As e-commerce became the primary shopping channel during the pandemic, it opened up more opportunities for counterfeiters to drive digital sales by impersonating brands.
While there are still some counterfeits being sold on the street in major cities, a significant volume of fake goods today is sold online. Setting up a website, social media account or product listings on a marketplace is inexpensive and simple for fraudsters, which has led to a growing problem of fakes as transactions shifted online. This year, counterfeiting has escalated along with online shopping. From March to September, brand protection firm Red Points’ fashion and footwear clients have detected 91 percent more counterfeits in the market than in the same period of 2019.
“Before the pandemic, we saw a steady revolving door of infringing marketplaces. Since March 2020, this has boomed across all clothing and apparel customers,” said Elliot Champion, global product director for brand protection at CSC Digital Brand Services, which specializes in brand and fraud protection. “The recent rise in e-commerce related to Covid-19 has brought new sellers and manufacturers online. These new sellers, whether aware or unaware of their infringing products, are more often than not unaware of the rules for selling on major online marketplaces.”
Exacerbating the issue are consumers who are shopping online for the first time during Covid. Those that are less familiar with e-commerce norms may be more apt to fall into traps set by counterfeiters. “More and more people are shopping online—even those who are using the internet for the first time—and that increases the possibilities of brands being cheated of revenue and consumers risking buying fake products or experiencing fraud,” said Daniel Bennett, president of brand protection at risk management firm Corsearch. “This is only going to be a challenge that increases as time goes on.”
At the same time, imposters have become savvier at attracting customers with more realistic pricing strategies. According to Yoav Keren, CEO of online brand protection solution BrandShield, counterfeiters used to offer fakes at a deep 90 percent discount, but today the pricing tends to be about 20 to 30 percent less expensive than the full price.
Counterfeiters are also targeting new channels to better mimic brands. “What the scammers started doing is moving into social media, which for a lot of people seems really convincing. They can easily impersonate someone from a company or the company itself,” said Keren. Fraudsters can create accounts that look realistic to consumers and send them toward scam links.
While luxury and designer brands are prime targets for fakes, counterfeiters don’t discriminate on price point. Brand visibility and longevity also don’t matter, as small- to medium-sized labels are at risk of being illegally copied. While margins on high-end goods tend to be better, counterfeiters can court a larger audience and sell a greater volume of lower priced merchandise.
Infamous Swim has learned that even young labels can face copycats. When the Australian company launched about two years ago, counterfeits began cropping up almost instantly on marketplaces like Alibaba and eBay. “You put so much work and effort into small business, and unfortunately most of the time it is the small businesses that have innovative and exciting new ideas that are the ones that are copied a lot,” said Gemma Crowe, the owner and designer of Infamous Swim. To combat counterfeits, the label began working with Red Points on brand protection.
This year, the brand made a push into the U.S., and found that consumers there had already been introduced to its mommy and mini swimwear styles through fakes on platforms such as Amazon. Counterfeiters took the imagery shot by Infamous Swim and used it to promote knockoffs that were retailing for $12, less than one-tenth the price of the original. Beyond marketplaces, influencer posts and keyword searches also sent shoppers to buy these fakes. According to Crowe, with the rise in online shopping, it has become costlier to compete with her copiers for online advertising placements.
“It is a telltale sign that you’re having a counterfeit problem if you begin to see a lot of reviews around poor quality.”
The impact on brand reputation when a customer buys a counterfeit is massive. Often the quality is subpar, since the counterfeiters are more concerned with duping consumers and making money than creating well-made goods. For both emerging and established brands, knockoffs can lead to lost sales as shoppers decide not to buy again from a particular company.
There are also word-of-mouth implications. Red Points research shows that 47 percent of consumers who end up with a counterfeit leave a negative review on the marketplace or with the brand. Additionally, 28 percent of shoppers hold brands accountable for the fact that they received a knockoff, even if they didn’t make their purchase directly with the brand.
