Etsy this week has been exposed as a platform where counterfeit goods are easily bought and sold.
A scathing report by Citron Research states “we believe management has knowingly or, at the very least, negligently, turned this company into the largest organized clearing house for counterfeit goods in the world while not only allowing the behaviour but encouraging it and promoting it by selling placement and status to the millions of sites that regularly violate copyright laws.”
While counterfeit goods has plagued many a platform, from Amazon and eBay to Alibaba, Citron says the number of incidents of brands whose trademarks are being stolen and exploited has surged. Citron further calls into question the quality of reporting of all internal metrics and the viability of Etsy’s revenue base as well as a review of its transparency and corporate culture.
The site is rife with luxury counterfeit goods
Etsy, known for its craft and handmade goods also sells fashion, jewellery and accessories. Popular fake items such as Nike, Rolex watches, Chanel handbags, Louis Vuitton accessories and Disney merchandise are rampant on the site. A search for “Nike” returns close to 200k stores and the top 6 out of 8 of Citron’s search were clear counterfeits, some of which are advertising and are labelled as “Star Sellers” by Etsy.
On its website, Etsy's disclaimer seems to not be true to practise: “Unauthorized replicas or copies of items, and patterns or designs enabling their creation, are prohibited on Etsy. We consider counterfeit or unauthorized goods to be items that imitate an authentic good, particularly by using a brand’s name, logo, or protected design without the brand owner’s consent. Additionally, we may consider up-cycled or re-purposed items, even if using authentic materials, to be counterfeit if they are making use of a brand's name, logo, or protected design without their permission. Examples of prohibited counterfeit or unauthorized goods include replica luxury and non-luxury items like bags and branded apparel.”
On Citron’s announcement, Etsy shares tumbled 8.4 percent on Thursday. The company's revenue generated from counterfeit goods is not known, however the integrity of the site has come into question, leaving investors wary.
Etsy posted a loss in Q3 of 2022, due to a surging dollar and increase in shipping costs. Its woes are expected to continue when the company announces its Q4 and year end 2022 financial results on February 22nd.
Article source: Citron Research report 'Citron Exposes the Dirty Secrets of Etsy – One of Largest Counterfeiting Platforms in the World'