The trade in counterfeit clothing, textiles, footwear, handbags, cosmetics, and watches is worth over US$450 billion annually.
E-commerce is a key avenue of growth for luxury and fashion brands, especially since the COVID-19 pandemic has accelerated the trend towards online sales. However, online counterfeiting poses a key barrier to this growth – the trade of fake products now accounts for 3.3% of all global trade.
Counterfeits are most often found on social media platforms and online marketplaces, impacting fashion brands’ sales and revenues. E-commerce 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 article, we break down the threats posed by counterfeiting within the luxury and fashion industry, before detailing how brands can fight back and drive e-commerce sales with 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. A study by INTA showed that as much as 79% of Gen Z surveyed (aged 4-24) had purchased a counterfeit product.
The threat is particularly severe for the fashion industry, with 26.3 billion Euros worth of sales lost annually to counterfeit clothing, 1.9 billion Euros to counterfeit watches and jewellery and 1.6 billion Euros to counterfeit handbags and luggage. Corsearch research revealed that clothes are the most regularly purchased counterfeit product by UK consumers, making up 43% of all 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.
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. Some years ago, Birkenstock severed ties with Amazon, with Nike following suit and pulling its products from the online marketplace in a bid to fight back against 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. On Instagram, nearly 20% of all posts about fashion products feature counterfeit goods, with more than 50,000 accounts promoting and selling these knock offs.
Return Fraud Is Endemic
Fake products are increasingly being found in physical stores due to return fraud; consumers buy an authentic product and return a counterfeit, keeping the original product and profiting in the process.
In 2020, merchants lost an estimated US$25.3 billion due to fraudulent returns, of which $7.7 billion were made online. In fact, for every $100 of returned merchandise, it’s estimated that retailers lose $5.90 to return fraud.
There is an ever-increasing amount of these fraud-based returns, and this is partially credited to the rise in gift card fraud. Bad actors also use methods such as fake receipts, switched price tags, and cloned credit cards.
Significantly, most counterfeit products used in return fraud are sourced online. By using online brand protection technology to find and shutdown the largest counterfeiting operations, the supply of fake goods to fraudsters would be heavily reduced.
An Opportunity for Online Growth
Retailers are doubling down on their investment in e-commerce, as they strive to sustain the high online sales figures driven by the COVID-19 pandemic.
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 infringing marketplace listings and social media posts that do not directly reference your brand or products.
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.
Protect Your Brand and Increase Your E-commerce Sales
In 2021 Corsearch protected over 1,400 brands and over $5 trillion of annual revenue, harnessing the power of our leading brand protection platforms. The most prevalent and damaging online counterfeiters are targeted in our enforcement efforts in order to safeguard brand reputation and increase online revenue for our clients.
We achieve this through AI-assisted image-matching technology that is able to detect infringers wherever they hide. We also deploy clustering technology that links together related entities to uncover the networks of infringers exploiting your brand.
Find out how online brand protection can increase your brand’s e-commerce sales by speaking to one of our experts.