According to a survey from Yotpo, two-thirds of consumers look to reviews for sizing and fit information before they buy apparel. If a portion of the reviews are for fake merchandise, that can throw off shoppers’ ability to determine what will work for them. From the brand perspective, this also skews data about fit and quality, potentially convincing companies they have product issues that are instead solely related to the fakes. Correcting against this, Infamous Swim is reaching out to customers directly and asking for their order information to gauge what is legitimate feedback related to swimsuits it has produced.
“When you start to see a lot of negative reviews about your quality, most [brands] start to think about something happened in their production to change the quality,” said Daniel Shapiro, vice president of partnerships and brand relationships at Red Points. “And I would tell most brands you need to look to see if you have a counterfeit problem, because it is a telltale sign that you’re having a counterfeit problem if you begin to see a lot of reviews around poor quality.”
Despite the significant risk to a brand’s reputation and bottom line, labels often take a reactive approach to counterfeits. Experts instead suggest a proactive plan to monitor and fight fakes. “The way to deal with it is not by trying to repair the damage that’s created to those that buy counterfeits, it’s by preventing those sales,” said Keren.
There are still large shipments being caught by customs, but with online sales, counterfeiters are able to directly mail small packages from the manufacturer to the consumer to circumvent the oversight that would exist on large shipments. “As it’s harder to track the physical goods moving around the world, it’s even more important to increase focus on online channels and use the latest technologies to identify the key offenders as they attempt to hide the size of their activities,” said Bennett. “Where possible though, it’s also vital to continue offline activities such as raids and investigations based on smart solutions that combine online and offline data.”
It’s possible for brands to keep an eye out for fakes through manual searches, but with the proliferation of offenders, artificial intelligence offers a more thorough and efficient means of weeding out counterfeits. Automated processes can crawl the web for keywords or image recognition, finding brand logos or similar protected designs.
Per Champion, one main focus should be removing false positives so that brands can give their attention to listings that are more apt to be fraudulent. Among the clues that something is fake is an incorrect country of production within the product information. Sometimes the website listing is not enough, and brands will need to conduct test purchases to accurately determine whether something is actually counterfeit.
Once brands have identified fraud, most of the time, they can stop counterfeiters without having to resort to legal action. Marketplaces such as Amazon and eBay have policies against counterfeits, enabling brands to report fake merchandise to have it taken down. Shapiro estimates that the average time from identifying a counterfeit to having it removed from a marketplace is around one day.
If fakes are residing on an independent website rather than a marketplace, it becomes more complicated since the brand needs to find the owner of the website and ask to have it taken down. Should that effort fail, companies can ask the hosting provider to take action. As a final recourse if the site can’t be taken down, a brand can have a domain deindexed on search engines, reducing visibility. Companies can also contact payment providers to stop the website’s ability to process transactions.
One challenge that brands are facing is the globalized nature of the fashion industry. Champion noted that even with trademark protection in its home country, a label might still face an uphill battle in combatting an intellectual property infringement in another nation.
Should they wish, brands can choose to pursue legal action against counterfeiters to seek damages. But this requires more time and financial resources than strictly removing product listings. It can also be challenging to figure out the individuals behind a website or operation.
Proactive measures can also include consumer education and tighter distribution strategies. Keren suggests positioning a brand’s website as the main hub for shoppers to either purchase goods directly or find information about where to safely buy legitimate products.
Brand protection is an ongoing effort, since counterfeiters can move to a new address or social account. But taking action can help reduce the visibility of fakes over time, especially as brands learn how fraudsters are operating and using their IP.
“We are witnessing the dawn of a new internet age,” said Champion. “A year ago, having a digital governance strategy was a ‘nice to have.’ Now it’s essential that all stakeholders within a company including IP/legal, security and marketing come out of their silos and collaborate on protecting their brands against fraud and abuse.”
Due to the pandemic’s impact on retail sales, it is now more important than ever for apparel brands to protect themselves from stolen revenue. “In this particular time as a brand, would you want to share 5 percent of your retail sales with a counterfeiter?” said Shapiro. “And I would say you wouldn’t. You want to do something about it, particularly going into the holiday season where it’s more important than ever to maximize your sales and your profit, given it’s been a tough year. Could you imagine something worse than competing against yourself?”