Online counterfeiting is a very insidious problem that can seriously damage a company's reputation and revenue.
Counterfeiting is often associated with the fashion, design and sports sectors, but the online distribution and sale of counterfeit products is a serious problem for industrial brands too.
But what damage can online counterfeiting do to a manufacturing company?
And above all, how can you tell whether your brand is affected by this phenomenon?
THE DAMAGE CAUSED BY ONLINE COUNTERFEITING
According to a study by the EUIPO and the OECD, in 2021 counterfeiting accounted for 2.3% of world trade. In addition, about 4.7% of EU imports, worth USD 117 billion a year, involved counterfeit products. The damage caused by industrial counterfeiting is mainly:
- LOSS OF REVENUE
If a company's products are copied by counterfeiters and sold on the internet, its sales will inevitably be eroded. In particular, besides infringing trademarks, patents and designs (registered designs), many counterfeiters advertise their listings online using the trade name of the target company. In this way, they divert traffic and customers to their own listings, causing considerable harm to the company whose intellectual property rights are being infringed.
In particular, on B2B (Business To Business) e-commerce platforms, counterfeiters who infringe industrial companies' IP rights manage to close sizable "deals", selling hundreds or thousands of products in a single transaction.
- WASTED COMPANY RESOURCES AND LOWER ROI ON IP AND MARKETING INVESTMENTS
Companies invest substantial resources in registering all their industrial property rights (trademarks, patents, designs (registered designs)) and protecting their flagship products. Further resources are invested in marketing and in making these products known on the market.
The counterfeiter exploits these investments to enter the market and take advantage of the visibility and awareness of an already well-known and prestigious brand. In short, the company invests and the counterfeiter pockets a good part of the return on those investments.
- REPUTATIONAL DAMAGE
In many cases the buyer of counterfeit products is unaware of the illicit nature of the goods. This is because counterfeiting does not stop at the product itself, but also involves packaging, warranty certificates and all the elements that buyers usually consider when assessing a product's authenticity. While the outward appearance can be misleading, any malfunctions or problems that arise later will easily be blamed on the owner of the counterfeited trademark. The damage to the brand's reputation, in this case, will be considerable.
- WARRANTY CLAIMS FROM BUYERS OF COUNTERFEIT PRODUCTS
Closely linked to reputational damage is the possibility that the brand receives warranty claims from consumers who unknowingly bought counterfeit products. The impossibility of honoring the warranty and obtaining a replacement may reduce consumers' trust in the brand.
- PROBLEMATIC MANAGEMENT OF DISTRIBUTION CHANNELS
If an industrial company did not take effective action against online counterfeiting, besides losing its customers' trust it could receive complaints and protests from retailers and distributors, who would see their target markets threatened by the invasion of counterfeit products.
HOW TO TELL WHETHER YOUR BRAND IS THREATENED BY ONLINE COUNTERFEITING
Counterfeiters use many different channels, and detecting violations requires thorough monitoring of the various sources. Below are some tips and practices for checking for counterfeit products online.
- TRADE FAIRS
If counterfeit products are spotted at trade fairs, it is very likely that these items are being sold by the same parties and their resellers through online channels.
- SALE OF COUNTERFEIT PRODUCTS ON MARKETPLACES
Marketplaces (platforms that intermediate the sale of goods or services) are among the most important distribution channels for counterfeit goods. Western consumers usually tend to think of the marketplace universe as limited to Amazon and eBay.
However, there are numerous B2B platforms on the market where manufacturers from all over the world offer their products for sale. It is therefore essential for a company to check whether threats are present on these channels. A quick check can be made on the main B2B marketplaces, first and foremost Alibaba, available at https://www.alibaba.com/.
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SALE OF COUNTERFEIT PRODUCTS ON WEBSITES AND ILLICIT USE OF THE TRADEMARK IN THE DOMAIN NAME
Another channel used by counterfeiters is websites. In this case, companies producing counterfeit machinery or spare parts create a catalog for potential buyers on their website.
In the most serious cases, counterfeiters also use the trademark within the domain name (the name of the "site") to give the buyer the impression of buying from an authorized reseller or from the brand itself.
- SALE OF COUNTERFEIT PRODUCTS ON SOCIAL NETWORKS
In recent years, alongside marketplaces, social networks have established themselves as one of the preferred channels of sellers of counterfeit products. Thanks to the speed at which content spreads and the "privacy" guaranteed by private chats and the little information required at sign-up, a bad-faith actor can easily advertise their products and then complete the transaction outside the social network. Counterfeiters may also appropriate the brand's photos and impersonate the company on social networks in order to resell illicit products.
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