Fighting the Invisible Trillion-dollar Counterfeit Market

Fighting Against Counterfeiting

The growing counterfeit market is a widespread global problem. The amount of total counterfeiting globally has reached USD 1.2 Trillion in market value in 2017

Modern supply chains now offer counterfeiters more opportunities to introduce their fake goods, resulting in lost revenue. Moreover, as the fake product fails, it reflects badly upon the brand. The damage resulting from counterfeit products never reflects poorly on the counterfeiter or the contract manufacturer. Instead, it tarnishes the image of the genuine brand.

Counterfeit Market in Asia

With the growth of E-Commerce, the problem gets exacerbated, given the vast amounts of platforms for the counterfeiters. While brands may be able to protect the authenticity of goods sold through authorized distribution channels, they cannot easily control the sale of fake goods, sold as genuine, on the internet.

According to a 2016 study done by the Organisation for Economic Co-operation and Development (OECD), Singapore is the third biggest source of counterfeit and pirated goods. The majority source is from China/HK.

Vulnerabilities in the Supply Chain

This makes us wonder why Singapore, being a non-major manufacturing country, can contribute to the counterfeit market. The key issue here is being a major shipment/ trans-shipment hub.

Based on our experience, a visible product distribution channel is critical to prevent illicit trade. Below are four main areas of vulnerabilities along the supply chain that brand owners commonly face:

Vulnerabilities in Supply Chain in the Counterfeit Market

Area 1

  • Illegal Overruns
  • Counterfeiting
  • Pilferages ( Goods & Security Labels)

Area 2

  • Grey Market Diversions
  • Pilferages during freight, local delivery and warehousing

Area 3

  • Parallel Trade
  • Compatibles
  • Pilferages during warehousing and local delivery

Area 4

  • Returns of non-original products under warranty claims

Brand owners sometimes outsource their production, whether it is in parts, or in its entirety. Because of that, if there are any illegal overruns or pilferages, it can be hard to detect especially if there are many outsourced factories to manage. 

Moreover, complex product distribution channels across different regions add to the problem. Brand owners normally do not have visibility of how their products are being distributed beyond their first and second layers of main distribution channels. Tracking and tracing products as they make their journey to end consumers are often limited. Compared to detecting blatant product counterfeiting from fake factories, leakages along the supply chain is much harder to identify.

With a good brand protection program and sound brand protection strategies, companies can prevent a loss of revenue due to fakes. With a consumer engagement program inbuilt into the smart brand protection solution, companies can also have the avenue to engage their customers to upsell their products.

In conclusion, brand owners need to actively seek out the location of possible issues along their supply chain and select the suitable solutions to tackle them. After all, a brand is one of the biggest assets that any company can have – companies should never rely solely on country regulations to protect their brands. Being resistant to making changes immediately often result in making greater losses in the future. When that happens, it will definitely take any business a long time to recover.

Guankai

Guankai is a solution architect based in Singapore and the business development director of Nabcore Pte Ltd. He specializes in smart brand protection tracking solutions with 10 years of experience navigating the grey market in Asia. His focus is on designing interlocking smart applications for FMCG, industrial and automotive product and brand owners to prevent counterfeiting and enable post-purchase marketing engagement.

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