- Counterfeiting is trillion dollar problem and a threat for any business or brand
- The counterfeiting life-cycle can quickly destroy sales volumes
- The best protection strategies also increase consumer trust and deliver positive benefits like increased sales and brand equity
The Rise of Counterfeiting
Today counterfeiting is a major global industry, a trillion dollar problem and a significant threat for any brand or business. As technology, develops, so too does the sophistication of counterfeiters to replicate products.
The Devastating Effects of Counterfeiting
The effects of counterfeiting manifest in many ways including:
- Loss of sales revenue and profit margin
- Over production costs
- Fraudulent product warranty claims
- Product liability claims
- Brand and product reputation damage
The cumulative effect of these impacts is often significant (if not fatal) to businesses who are targeted by counterfeiters.
The Lifecycle of Counterfeiting
The destructive effects of counterfeiting follows a typical lifecycle over four stages:
- Entry – counterfeiting is at small scale as counterfeiters enter the market producing counterfeit goods in small scale. The small volume of counterfeit production is usually not detected and allows counterfeiters to achieve an entry point from which to scale up.
- Growth – at this stage the counterfeit product is being produced on a larger scale and becomes more economical for counterfeiters to further scale their production. By now the sales volume of the genuine product begin to slow as counterfeit substitution begins to achieve scale and traction.
- Critical – Growth of the counterfeit product expands rapidly to reach a critical scale where the volume of counterfeit products begins to significantly displace the genuine product resulting in declining sales volumes and decline in profit and market share. By this stage the problem is in epidemic proportions and the counterfeiters have hijacked a large share of the genuine product’s market share. Furthermore, consumers are now aware of the existence of counterfeit products and may stop purchasing the product which further compounds the declining sales volume.
- Fatal – Now the counterfeiting problem becomes so large and entrenched that the genuine product is losing significant sales and profit such that it becomes unprofitable. The brand reputation has been damaged such that consumers no longer trust the product or company and the situation becomes untenable.
How to Protect Your Brand and Business
Counterfeiting is a sophisticated practice that is well organized and often very difficult to counteract and mitigate once is has started. It is therefore critical for any business with a trusted brand to take proactive steps to ensure they protect their most valuable asset – their brand.
Furthermore, counterfeiting often involves a number of elements of a business supply chain model which makes it very difficult to both detect and protect against counterfeiters. In many cases the perpetrators are from within the company supply chain and therefore have inside knowledge and access to the company supply chain. This further complicates the problem as it is very difficult to know who to trust.
The best counterfeit protection strategy involves a holistic, multi-layered approach comprising anti-counterfeiting products, track & trace technology and digital integration to provide an effective, end-to-end supply chain solution. Depending, of course, on the product and underlying strategy this approach can also increase consumer trust in a brand and drive positive outcomes (in addition to avoiding the negative ones).
To find out how you can protect your brand and business contact us on +61 2 8977 4900