Brand counterfeiting is starting to reach epidemic levels

By Chrissie Jamieson
June 28, 2018

The rate of digital transformation within the business world is unstoppable. Of course, transformation of this kind can deliver numerous benefits, but it is also leading to an increase in illicit counterfeit activity.

In our research we have found that almost half (47 per cent) of brands are losing revenue due to counterfeiting. We’re not just talking about tiny amounts of money, either: one in three brands said the loss in sales equates to more than 10 percent.

Additionally, four-in-ten organizations (41%) have experienced an increase in the occurrence of counterfeiting and brand infringement. This has, more often than not, originated from a variety of components related to digital transformation on a global scale, including but not being limited to: advances in social media for six-in-ten (61%) companies; chat/messaging (52%); artificial intelligence (51%); the dark web (48%), and augmented reality (47%).

No light at the end of the tunnel

Everything from luxury watches to medicines have now become a victim of counterfeiting. According to the Organization for Economic Co-operation and Development (OECD), the global trade in counterfeits continues to expand rapidly and now accounts for 2.5 percent of world trade, or £383 billion ($461 billion).

In the UK alone, research by the Centre for Economic and Business Research showed that counterfeit goods cost the economy £17.3 billion ($20.8 billion) and resulted in 72,000 jobs being lost as a result.

Loss of consumer confidence

Over the past year there has been plenty of talk about the danger of fake news on consumer perceptions, but counterfeiting can also lead to the same results. There is an increasingly high number of fake goods entering the supply chain – in 2017, for example, the number of counterfeits seized in the U.S. grew by almost 10% – which has led to a massive reduction in consumer confidence levels. This in turn can have catastrophic consequences on a genuine brand’s bottom line.

Today, reputation is everything. Whether it’s a restaurant, a movie or a car, nowadays they all live or die by the ratings they receive online. The internet has become a word-of-mouth referral system for a whole generation of consumers. Because of this, negativity around a brand – partially stoked by counterfeit goods skewing reviews – can spread like wild fire.

Evolving your approach

Online brand protection has never been more important than it is today, but it will only continue to grow in complexity. As a result, it’s vital that organizations adapt their approach accordingly today to reap the rewards tomorrow.

The issue of brand protection has always been a challenge for businesses. However, the scope of the problem has grown significantly over the last few years due to the global nature of business, an increased consumer appetite for shopping online and an expanding marketplace, driven by the proliferation of social media channels. This has provided additional points of infiltration for criminals and those with malicious intent.

Today, brand protection is not confined to just the business. Rather, an overriding objective is for the organization to protect its customers, safeguarding their trust and loyalty.

Successful company brand protection requires a multi-disciplinary approach that starts from within. It is therefore imperative to gain buy-in from the very top of the organization. However, our research reveals that only 19 per cent of respondents currently use a unified approach when implementing and monitoring a brand protection initiative. Looking at those respondents with no plan in place, the number one barrier is cost (65%), followed by a lack of time and resources (64%).

The danger of complacency

While we have already discussed the fact that nearly half of brands have lost sales due to counterfeiting, much of the damage is actually difficult to quantify. For example, other types of infringement that brands typically suffer from include lost traffic due to cyber-squatted sites (46%); an increased cost of paid search adverts (49%); damage to a brand’s reputation (50%), and counterfeit-sponsored adverts on social media (45%).

Despite counterfeiting rising in frequency, brands are far too often remaining complacent regarding standing their ground against infringement. Only just over half (56%) of respondents have taken legal action, with 23% saying the action resulted in a takedown of infringing content or products, and a quarter (24%) saying it resulted in financial compensation.

Catch-22

Online brand protection remains a critical feature for all businesses. As the digital channels expand with new ways to advertise and market goods and services, the threat of infringement and abuse rises too. It’s a catch-22. The online space has presented brands with tremendous opportunities, but these same opportunities are also being exploited by cybercriminals and fraudsters. The result is damaged customer trust, lost revenue and a tarnished reputation.

The good news is that those brands that have had the foresight to implement online brand protection will gain valuable awareness of the landscape in which they operate, the channels that need to be monitored and the importance of such a plan. However, they will still face challenges in the monitoring and management of these programmes – challenges that need to be overcome to face future threats. These include the ability to quantify the value lost to infringements and the ability to prioritize them, a lack of knowledgeable staff and a lack of resources.

Keeping reputations intact

As easy as it might be to believe the answer to solving the counterfeiting issue can be found in-house, the truth is that this is rarely the case. Without the necessary resources, the problem cannot be tackled effectively.

Working with a trusted third-party is often a more effective way forward. Not only do these individuals hold invaluable knowledge and wisdom, but it importantly allows the customer to remain at the heart of your brand protection programmes.

Whatever the case, this still leaves cost as a major obstacle for those without a brand protection programme in place. But with the increase in counterfeiting and the associated loss of revenue it is very much a case of having to speculate to accumulate. Making the investment almost always leads to swift return on investment.

Taking all of the above into account, it’s incredibly important that all brands – from world-leading multinationals to enthusiastic start-ups – must embrace advanced technology and work closely with third-party organizations to help protect their brand online in today’s environment. Those that can maintain customer trust while simultaneously protecting them from the dangers posed by counterfeiting and online criminals, will no doubt see strong results.

 

Image Source: Deposit Photos.

The Author

Chrissie Jamieson

Chrissie Jamieson is the Vice President of Marketing for MarkMonitor at Clarivate Analytics. With a career spanning more than 20 years, Chrissie is a highly experienced strategic marketer with a strong focus in the business intelligence, brand protection and domain sector. As senior director for Clarivate Analytics, Chrissie leads two of the company’s brands, MarkMonitor in EMEA and CompuMark globally.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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