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A growing number of companies are battling counterfeiting by educating their customers on fake goods and the dangers they could bring, as Stuart Fuller explains.
Every day in some of the world’s busiest ports, customs officials try to stop thousands of counterfeit items entering legitimate global markets. The value of goods confiscated after raids and seizures by the authorities continues to rise, topping $1.26 billion at the end of 2012, but this is just the tip of the iceberg.
In June 2014, thanks to a tip-off, authorities in Scotland seized more than £2 million ($3.4 million) worth of pirated DVDs and fake watches. It was a significant find but one that barely scratches the surface of the problem. If the sheer number of unidentified shipments wasn’t enough of a major headache for the authorities and brand owners, the online marketplace for infringement, counterfeits and digital piracy continues to grow at an alarming rate.
The number of websites detected promoting and selling counterfeit goods is actually falling in real terms, as many rogue traders simply replicate content across a huge number of websites to reduce the risk that one of their sites will be taken down.
Technology has made the ease, speed and cost of setting up online sales channels easier than ever. With some basic web development skills, a copycat website can be set up within an hour to offer fake products. Add a cheap domain name, which features the brand name or a close misspelling of it, and you have created a portal that can trick consumers into believing they have stumbled upon a real sales outlet.
Even with advanced domain name monitoring capabilities, it can still be a minimum of 24 hours before such infringing websites are discovered, by which time the counterfeiters could have made thousands of dollars.
Fight the good fight
Major brands have developed strategies to combat these threats over a number of years. A domain name strategy has allowed them to register defensively in the key top-level domains (TLDs) that could be used for mischievous purposes. But recent changes to the domain name world have meant that all brand owners need to rethink that strategy. The launch of up to 600 new publicly-available generic TLDs in the next two years brings some fantastic opportunities that have never existed before for many brands. However, there are some major risks which, if ignored, could multiply the problem of counterfeiting and brand infringement.
Luxury brands, for instance, will need a strategy for protecting their online reputation, web traffic, customers and, of course, ultimately revenues when TLDs such as .cheap, .discount and .bargain launch this year. While they will not want to use these domain names proactively themselves, as they may be seen as devaluing their luxury status, brands certainly do not want to see the domains being used by third parties. Fortunately, a number of rights protection mechanisms are available to brand owners that mean if they are taking the threat of domain infringement seriously, they can cost-effectively protect their IP within the expansion of the internet.
The source of the majority of counterfeit products is still China, thanks to plentiful cheap labour and huge manufacturing capabilities. One simple search on Chinese marketplace sites such as Taobao and Alibaba for any major product will reveal the extent of the problem brand owners face. Hundreds, if not thousands, of listings can be found in quantities from single units to containers full of the product, ready for shipping to the four corners of the globe. However, in the next few years the growth of the counterfeit market will undoubtedly spread to India, some areas of Africa and even South America. This means more headaches for those involved in enforcement both online and offline.
"Technology has made the ease, speed and cost of setting up online sales channels easier than ever."
While online brand detection and protection capabilities are constantly being improved, with many companies outsourcing this task to specialist companies such as NetNames, the low barriers to entry mean that the number of counterfeiters entering the black market continues to rise. Part of the problem is driven by consumer behaviour—we want to be seen with luxury products but want to pay pound-shop prices.
But these cheap counterfeits are not the worrying trend for brand owners. After all, few consumers will believe that a £1,000 ($1,700) watch can be sold legitimately at £10. The real problem occurs when those products cost £900 ($1,500)—consumers in this case will simply think they have grabbed a bargain rather than a fake.
Many major brands now realise that trying to fight the counterfeiters is a battle they will never completely win. While investing in a brand protection strategy is important to try to keep themselves one step ahead of the rogue traders, brands should not neglect the idea of educating their customers as well as asking them to act as remote eyes and ears. By educating their consumers on counterfeit goods and the dangers they bring, some brands are hoping to increase the intrinsic value these ‘brand ambassadors’ can deliver.
In the US, electronic consumable brands including Canon, Lifeproof and Griffin Technology have set up dedicated webpages to help customers determine whether a product they have bought is a fake (and also giving them a mechanism to report where they bought those products to help them find the source of the problems). Apple has recently joined the growing band of companies that have taken the step of educating customers, highlighting some of the issues that could occur by using unlicensed and counterfeit products.
The market these companies operate in is one of the most infringed (second only to pharmaceuticals) and fakes are estimated to cost these brand owners more than $169 billion per annum globally. That is a huge amount of potential lost revenue. It would be foolhardy to suggest that every counterfeit sale directly replaces a sale of a real product—but there will still be a significant number of sales that are made in good faith.
While the battle against counterfeiters will continue across the globe, both in terms of online and physical detection, the policy of educating customers can be a cost-effective way for brand owners to bolster their brand protection strategies. Only time will tell if a consumer revolution, putting legitimacy over cost, will be successful but it is certainly an approach that could be another weapon in the armoury against the infringers.
Stuart Fuller is director of communications at NetNames. He can be contacted at: email@example.com
brand protection; customs regulation; counterfeit; piracy.