame in the e-commerce industry. Is Amazon, in a way, raising the barrier of entry way too high, by ultimately forcing startups to outlay a larger initial marketing spend?

Fake Reviews v. Discount-For-Reviews: Both Are Now No-Nos on Amazon

What is the difference between fake reviews and discount-for-review programs? The former conspicuously violates Federal marketing regulations; the latter is (perhaps, it’s now more accurate to say, “was”) an enormously helpful startup marketing tool — which also spawned an entire promotional services niche, feedback facilitation.

Or, to put it simply: discount-for-review programs helped grow the online business economy.

Difficult But Necessary?

On account of Amazon’s no-holds-barred approach to exterminating solicited reviews, a big e-commerce question now looms: Do Amazon’s actions fall into the “difficult-but-necessary” category? Did company quants crunch numbers and discover that its third-party selling programs were ballooning at a breakneck — and unsustainable — speed, flooding the platform with potentially problematic digital detritus?

Because here’s the thing: Amazon is currently the top-dog, and as such, greatly exposed. It must be careful. Other online retailers are patiently crouching in the tall weeds, waiting for the perfect opportunity to pounce — and that opportunity could be Amazon’s deteriorating respectability. After all, if the platform becomes synonymous with counterfeit goods and phony reviews, the public will start to look elsewhere.

Adjust To Survive

Now, does all this news spell doom and gloom for FBA sellers? No. Surviving amounts to adjusting. Brands and marketers should consider:

  • Launching products at a low price, along with a well-executed customer satisfaction email campaign, which encourages consumers to leave reviews.
  • Readjusting budgets to include other types of “Off Amazon” marketing efforts.
  • Adding an unexpected packaging surprise. Why? Because people are more likely to leave a review if they’re delighted by an unanticipated treat. This tactic also has the added advantage of acting as a counterfeit deterrent.

Need Advice From An Amazon E-Commerce Attorney?

Our firm helps business owners overcome online review challenges, in addition to other Internet business issues, like account suspensions, counterfeiting, and intellectual property troubles.

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Supplement Marketers: Are You Crossing The Language Compliance Line?

picture of apple filled with dietary supplements to accompany blog post about supplement marketersLegal advice for supplement marketers: Be careful wording promotional materials. Strict rules apply. Breaking them could cost you millions.

FDA Takes Notice Of Trade Show Marketing Materials

Picture it (TM Sophia Petrillo). March 2016; the Natural Products Expo West Center [wavy lines transport us to a flashback]…

Health enthusiasts buzzed round the nutraceutical carnival; aromatherapy dominated olfactory senses, and a Washington State supplement brand charmed marketing materials into recycled tote bags.

Several weeks later, the material found its way to the FDA, who in turn issued a stern warning about “non-compliant disease claims.”

What Phrases Should Supplement Marketers Double Check?

So, with what wording did the FDA take issue? Here’s a list:

  • “…used in herbal medicine to help slow the progression of disorders for the eye…”
  • “…lowers blood pressure in hypertensive individuals…”
  • “…lower cholesterol levels…”
  • “…protects against cardiovascular diseases…”
  • “…slow the progression of diabetic and hypertensive retinopathy…”
  • “…protect against development of cancerous prostate cell lines…”
  • “…clinically effective in treatment of alcoholic cirrhosis…”
  • “Clinically improves cognitive function [for Alzheimer’s, vascular or mixed dementia patients].”

Are the above expressions always out of bounds? No. It’s important to understand that context is key.

Play it safe by having a marketing lawyer review your advertising materials before launching a campaign — everything from your website to trade show pass outs.

Interested in other marketing legal issues? Jump this way.

Are you a supplement marketer in need of a compliance review? Get in touch.

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Amazon’s New Review Policy: Big Changes

Picture of two business people on couch to accompany blog post about Amazon’s new review policy
Amazon’s new review policy crashed into Planet-Online-Retail, and now feedback facilitators are working round the clock to adjust business models.

Let’s take 3 minutes to outline the situation — in plain language — and examine how the change will affect Amazon sellers and reviewers.

How Amazon Reviews Used To Work

Before this e-commerce October surprise, Amazon let sellers offer discounts in exchange for product reviews, so long as the reviewer included proper disclosures. The system seemed to work and even spawned review facilitation businesses that helped vendors plan and execute discount-for-review programs.

But Amazon never seemed entirely comfortable with paid reviews, of any ilk. In fact, to combat the trend, platform engineers deployed a “learned algorithm that gives more weight to newer, more helpful reviews” and implemented stricter “verified purchase” badge requirements.

Amazon has even sued a few unlucky pay-for-review services, which you can read about here and here.

Amazon’s New Review Policy Points

So, what was the big change? In short: Sellers can no longer offer free products and discounts in exchange for a review. Here is a handful of specific points:

  • Sellers can’t use third-party services to loophole around the restriction.
  • The policy took effect immediately, but vendors shouldn’t worry about past posts. However, Amazon may remove old reviews “if they are excessive, and don’t comply with prior policy.”
  • Sellers CAN “continue to offer discounts and promotions as long as they are not offered in exchange for reviews.
  • Ignoring Amazon’s new review policy is grounds for account suspension.
  • Review facilitators can no longer require members to leave reviews.

