Counterfeiting in a Bad Economy: The Threats Remain but the Targets Change
While counterfeiting may not be the “world’s oldest profession,” given its ancient roots and its ubiquity across geographic and cultural boundaries (counterfeit coins were as common in Roman times as Canal Street knock-offs are today), it clearly deserves a place as one of the humanity’s most persistent paths in pursuit of illicit profits. But just because counterfeiting is enduring does not mean that it is unchanging; many of the same macroeconomic drivers, fashion trends and new technologies that inform our preferences at the shopping mall also drive the behavior of the astute counterfeiter. So as the newspaper headlines continue tell us that bad economic times may stay with us for a while, it is worth considering how a challenging economic environment can impact the behavior of the counterfeiter and what brand owners can and should do to fight this threat.
Slow Economic Growth is not Slowing Down Counterfeiters
Notwithstanding tough economic times, counterfeiting continues to be a growth industry:
- A study on piracy by the Business Software Alliance found that software piracy losses increased by 14% from 2009 to 2010.
- A KPMG study found that consumption of fake cigarettes in the EU grew by 5% from 2009 to 2010.
- The World Health Organization has reported that incidents of counterfeit drugs grew 7% from 2008 to 2009.
Against a backdrop of flat to no growth in the EU and North America, counterfeiters are more than holding their own.
Counterfeiters Adjusting Their Targets
Recent reports out of both the EU and US customs provide an illuminating real-time window into the activities of counterfeiters and how they has adjusted their behavior in light of economic conditions:
- The number of seizures in both the US and EU continue to grow; from 2009 to 2010, seizures in the US increased by 34% and the number of EU cases in that same period nearly doubled.
- In the US, the average value of each seizure dropped by nearly 50% from 2009 to 2010; common consumer products made up a greater share of seized material compared to past years.
- In the EU, cigarettes and other tobacco products along with office supplies led the list of seized good in 2010.
An early sign of difficult economic times is skyrocketing demand for common household items like white bread as consumers adjust their lunchtime behavior and switch from fancy restaurant meals to home-prepared sandwiches. So lest anyone think that counterfeiters limit themselves to copying $100 bills or consumer electronics, customs data indicates that successful counterfeiters are only too happy to take advantage of consumers desperate to save some pennies on common items they buy each day.
Online Marketplaces a Cheap and Anonymous Storefront
The same drivers behind the bankruptcies of retail icons like Tower Records and Borders Books – the financial and operational challenges of maintaining a physical presence against online competition – have driven counterfeiters to transition from selling their goods on street corners and out of temporary storefronts to slick and convincing e-commerce sites, B2B marketplaces and online auction sites. With their omnipresent online presence, counterfeiters gain a cost efficient marketing and sales platform, a global footprint and anonymity from law enforcement, creating a nightmare of law enforcement and consumers alike. While the counterfeiter who sells fake handbags on Canal Street in New York is a sitting target for law enforcement the counterfeiter operating online can remain anonymous and largely out of reach. At the same time, consumers looking for a bargain online can easily fall victim to a professional looking but fake e-commerce site.
What Can Brand Owners Do?
Overt authentication technologies can be integrated into a brand’s identity to deliver intuitive visual effects that are easy for consumers to identify but difficult for counterfeiters to replicate. Some companies track and trace technologies when coupled covert markers allow brand owners to cost effectively track products – even common consumer goods - through the supply chain.
Counterfeiting will probably never go away and the counterfeiters will surely continue to find new ways to create and sell their products but brand owners can take comfort in knowing that innovative technology companies are continually developing new solutions to address the age old problem of counterfeiting.