A global approach to anti-counterfeiting
This is an Insight article, written by a selected partner as part of WTR's co-published content. Read more on Insight
The reality is that as the counterfeiting market expands, brands will never be able to eliminate every single instance of it. However, it is not necessarily a losing battle. Instead, it requires a change of focus.
Counterfeiting is a global problem that is only getting worse, affecting brands and consumers alike. In the past there was an assumption that it was either big-ticket items that were counterfeited (eg, electronics, luxury brands and watches) or smaller items, such as DVDs or cigarettes. However, today there is an awareness that almost everything can be counterfeit – from jewellery, wedding dresses and trainers, to car parts, medicines and board games. One of the reasons for the proliferation of fake goods is the Internet. Counterfeiters are using social media platforms and a host of online marketplaces to advertise and sell their goods, making it easier for unwitting consumers to fall victim and enabling fake products to find a wider audience.
The presence of counterfeit goods on the market has a number of consequences for both legitimate brands and their consumers. While brands are losing revenue and customer trust and suffering damage to their reputations, consumers are simultaneously finding themselves out of pocket and saddled with sub-quality goods. Beyond this, there are also far wider-reaching consequences, such as health and safety issues – especially as a consequence of buying medicine, cosmetics and electronics that are fake. This is due to the use of sub-par materials and the lack of observed safety standards during manufacturing.
Looking at the wider impact, counterfeiting accounts for 2.5% of world trade, equating to $461 billion. This is according to the Organisation for Economic Cooperation and Development, which also states that the global trade in fake goods is on the rise. In a Centre for Economic and Business Research report, it was revealed that counterfeiting cost the UK economy £17.3 billion in 2016. In addition, more than 70,000 jobs were lost as a consequence.
The reality is that as the counterfeiting market expands, brands will never be able to eliminate every single instance of it. No matter how many enforcements are carried out, how many marketplace sites and listings are shut down or how many third-party platforms are monitored, it is never possible to eliminate all instances of infringement.
However, it is not necessarily a losing battle. Instead, it requires a change of focus; brands must develop and implement a global anti-counterfeiting strategy that places the consumer at its heart.
Before considering such a strategy, it is important to understand the environment in which brands are operating and just how counterfeiters are thriving online.
What’s working for counterfeiters?
An entire online supply chain has grown around counterfeit goods, operating parallel to legitimate distribution channels. This illicit but highly profitable industry takes advantage of the same tools, techniques and best practices that are employed online by legitimate brands. The contrasts with counterfeiting in the physical world are important to understand, and are based on the Internet’s global reach, anonymity and efficiency. These attributes – and especially the digital world’s powerful promotional potential – have enabled online counterfeiters dramatically (and rapidly) to outstrip all the street corner fakes, flea markets and “Canal Street districts” that exist in the brick-and-mortar world. In the wholesale trade, business-to-business marketplaces (also known as trade boards) often traffic in counterfeit goods. At the retail level, counterfeiters also use marketplaces to supply counterfeit goods to consumers. It is not unusual for counterfeiters to acquire fake goods on wholesale sites, only to resell them to consumers via digital channels – in addition to offline flea markets, bazaars and even retail shops. Promotion is an important part of this illicit ecosystem. Counterfeiters use the same tactics that legitimate marketers use, such as paid search ads and search engine optimisation (SEO), to lure buyers to their sites.
According to Direct Magazine, 14% of searches on a branded item lead online users somewhere other than the legitimate brand’s site. While some of these searches may lead to legitimate resellers or partners, it is reasonable to assume that many of them lead to the site of a counterfeiter. Some counterfeit sellers also employ unsolicited email (ie, spam) to boost their site traffic. This is especially prevalent among sellers of fake pharmaceuticals, software and luxury goods (eg, watches, jewellery and high-end apparel). They also make use of cybersquatting techniques, using branded terms in domain names in order to attract traffic and convey authenticity. Further, as savvy marketers they take advantage of inbound linking strategies and other SEO techniques to sell their illicit goods online.
The counterfeiting ecosystem extends to popular auction and exchange sites where direct searches frequently include counterfeit goods among their results. Links to sites pushing counterfeit wares can also be found on social media avenues such as social networking sites, blogs and microblogs.
Clearly, legitimate and counterfeit ecosystems overlap – with some auction and e-commerce sites selling both real and fake goods – and this makes the problem more difficult to address.
As a result, having an online brand protection plan in place has never been more important. Indeed, it is here that the value of working with a skilled team of in-house and third-party experts to put this strategy together becomes clear.
It starts with the consumer
Brands have a customer-centric approach to many things, so it makes sense to adopt this same philosophy when it comes to brand protection. Ultimately the purpose of a brand protection strategy is to protect the business and safeguard the consumer; but adopting a more consumer-centric approach to the development and execution of the strategy requires a shift in focus.
This is driven by the changing attitudes of the consumer – according to the latest MarkMonitor barometer report, 86% of consumers believe that brands should be doing more to protect them from the risk of buying fake goods. The same research revealed that 31% of shoppers have unwittingly bought a fake product at some point, with one-third having done so two or three times.
