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What is counterfeit?
Counterfeit goods can be defined as replicas or imitations of a product, aimed at being considered authentic and deceiving others. Simply put, counterfeit and inferior goods refer to counterfeit products made from lower quality or substandard products, sold under the name and trademark of other brands without authorization from the brand owner.
In fact, according to Article 18, Section 2320 of the United States Code, trafficking in counterfeit goods is classified as a crime and punished.A core characteristic of counterfeit goods is that there is always malicious deception and misleading buyers to believe that the product is genuine, but in reality, the opposite is true. They are impersonated as genuine products. Therefore, counterfeit goods infringe on the trademark and other intellectual property rights of genuine brand owners.
Forgery also includes copying authentic labels, packaging, or any other relevant elements that exhibit distinctive features.The reason why counterfeiters are rampant is because the selling price of counterfeit goods is much higher than the production cost, and unsuspecting buyers are willing to pay the fee because they believe they have purchased genuine products at a lower price.
Yuandan goods – fake, unauthorised replicas of luxury products – do exist, there is evidence of that, but the production costs of a high-tier Replica Sneaker will make its selling price too high to compete with the cheap copies that other manufacturers make. Further, there is always the risk of having the counterfeits seized by Customs. While having a container full of fake Ray-Ban glasses seized and destroyed will not hurt their manufacturer, this is not the case for a high-end replica which requires premium materials and sophisticated machinery to produce. It is legally – but more importantly, economically – safer for such manufacturers to sell their products under their own factory brand or even under a white label rather than as high-end replicas.
Although the Global Brand Protection Report states that losses due to the online sale of counterfeits amounted to $32 billion in 2017, it is difficult to estimate the actual losses for this market. Losses caused by the counterfeiting of luxury goods are different from the losses which affect other products, where each sale to a customer by a counterfeiter is a sale lost for the brand. There is a very high chance that buyers of such products would never have purchased a genuine product. Although that is not to say that counterfeiting does not hurt luxury brands, quite the opposite; its harmful effects are more insidious.
In the luxury industry, originality and scarcity are the main drivers of success. If a luxury good becomes commonplace, it will stop selling, and all the research and development, design, marketing and advertising resources invested in creating something distinctive will be lost.
While sales made by counterfeiters are not direct losses for the infringed brand, they may lead potential customers not to choose genuine products which have lost their lustre and reputation. More than any other market, the luxury market relies on reputation and the feeling of exclusivity that its customers have. The mass selling of counterfeit products enabled by the Internet is a clear danger for luxury brands. The luxury industry is mostly composed of wearable products (eg, sunglasses, clothes, leather goods and perfumes), and the manufacture of such products is highly regulated, even when the goods are not high-end items.
The lack of traceability and the long reach of the Internet pose additional risk for luxury brands which may appear liable if the public believe that it is the brands that are selling faulty products.
Online sales
Long gone is the time where the leading distribution channel of counterfeit luxury goods was a blanket laid on the ground of a tourist village marketplace. Today, manufacturers of counterfeit goods have a direct and constant reach to every potential customer, not just a few tourists. Anyone with internet access can easily find and acquire a counterfeit pair of sunglasses or perfume at any time of the year, at every hour of the day, without leaving home.
Many counterfeiters no longer ship merchandise; they send small parcels directly to the end customer. This phenomenon is so crucial that certain online marketplaces started and grew their businesses mainly by enabling counterfeiters to sell their goods to the public. Fortunately, this is no longer the case, and most marketplaces monitor their merchants’ behaviour. Nonetheless, marketplaces still need to be scrutinised to ensure that they do not fall back on bad habits.
Although social media networks are not primarily places for commerce, such platforms are a powerful instrument for marketing products, and they can drive sales to online shops subject to little or no regulation. The most important ones today are YouTube, Facebook, WhatsApp, WeChat, QQ, Qzone, Instagram and TikTok. These platforms have billions of active users and as many potential customers. Studies show that almost one-fifth of the content posted on social media regarding luxury brands is illicit.
Such means of free advertising has an added benefit for counterfeiters. First, they are not dependent on a marketplace and its IP enforcement rules. Second, shop addresses are harder to find for brand owners, as they are either not well ranked or completely unavailable via search engines. Finally, instead of listing one single online shop such as replica air jordan store, counterfeiters can communicate with different web addresses and limit the risk of having all their sales stopped when one site is suspended.
