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Counterfeiting is a Big Business and Was Estimated to Hit Over $1.7 Trillion Dollars Globally in 2015

counterfeit-goodsOne of the commenters on my recent blog about cargo theft suggested that I address the global concern of counterfeit products. Everyone knows that making fake products and then selling them to consumers is illegal. However, I wonder how many people realize just how big the problem is if they willingly or unwillingly purchase goods and how much incentive they give to counterfeiters worldwide. Who and what is the money supporting when purchasing these illegal products? The reality is, if consumers buy it – it will never go away. It is important to point out that there are “two types of counterfeit product purchases by consumers”, according to Dr. Haider Ali’s article titled, Why People Buy Counterfeit Brands. Deceptive counterfeiting takes place where the consumer does not know that they have purchased a counterfeit product. It is surprising how authentic some counterfeit products look. In contrast, “non-deceptive purchases of counterfeit products take place where the consumer willingly buys the counterfeit products.” First and foremost, with respect to ‘deceptive’ counterfeiting, consumers should do some due diligence and check the authentic websites to determine who in fact is an authorized reseller. It can be difficult to tell the difference and it is surprising how even some stores themselves look authentic.

On the other hand, ‘non-deceptive purchases’ of counterfeit is where the suppliers may need to “consider why the demand exists”. This is where items are sold in the backs of cars, alleyways, flea markets and basically anywhere counterfeit is bought and sold – the black market. Although there has been a significant amount of research into why and who would buy counterfeit brands. There are surprisingly many reasons on the attractiveness of buying counterfeit.

According to a 2014 report released by the US Department of Homeland Security, “US Customs seized more than 1.2 billion US dollars worth…where more than 60 percent of the goods were from China”. This includes not only clothing, shoes and luxury items but also auto parts and medical supplies.

Luxury retailers do invest a lot of time to crack down counterfeiters. For example, CTV news released a story of a 45-year-old Chinese woman that was being sued for counterfeiting by eight luxury brands.

  • Legal troubles began in 2008 when Chanel sued her for $6.9 million in damages for selling counterfeits online. She still hasn’t paid the damages, according to Chanel spokeswoman Kathrin Schurrer.
  • In 2009, a Florida judge ruled against Xu Ting and shut down seven websites she was accused of helping run that sold fake Louis Vuitton, Marc Jacobs, and Celine. She did not show up in court.
  • In 2010, Gucci, Balenciaga, Bottega Veneta and Yves Saint Laurent — all brands belonging to France’s Kering group — filed a lawsuit in New York federal court against Xu Ting, her future husband, younger brother, and mother along with six others who the companies said sold more than $2 million worth of fake handbags and wallets online to U.S. customers.

Mark Cohen, former intellectual property attache at the U.S. embassy in Beijing explains, “At the end of the day, there may be an economic calculation about how much money it’s worth to pursue these people” for any business. These counterfeiters do not and will not stop if consumers purchase. We as consumers need to also understand who we are supporting when purchasing counterfeit. Designers brands and businesses have worked very hard to give consumers an opportunity to purchase beautiful and creative pieces with a level of quality that is second to none.

Posted in: Protective Services and Investigations

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Is It Fake?

Today it is easier than ever to order luxury products online as cyber marketplaces gain more and more popularity. One rapidly growing website is Alibaba Group, which started in China 16 years ago and now competes with eBay and Amazon. Alibaba’s consumer-to-consumer Taobao, similar to eBay.com, features nearly a billion products and is one of the 20 most visited websites globally. This multi-billion dollar company has plans to further expand throughout the globe. The slowdown in China’s economy has led to only a 27% growth in revenue in the last quarter compared to 60% in the previous seven. This increase was primarily caused by the rise in sales of luxury products. As consumers in China get more disposable income, they are prepared to pay as much as 4,200 Yuan ($661) for a single item and they want to know that the product is real. Unfortunately, Alibaba has gained the reputation of being a counterfeit haven.

This is an image that will be hard to shake off, as China is known to produce ‘close to real’ Rolex watches and other luxury goods for as low as 1% of the original price. Many ordinary sailors could be spotted wearing these expensive watches when they came back from long trips oversees. At least it was understood that they were not getting the real deal when buying from a sales guy that had 25 watches on display in downtown Hong Kong.

In order to become a trusted online marketplace for luxury goods, Alibaba needs to put in a solid effort to prevent selling fake products. Their measures should be transparent and verifiable in order to convince not only local consumers, but also those in western countries where Alibaba wants to expand.

There are many ways to have fake products enter the supply chain, starting at the source, the production facility. After that, the final product makes its way through many warehouses and modes of transportation. In order to assess the vulnerability of the supply chain, there needs to be a detailed mapping of all these steps along with a review of the risks involved by site, transition phase and the transportation legs. Luxury brands will have to put pressure on companies like Alibaba to allow for thorough assessments performed by reputable management or security companies. The vulnerability assessment will result in recommendations to mitigate the risk of fake products entering the supply chain and in the end protecting the customer from buying a real fake Rolex.

Posted in: Protective Services and Investigations

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