Authors Are Exempt From Amazon’s New Review Rules

Which segment of Amazon World doesn’t have to worry about the new review guidelines? Authors. Giving away advanced copies of a book, in exchange for a review, is a publishing industry solemnity — and the online retail giant doesn’t want to disturb the ancient institution. In Amazon’s exact words, the company will “continue to allow the age-old practice of providing advance review copies of books.”

What’s VINE Got To Do With It?

Discount-for-feedback programs are strictly prohibited “unless […] facilitated through the Amazon Vine program.”

Wait, what?

Yep, Amazon is now the only acceptable channel for early offer arrangements. But even that’s a slight misnomer because Amazon doesn’t “incentivize [Vine members to give] positive star ratings, attempt to influence the content of reviews, or even require a review to be written.”

Is Amazon Sticking It To The Proverbial “Little Guy”?

Amazon’s new review policy press release states that “when done carefully,” incentivized reviews “can be helpful to customers by providing a foundation of reviews for new or less well-known products.”

To put it another way: Amazon admits that “incentivized reviews” help online retail startups, but it’s outlawing the practice regardless? Apparently so.

Now, does this mean it’ll be impossible to start a successful FBA store? Not at all. Most review facilitators have already operationally adjusted to the change.

But beyond that, in the simple terms, people like reviewing products. Stick to an effective marketing plan — which includes follow-up e-mails and superior customer service — and you shouldn’t notice a seismic change in sales.

Online Retail Legal Reminders and Considerations

Before our 3-minutes are up, we wanted to leave you with 3 legally minded thoughts:

  • “Unfair and deceptive marketing” rules do apply. Adhere to them or risk and FTC investigation and fine.
  • In light of Amazon’s new review policy, feedback services should make a Herculean effort to contact their review-writers’ networks. Don’t forget, a review that includes something to the effect of “received at a discount for an honest and unbiased review,” is now non-compliant.
  • Account suspension is reversible in some instances. Talk with an online retail consultant who can help pinpoint the exact problem, and provide the best plan of action to restore your account.

Good luck with Amazon’s new review policy. If you have questions, get in touch.

Luxury Counterfeit Law: Kering v. Alibaba

luxury counterfeit lawsuitAlibaba.com and a behemoth fashion company are entangled in a luxury counterfeit lawsuit. Let’s take a look.

The Cast: A Luxury Brand to Rule Them All v. Online Retail Giant

Before we get to the lawsuit, let’s establish the players.

Kering

Kering is a huge fashion holding company for sport and luxury brands like Yves Saint Lauren, Gucci, McQueen, Brioni, and Puma. (Fun Fact: Kering’s CEO, François-Henri Pinault, is married to actress Salma Hayek.)

Alibaba.com

Alibaba.com (at the time of writing) is the #2 tech company in China and a major online retail hub. Almost everybody in the product marketing industry interacts with Alibaba.com in some capacity. Like Amazon.com, Alibaba.com is an expanding Borg-like force.

Kering v. Alibaba.com: The Clash of The Retailers

Product Marketing Legal Overview

Let’s be blunt: More often than not, especially lately, items bearing luxury tags are made in China. Why? You know the answer: cheaper labor. “Then how come luxury items cost so much?” Again, you know the answer: brand status is commerce’s co-pilot. “So, then, where does all that luxury money go if not to the people making the products?” Bingo! Back to the luxury companies who are  trading mostly in marketing, not manufacturing.

A retail revolution Is afoot: Asian factories are growing frustrated with the disparity. After all, who appreciates doing most of the work and reaping the least amount of profits? Nobody. So, Chinese manufacturers began a “Quality Made in China” initiative in an attempt to bypass luxury marketing middlemen, like Kering. Let’s put it this way: if “Made in the USA” is about patriotism, the Chinese effort is about globalism.

Luxury Counterfeit Law Claim

So, back to the lawsuit.

In an attempt to knockout knockoffs, Kering sued Alibaba, claiming various intellectual property infringements and — rather dramatically — racketeering.

Racketeering, you ask? Here’s the argument: Alibaba allegedly collaborated with fourteen counterfeiters, by allowing vendors to sell phony products on its site, over an extended period, to deliberately cheat Kering of profits.

Alibaba insists the claims are baseless. So much so that Jack Ma, the online retailer’s founder, vowed to lose in court rather than settle. Why isn’t Ma compromising? Only he knows; but to wager a guess, it’s probably because a settlement would thrust Alibaba into an extremely vulnerable cash flow position — which could also effect U.S. online retail companies. Moreover, a racketeering conviction, in a case like this, has the power to hamstring the global market — top to bottom.

Judge Shuts Down Luxury Goods Racketeering Claim

Theoretically, the racketeering assertion is plausible; but is it practical? No way. Why? It could crush the multi-billion online retail industry — and jump-start another global recession.

The presiding judge did side-eye the racketeering claim, and ultimately dismissed the charge, explaining:

“[M]erchants weren’t aware of each other or were in intentional cahoots w/ Alibaba, required by U.S. racketeering laws. […] The fraud perpetrated by each merchant defendant could be accomplished without any assistance from any other merchant defendant.”

The Case Is Not Over: Yes, in this luxury counterfeit law case, the judged axed a racketeering charge — but the intellectual property claims persist; Jack Ma and co. aren’t out of the woods just yet.

An Attorney Who Understands Luxury Counterfeit Law

Need help sorting an Internet business issue? If so, get in touch.