NEW YORK (TheStreet) -- As more consumers turn to the Internet for shopping, more counterfeiters follow suit, plaguing some of the largest e-commerce companies in the industry.
The most recent victim of counterfeit has been the Etsy (ETSY) marketplace, which according to research firm Wedbush Securities has a much larger counterfeit risk than anticipated. Alibaba (BABA) has been under fire as well. The company faces a lawsuit brought by Kering (PPRUY) over counterfeit goods on its site. eBay (EBAY), Amazon (AMZN) and other companies -- essentially every retailer with a Web site -- face counterfeiters in some capacity.
"Anyone in e-commerce, especially with a vibrant marketplace, is going to have issues," Max Wolff, chief economist at Manhattan Venture Partners said. Wolff finds that counterfeit issues are even more severe when companies seek large growth in both users and revenue. "They're trying to aggressively grow, so they're less careful who they invite on the platform," he said. "When you're putting growth at the top of your priority list, then vetting people carefully is usually not at the top of the list."
Under the scrutiny of Wall Street and investor demand, Etsy, Alibaba, eBay and Amazon are all striving to grow as much possible, so it's no surprise that counterfeit issues follow.
"As many as 2 million items on Etsy (>5% of all merchandise) may potentially be either counterfeit or constitute trademark or copyright infringement," Wedbush Securities analyst Gil Luria wrote in a note on May 11. "We believe the share of GMS [General Merchandise Sales] may be greater considering Etsy has become a go-to destination for counterfeits."
Alibaba has been hit with multiple counterfeit lawsuits, most recently from Paris-based Kering, which owns Gucci, Yves Saint Laurent and other luxury brands. Among the examples of counterfeit is what appears to be a $795 Gucci bag that sells for $2 to $5 when bought in bundles of 2,000 units on Alibaba.
Though eBay and Amazon have recently avoided much media coverage of counterfeit goods, the companies have had their fair share of troubles in the past as well.
The issue of counterfeit can have a huge impact on a business, whether it's Etsy, Alibaba, eBay or Amazon.
"If Etsy chooses to continue to ignore these potential violations, we believe it could tarnish its brand with both buyers and sellers," Luria wrote in his May 11 note. "Considering the broad backlash on Alibaba regarding inauthentic merchandise, we expect added scrutiny, given the social responsibility ethos at the core of its Etsy's brand."
In a note nine days later, Luria continued, "We believe the dilution of the brand by potentially counterfeit and mass manufactured items will curtail listing and revenue growth."
There is clearly a problem with counterfeit goods -- the question then becomes what the companies can do to combat fakes.
In Etsy's first-quarter earnings call on May 19, CEO Chad Dickerson frowned upon the use of the word "counterfeit," saying that "people can't even agree on the definition of that term," but he did promise that the company uses "technology to prevent bad actors from returning to our marketplace." Dickerson declined to give any more detail, citing security reasons, but he noted, "We're often accused of being too aggressive and taking down material posted by sellers."