4 Ways Online Retailers Can Fight Against Counterfeit Fraud
In the last decade, we've seen a rise in online shopping, from e-commerce powerhouses to direct-to-consumer up-and-comers. Customers are reaping the benefits from the sophistication and growth available through digital retail. Heading into 2019, e-commerce sales comprised 15 percent of total retail sales and, according to Mary Meeker’s 2019 internet trend report, e-commerce sales growth in the United States remained “solid” with 12.4 percent year-over-year growth in Q1 of 2019.
A large contributing factor to the growth and success of online retail is the increase of third-party marketplaces. Amazon.com, Alibaba, eBay, and several others have created global platforms for smaller retailers to stay competitive online. These online marketplaces have made it easier for smaller retailers’ and brands’ products to be distributed, while also providing them with access to a larger customer base. However, this comes with its own set of challenges. The growth of online marketplaces has led to an increase in counterfeit merchandise sales, which is not only a pain point for retailers from an operations perspective, but also hurts the company’s branding and image. According to the Global Brand Counterfeiting Report, overall losses last year due to counterfeiting totaled $323 billion. The report also forecasts the online counterfeit business to balloon to $1.8 trillion by 2020 in counterfeit sales of just brand makeup, skincare and other goods, a 50 percent jump from $1.2 trillion last year.
So how can online retailers fight against counterfeiting?
4 Best Practices for Fighting Against Online Counterfeiting
As today’s online retailers look to prevent counterfeiting, there are certain best practices that should be taken into consideration. Here are four tips retailers can use when addressing today’s concerns around counterfeiting:
- Research and monitor points of promotion. While it’s obviously important to identify and shut down counterfeit distribution channels, it’s almost certain that counterfeiters will regularly seek new sales venues. It's therefore just as critical to monitor the online promotional channels used by these violators. Counterfeiters use the same effective promotion techniques employed by legitimate marketers while leveraging powerful, highly recognizable brands built by experts. Using paid search advertising, links within social media, search engine optimization tactics, cybersquatting and spam, they successfully steer traffic to their illicit offerings and diminish the marketing return on investment of legitimate brands. Monitoring for these promotional efforts is critical … and enables the next best practice.
- Implement minimum advertised price (MAP) policy enforcement and monitoring. Continuous brand protection monitoring is key to both prevention and early detection of counterfeit sales. Leading brands with vast online seller networks are adding brand protection software — also known as MAP monitoring or brand compliance solutions — to their technology stacks, with ROI expected from increased online sales and eliminated MAP violations. Within the database, machine learning predicts the words and images likely to be covered by your linked IP portfolio. Brand protection software saves significant user time and aggravation by simultaneously monitoring thousands of marketplaces, social media portals, search engines and websites to document potential infringements and unauthorized sellers. Today, this technology is capable of monitoring all possible products and product matches sold under one’s brand name, making it possible to scan beyond just the registered product database, which won't catch unauthorized sellers.
- Promote ‘Gray Market’ customer education and tracking. Unlike the Black Market, the Gray Market, where heavily discounted products are sold without the brand’s control, is often technically legal, though it closely toes the line while holding the same negative stigma. What can be tricky is the ability sellers have in the Gray Market to bypass long-established rules and agreed-upon codes of conduct. Their deceitful behavior puts both the brand and customer at risk, while reaping a fair bit of cash for the reseller. Adrian Punderson, vice president of Oakley Brand Protection, estimates that once fakes get into the “stream of commerce” it costs approximately 100 times more to stop being sold. Many companies have actually taken the extra step to create their own Gray Market tracking departments, with the goal of brand protection while also making efforts to educate customers of this hidden market. This often involves identifying resellers and converting them to authorized dealers to amicably mitigate the damage caused and build up new reliable sales funnels. Therefore, these teams contribute to MAP enforcement and sustained brand legitimacy.
- Be proactive and think globally. Online retail has opened the flood gates for international trade, and with that comes the proliferation of illegitimate businesses targeting consumer dollars through counterfeit sales. Counterfeiters enjoy more success when left to operate unchallenged, which is why brands and retailers have a stronger impact when they aren’t passive about such violations. While many brands think it's easier to start locally when fighting against counterfeit violators, it's actually more effective to launch global anti-counterfeiting initiatives — and to get them operational quickly. Prepare by ensuring your trademarks are registered internationally. This is especially true in China, which observes a “first-to-file” policy that grants registration to whoever files first, even if it’s not the true brand owner. Also look to incorporate round-the-clock monitoring tools to ensure price tracking during business hours. Prices should be monitored across the varying time zones from continent to continent. A global effort doesn’t preclude addressing markets that target a specific country exclusively. In some cases, this will require competent language translation resources for monitoring, detection and enforcement.
Overall, the above tips will help brands increase their bottom lines and enhance their brand images. Reporting and violation visibility enable brands to work with third-party sales platforms to help identify violators preemptively. Monitoring for all of the above makes any organization a proactive one.
Sanjeev Sularia is CEO and co-founder of Intelligence Node, a retail analytics and AI price optimization company.
Related story: 4 Steps to Stop Unauthorized Online Sales of Your Products
Sanjeev Sularia is CEO of Intelligence Node, a retail analytics and AI price optimization company that offers the world’s largest retail product index. Prior to founding Intelligence Node, Sanjeev was the CFO for Exclusively.in, a fast-growing high-end fashion e-commerce site acquired by Snapdeal, and CFO for Shersingh.com, a private label e-commerce company acquired by Myntra. Sanjeev is a graduate of London Business School and a Forbes Technology Council member.