This represents a considerable loss of revenue for many genuine brands. A consumer-centric approach to brand protection aims to recapture this revenue from well-intentioned consumers (ie, those looking to purchase genuine products), by identifying how they are being duped into making counterfeit purchases and working backwards to develop a successful protection strategy.
How then does this consumer-centric approach work?
First, it enables brands to take the fight against infringement to the front lines, where it most affects the customer – that is, where they shop online.
Remember that the thought of being fooled does not even cross most consumers’ minds, so it is important to remove the most visible instances of infringement as quickly as possible, or else face damaging consequences. By prioritising this – while also ensuring that all remaining visible sites on search engine results, online marketplaces and elsewhere are legitimate – brand owners protect both brand reputations and their consumers.
Second, it allows brands to use cutting-edge technologies and approaches. It is often in the best interests of brands to work closely with a trusted external provider. The right choice of provider can leverage experience and expertise more accurately to identify the most visible instances of brand infringement and deal with them in the most efficient manner.
Geo-specific searching, for example, leverages thousands of IP proxies to differentiate search engine and marketplace results from one country to another, helping to mitigate the risk of counterfeiting on a global scale. Some providers can also provide a threat level analysis, which uses data science technology to predict the online listings that are most likely to be infringing and help brands to enforce appropriate measures as quickly as possible.
Case study: a global anti-counterfeiting strategy in practice
Counterfeiting is an issue in almost every single industry. However, it is especially concerning in high-risk markets such as pharmaceuticals or automotive.
Customer safety is the number-one objective for the automotive industry, and trafficking in counterfeit parts on business-to-business and consumer marketplaces and rogue e-commerce sites is a significant concern. Counterfeit parts may also undermine the integrity of legitimate distribution channels, adversely affect customer satisfaction and ultimately damage brand reputation. This may result in higher customer service and warranty costs – not to mention the product liabilities involved when oil filters, brakes, engine parts or other components fail.
For example, brand confusion was one of the more significant issues that Nissan recently had to resolve. Some sellers of aftermarket parts misrepresented them as genuine original equipment manufacturer (OEM) parts on online marketplaces and rogue websites.
Counterfeit parts are a major product liability risk. Parts not designed to OEM standards deceive both consumers and auto mechanics, who rely on replacements being manufactured to specified performance levels. These parts look similar to genuine Nissan parts and can be installed in a car quite easily, with the potential to cause serious damage if they fail. A Nissan dealer may then repair under warranty a car that appears to have the correct part installed when it does not. The final cost of counterfeit parts can exceed any savings from the OEM part price many times over.
For Nissan the whole problem of counterfeit parts came to a head a few years ago. To address the problem, it enrolled in a back-to-back pilot programme with MarkMonitor in 2014.
Since then Nissan has become highly engaged in the whole counterfeit challenge. The team have accomplished several major goals, increasing customer safety while also reducing abuse of the Nissan and Infiniti domains and brands. They have identified and addressed brand abuse in website content, demonetising pay-per-click sites, decreasing brand confusion and significantly reducing counterfeit listings on multiple marketplace platforms globally.
Nissan’s MarkMonitor-assisted brand protection strategy helped to remove over 31,700 counterfeit Nissan products and to enforce over 125,000 marketplace listings, which had a total advertised value of over $283 million. Nissan was also able to conduct successful enforcement activities in Asian marketplaces with the help of the Shanghai-based MarkMonitor team, while utilising MarkMonitor relationships and contacts for accuracy and efficiency.
Nissan’s strong market position and brand leadership unfortunately made it a lucrative target for counterfeiting, but now its robust methods of detection means that it can educate the dealers about the hazards of unwittingly using fake parts. Further, as a direct result of Nissan’s work with MarkMonitor, pay-per-click sites that have ‘nissan’ in the domain name are prohibited from containing sponsored links.
Brand protection has never been more important than it is today – and given the growth of the counterfeiting market, it will continue to play a critical role for business. The purpose of an online brand protection strategy is to protect the customer and the business’s bottom line and lessen the negative impact that any abuse may have on customer trust and the brand’s overall reputation. For anti-counterfeiting, this typically covers a number of elements, including the following:
- attaining global visibility;
- monitoring points of promotion;
- taking proactive action;
- fighting online counterfeit sales holistically;
- using intelligence to inform offline defence;
- acting swiftly and globally; and
- educating customers.
In today’s high-risk environment, brands are taking a more focused approach to brand protection, focusing on the customer and targeting their efforts where customers are most likely to be affected by the problem: online. With the right approach and partner, brand protection plans can be devised, implemented and enforced, removing the most obvious instances of infringement before the customer even sees them. In this way, revenue can be reclaimed and the customer can be protected.
While the counterfeiting problem will never be completely abolished, the brands that find effective and proactive ways to tackle it head-on will ultimately be more successful in safeguarding themselves and their customers.
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