The trade in counterfeit clothing, textiles, footwear, handbags, cosmetics, and watches is worth $450 billion annually, but brands are fighting back.
Ecommerce is a key avenue of growth for high street fashion brands. However, online counterfeiting poses a key barrier to this growth with 33% of retailers stating that it is one of their top three external threats to their ecommerce businesses.
Counterfeits are most often found on social media platforms and online marketplaces, impacting fashion brands’ sales and revenues. Ecommerce managers and marketers need to be aware of not only the threats posed but also the opportunities presented. If brands are able to take down the most prolific infringers and drive consumers to legitimate channels, they can reduce the reputational damage and increase their online sales.
In this piece we break down the threats posed by counterfeiting within the fashion industry, before going on to detail how brands can fight back using Online Brand Protection.
Online counterfeiting is increasing
The availability of online counterfeits is increasing, with consumers unknowingly purchasing fake products on social media platforms and online ecommerce marketplaces. Through enforcement for one of our customers in the fashion and luxury space, we have discovered that online infringement is increasing in India, making up 66% of total notices sent between April and May 2019.
Clothes are the most regularly purchased counterfeit product by UK consumers, making up 43% of total counterfeit purchases. Unable to view the product in person before purchase, the subtle physical differences that hint to whether a product is fake or genuine are hidden from consumers. Highlighting the scale of this issue, Incopro research finds that 26% of UK consumers unintentionally purchased counterfeit goods online in the last 12 months.
The lack of online traceability further complicates the matter. Marketplaces that facilitate third-party sales are plagued by counterfeiting, with a recent purge of thousands of vendor accounts on Amazon revealing the sheer scale of this problem.
On social media platforms, the threat is also growing. Instagram and WeChat are both inundated with fake apparel and increasingly sophisticated techniques are used to throw brands’ legal teams off the scent. According to a study published in April, nearly 20% of all Instagram posts about fashion products featured counterfeits, representing a 171% increase from 2016. Enforcement for one of our fashion and luxury customers reveals that Instagram remains the social platform housing the greatest number of counterfeit infringements in Asia.
Returns fraud is endemic
Fake products are increasingly being found in physical stores due to returns fraud; consumers buy an authentic product and return a counterfeit, keeping the original product and profiting in the process.
The returns fraud economy is estimated to be worth $24 billion and is a particular issue for brands offering premium jeans where the financial incentive is far greater. Retailers have been known to refuse returns of Nordstrom products given the scale of fraud associated with the brand.
There is an ever-increasing amount of these fraud-based returns, and this is heavily credited to the rise in gift card fraud. Bad actors are also aided by fake receipts and price tags, but also by cloned credit cards.
Significantly, most counterfeit products used in return fraud are sourced online. By shutting down the largest counterfeiting operations, the availability of fake goods to fraudsters would be reduced and the financial impact to brands mitigated.
An opportunity for online growth
An ecommerce survey conducted by WBR Insights notes that 81% of retailers see marketplaces as an opportunity rather than a threat. In a 2019 ‘State of Fashion’ survey conducted by McKinsey & Company, 54% of respondents indicated that increasing omnichannel integration, alongside investing in e-commerce and digital marketing, is their number one priority for 2019 for the third year running.
It’s true that brands can offer their goods to a wider pool of consumers by harnessing marketplace infrastructure and keep most of the profit in the process. However, the continued strain placed on brand owners by counterfeiting is holding many back.
A comprehensive Online Brand Protection strategy will allow you to root out and take down the most prolific criminal networks exploiting your brand. Image matching technology and regularly updated keyword searches will allow you to discover infringements that do not include your brand name or trademarks on Chinese marketplaces such as DHgate.
Proactively dealing with counterfeits allows brands to tap into the potential of marketplaces without worry of damage to brand reputation or revenues by spurned consumers. By converting buyers who may have otherwise unknowingly purchased counterfeits, you will drive online growth for your brand and increase revenue.
And the ROI is clear – leading technology consultancy Forrester notes that comprehensive Online Brand Protection is able to increase online sales by 3% per brand covered per year.
Jade Knight is a brand protection analyst at Incopro