Counterfeiting, Fraud, and Consumer Products
The globalisation of manufacturing and rising food prices has increased the risk of counterfeiting. This is because the diversity of goods available, and therefore of suppliers, is significantly higher than in past decades, leaving companies facing fragmented control of manufacturers and extended supply chains. This climate has resulted in an opportunity for criminals to sell counterfeit consumer goods such as clothing, foodstuffs, cosmetic products, cigarettes, and pharmaceuticals, when previously only luxury goods were targeted.
Counterfeiting now costs more than 2% of total global economic output, or around USD1.8 trillion per year, and the internet has made counterfeiting a problem that is difficult to combat, with a 15% increase in sales of counterfeit goods online last year. Rogue websites and online auctions all give counterfeiters anonymous channels for their activities, with counterfeit products now spreading to legitimate supply chains, as counterfeiters become more security savvy.
Every year, consumers are deceived into buying counterfeited products which can pose significant risks to their health and safety, in addition to damaging companies’ brand reputation being, and eroding profitability and market share. Europol, Europe's police agency, recently seized more than 4,500 website domains trading in counterfeit goods that were selling anything from luxury goods, sportswear, spare parts, electronics, pharmaceuticals, and toiletries.
Mitigating Risks in an Era of Globalisation
With a vast array of deceptions taking place and the associated damage to brand and reputation, it is essential for manufacturers and retailers to mitigate counterfeiting risk. You should therefore:
- Keep Your Eyes and Ears Open: Your sales force will usually be the first to detect counterfeits. Ensure they are instructed to keep a look out for such products and that they report them further up the chain.
- Gain a Greater Understanding of the Supply Chain: A clear path of investment and focus in understanding today’s global supply chain is imperative. Map and understand the risks, categorised as a minimum by country, sector, transaction, and business partnership.
- Use Technology to Protect Your Goods: Anti-counterfeit technology, such as track and trace and the use of holograms or watermarks on packaging, can help maintain supply chain integrity.
- Change Products and Packaging Regularly: This makes it much harder for counterfeiters to keep up and easier for you and your customers to spot the fakes.
- Use Data to Understand Trends: Spotting trends in consumer preferences can help identify products which are more attractive targets, allowing for a bespoke deterrent to be put in place.
- Protect Intellectual Property Rights: Obtain a registered trade mark, registered design, and patent protection to give yourself the largest possible arsenal of weapons to deploy against counterfeiters.
- Assess Insurance Coverage: Understand how your third-party and or recall policies and procedures will respond to counterfeiting risks.