Fake goods are hurting more than bottom lines and brand reputations—the proliferation of counterfeits in the age of e-commerce has cost the U.S. 750,000 jobs.
Growth in global trade has fueled the counterfeit economy, and according to new research from brand protection services firm NetNames, the rising volume of imports and exports makes it challenging to check shipments for counterfeits, and counterfeiters are only getting smarter about disguising product origins and preventing goods tracking.
Brands miss out on sales when consumers are buying fakes, whether knowingly or unknowingly, which means governments lost out on taxes and people lose out on jobs. According to the report, the global counterfeit market is estimated at $1.7 trillion, and up to 2.5 million jobs have already been lost worldwide, 750,000 in the U.S. alone. The effects of apparel and accessories knock-offs are estimated to have cost the EU as many as 518,000 jobs.
“These findings must act as a further drive for global brands and enforcement bodies to work in collaboration to crack down on this illegal activity and protect innovation and competition among businesses,” NetNames director of commercial operations Stuart Fuller, said.
Because consumers are increasingly seeking out big brands’ products at small prices, counterfeiters are poised to capitalize.
The European Commission has estimated that sales of fakes drain 10 percent of the fashion sector’s revenue in Europe, a value of roughly 26 billion euro ($27.8 billion) each year.
Personal accessories, like handbags, wallets, watches and jewelry, make up the highest share of counterfeit goods seized at both EU and US borders. In the U.S., apparel and accessories account for 21.6% of all counterfeits seized by volume. American fashion brands are the most faked (20 percent), then Italian (14 percent) and French (12 percent).
Sites like Alibaba and Amazon have been pinpointed for their sale of counterfeit goods, but the problem is challenging for all parties to skirt.
“Although luxury brands often restrict direct selling on sites like Amazon, unauthorized third-party listings are nearly impossible to prevent,” Brian Igel, founding partner at Bellizio and Igel law firm, said. “[They] need to do a better job on consumer education…what are the telltale signs that a listing is fake?”
The Internet has posed a plethora of problems related to counterfeiting, and social media has helped fuel the challenge.
“Although brands have been quick to harness the power of social interactions to drive sales and customer loyalty, counterfeiters have spotted the same opportunity,” according to NetNames. “With little or no regulation to govern them, these platforms have now become a haven for those selling fake designer clothing and accessories.”
It’s cheap and easy for shady companies to create authentic-looking digital footprints to exploit unknowing consumers, but the bigger problem may be those selling fakes through their own accounts.
On Facebook, for example, counterfeiters can showcase fake goods in photo albums and groups and buy targeted advertising to appear in users’ timelines and hardly face any repercussions.
That and the traditional methods of using rogue e-commerce sites, paid search, peer-to-peer auctions and marketplace listings, make the whole counterfeiting sector a major challenge.
Mobile, however, will be the channel to watch, according to NetNames.
“More than half of all web browsing now happens via phones, and we’re using them to make ever more purchases—but smaller screens and on-the-go engagement may leave consumers more prone to being duped,” the report noted.
Curbing the counterfeit cycle, according to NetNames, will require brands to defend their digital assets and safeguard their IP and their legitimate traffic to encourage customer engagement and promote education to lower risks or trickery from e-commerce counterfeiters.
“Today’s pandemic of fakes is far from a new era for business; it’s an erosion of business,” the report noted. “Counterfeiting drains sales from legitimate firms while requiring them to spend more defending their intellectual property—lowering wages and destroying jobs.”