Online Sales Aren’t the Only Thing Going Up for the Holidays

Nearly a third of shoppers say they’ve unwillingly bought a fake product online

Author: Andria Cheng

December 15, 2017

With online sales on track to hit a record high again this holiday season, another digital phenomenon on the rise: consumers being duped into buying fake goods.

Nearly a third (31%) of internet users worldwide say they have unwillingly bought a counterfeit product online, up from 23% a year ago, according to a November survey by Vitreous World for MarkMonitor, a brand protection outfit that counts Valentino among its clients.

Worse yet, among those who’ve unknowingly bought fake goods, half said they have been tricked more than once—34% were victims two to three times, 11% three to five times and another 5% more than five times.

So why is this a cause for worry? An overwhelming 86% of consumers in the survey said brands should do more to protect people from buying fakes. Shoppers also blamed authentic brands when they realized they bought fakes. In fact, 20% complained to the genuine brand and 16% griped about it on social media. But that’s not the end of the damage: more than two-fifths (44%) of consumers warned family and friends about the brand, while a quarter said they stopped shopping the brand altogether, the survey found.

Worldwide, imports of counterfeit and pirated goods total nearly half a trillion dollars in value each year, or around 2.5% of global imports, according to a 2016 report by the Organisation for Economic Co-operation and Development (OECD) and the European Union Intellectual Property Office (EUIPO). That’s up from 1.9% in 2008. Fake products aren’t just limited to luxury goods like handbags. Perfumes, machine parts and chemicals are also common targets, according to the study.

Shoes were the most frequently copied category.

Meanwhile, a US Chamber of Commerce post in November said the global value of counterfeit goods is more than double the 2014 profits of the world’s top 10 companies combined.

By 2022, counterfeiting and piracy together are expected to drain $4.2 trillion from the global economy, according to the International Chamber of Commerce (ICC). It added that today’s counterfeiters are capable of reproducing food, beverages and medicines, along with everyday household products.

MarkMonitor’s findings broadly echo the ICC’s. Internet users polled admitted that clothing, electronics, perfume and cosmetics were the most commonly purchased fake products. As for the channels where consumers were most suspectibile to buying fakes, online marketplaces were the lead source, cited by 42% of respondents. Links found in search results and social media ranked as the other top channels, named by 15% and 10% of consumers, respectively.

 

Ironically—and potentially highlighting the challenge the industry faces in reducing the fraud purchase rate—the survey found those three channels were among the ones where consumers felt most secure shopping, including 86% who cited online marketplaces.

But counterfeits aren’t the only worry for brands. Knockoffs that copy the look of a branded product and violate patent protections without using the brand name are another thorny issue.

“If factories copy your product as soon as it hits the market, and those copies are then sold online side-by-side with the original item [with the licensed or owned patents] for a fraction of the price, how can you compete?” said Andrew Schydlowsky, founder and CEO of online brand protection and market analytics firm TrackStreet.

To be sure, the industry isn’t sitting still.

Rubber-soled shoe brand Vibram and Ugg shoes, for instance, have both taken action against counterfeiting. Since 2009, Ugg, a unit of Teva sandals parent Deckers, had seized over 2.2 million counterfeit products before they hit the market and taken legal action against more than 60,000 websites selling counterfeit products, according to a September 2016 report from trade group National Retail Federation (NRF)’s Stores Magazine. Ugg also had over 590,000 fake listings removed from websites including Alibaba's Taobao and eBay.

Counterfeiting, alongside topics such as record loss from organized retail crime, ranks among key discussion points at NRF’s annual loss prevention and security conference, NRF Protect, which earlier this year gathered some 3,000 attendees from Amazon to Walmart.

In another sign of the seriousness of the matter, attendees from companies including Procter & Gamble, Johnson & Johnson, GoPro and Benefit Cosmetics are set to gather in San Francisco in late January to attend the 20th Anti-Counterfeiting & Brand Protection Summit hosted by event organizer IQPC. What’s on the agenda also reflects the changing dynamics of online shopping—the rising number of counterfeits on social media will be one key discussion topic. 


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