Counting the cost of counterfeit goods

Following the gift-giving frenzy of Christmas, January is traditionally a month when brands are busy redeeming vouchers or providing refunds and exchanges on unwanted presents. For many brands, though, it is also a time for dealing with a spike in consumer complaints about counterfeit products sold by rogue operators.

A Marketing Week investigation published in January 2014 revealed a thriving black market worth £10bn globally, targeting brands including Ray-Ban, Louis Vuitton and Ugg Australia. A year on the situation shows little improvement.

Counterfeiting is a year-round problem, but those hawking fake goods are particularly active during busy retail occasions like Black Friday, Christmas and the January sales. News stories have emerged this month about festive shoppers in different parts of the UK that have fallen foul of counterfeiting rings selling imitation Ugg boots and fake, unsafe dolls that purport to be official merchandise from the Disney film Frozen. In total, British shoppers spend around £90m a year on counterfeit goods, according to government body the Trading Standards Institute (TSI).

James Corlett, in-house counsel for luxury fashion retailer Karen Millen, confirms that the festive season and its aftermath is a busy time for dealing with counterfeiting issues, with gift buyers often the victims. He notes that counterfeiters are finding increasingly sophisticated ways to sell fake items to unsuspecting consumers, such as by using online adverts and social media posts to direct people towards websites selling counterfeit goods.

“Counterfeiters use a variety of channels in the same way that genuine retailers do,” says Corlett. “I know, for example, that some counterfeiters have targeted consumers on Instagram by posting links in the comment sections of celebrity accounts.”

Ten per cent of people looking for a bargain online have visited a rogue site by mistake, according to research by brand protection company MarkMonitor. The study, which used a Nielsen panel to track 9 million online shopping sessions in the USA and five European countries, also found that one in six bargain hunters who stumbled upon a rogue site demonstrated purchase intent by placing an item in the shopping basket.

Charlie Abrahams, senior vice-president of sales at MarkMonitor, notes that counterfeiters often set their prices and supposed discount offers at the same level as legitimate retailers in order to dupe consumers – a tactic reinforced by the use of a brand’s advertising campaign or imagery on their sites. He argues that while most businesses are aware of the scale of the counterfeiting challenge, many are not investing enough to combat it.

Some of the nationwide organisations involved in tackling counterfeiting have recently stepped up their efforts to involve brand owners in the fight. Last month the Anti-Counterfeiting Group, a trade association that counts brands like Chanel, Nike and Procter & Gamble among its members, completed a takedown operation against counterfeiters selling goods on Facebook. The group worked with the social network, as well as Trading Standards and the Police IP Crime Unit, to remove content from more than 250 traders.

The raid had a particular focus on South Wales and Leeds, where the the most prolific traders were operating, and led to the seizure of a wide range of counterfeit items including branded cosmetics, electrical goods, clothing, footwear and cigarettes. Over 2,300 UK company web domains were shut down in 2013-14 as a result of intellectual property offences, according to the latest IP Crime Highlight Report.

Julie Philpot, sales and marketing officer for the TSI, explains that the relaunch of Brand-I is intended to encourage more brands to put their stockist lists on the site, thereby helping to turn it into an online hub for consumers concerned about counterfeiting. Brand-I currently has over 30 members including Barbour, Jimmy Choo and Ray-Ban, though Philpot believes many other brands are not taking the issue of counterfeiting seriously enough.

“Sometimes when you talk to people working in the brand protection teams of brands, they find it difficult to get the necessary funding to do their work,” she says. “If marketers and brand managers could allocate just a bit more spending to brand protection, it would go a long way to protecting their valuable brand reputations.”

Karen Millen, which works with MarkMonitor on brand protection, has opted to devote significant resources to tackling counterfeiting. James Corlett, who joined the company’s legal department three years ago, says this has yielded clear returns for Karen Millen in the form of increased web traffic and a reduction in the cost of Google AdWords due to fewer counterfeiters bidding on its name as a search term.

“At the time I joined the company, if you typed Karen Millen into Google then several counterfeit sites would appear on the first search page,” he says. “Now there are no counterfeit sites on the first five pages, which shows you how far we’ve come in getting on top of this.”

Corlett adds that shutting down a rogue site is not necessarily an expensive endeavour as it often involves simply issuing a cease and desist letter. Karen Millen also uses its own website and social media channels to educate the public on how to spot a fake before they buy, as well as to support consumers if they do fall foul of rogue operators. As the counterfeit challenge grows, more brands may wish to follow this approach in the year ahead.