Imagine you have gone trekking to the mountain top with your buddies and are making your way through thick vegetation along the path. It’s beautiful and untouched and you are admiring the view as you push away the long grass and tree branches and make your own trail.
Suddenly your friend behind you cries out ‘Hey! You are bleeding!’. You turn around and to your horror, your entire leg is covered in blood which is trickling down in thin rivulets.
You didn’t even realize when you got wounded until you notice a couple of leeches stuck to your calves, engorged with your blood.
Counterfeiters are like leeches
Leeches attach themselves to the skin and their bite introduces an anti-coagulant mixed with a mild local anesthesia at the bite location, so the blood flows freely and the victim does not even feel the pain.
Most brands are a bit like that victim and the leeches are like the counterfeiter who is feasting on the brand’s reputation by selling duplicate products. If you are that brand, you may be feeling happy in your journey to the mountain top while the counterfeiter would be feasting on your lifeblood for free.
Counterfeits not only steal your hard-earned revenue and profits in the near term, but also cripple your reputation and equity. Just recall the effort and investment your organization or you have made in developing loyalty with your customers.
Brands reach where they are after decades of work in providing a high quality product experience. This is backed up by the grind of distributing the product, determining the ideal price point, agonizing over the right positioning and communication, outstanding customer service and everything else that goes into building a successful brand.
Imagine then, someone else just coming in, copying your product and your packaging and taking away the fruit of YOUR labour, your revenue, your equity and damaging your hard earned reputation!
I have personally worked on a Brand which pegged its losses to counterfeits at more than 10% of its global revenue, a loss of $0.5 billion.
Brands are at serious risk from counterfeits
When your customer buys a counterfeit, she goes through a pathetic product experience because the counterfeiter couldn’t be bothered about quality. Net result, your customer is sorry that she bought your brand, doesn’t make that mistake again, and moves to your competitor forever.
If you operate in a sector that can have an impact on the health and safety of your customers, you are at an even bigger risk. Imagine if you are in the food or pharmaceutical industry and a fake product makes your customer seriously ill or even cause death. It is not an unlikely event – there are hundreds of thousands of documented cases of fake products causing fatalities.
Other industries can be impacted as well – fake electrical and electronic products can cause fires or explode, fake automotive parts can cause fatal accidents, fake health supplements or alcohol or tobacco can kill you. I can go on, but I am sure you get the picture.
Fake products have the potential to cause PR nightmares and reputation damage that can severely impact your stock price.
Most Brands are complacent about counterfeits
Most brands do a half-hearted job of tackling the problem of counterfeits. I have spoken to CEOs of successful brands who earnestly believe that they don’t have a problem at all! Then there are brands who are aware of the problem, but are apathetic to it or genuinely do not know what to do about it.
Some brands follow a reactive approach and feel that it is enough to respond to customer complaints or go after counterfeits being reported from the market by the sales team, distributors etc. Some brands are reluctant to take visible action against counterfeits as they fear they will be seen as ‘the one with the fakes problem’.
I feel that at the heart of the weak response to this threat is a lack of a real understanding of how big the problem is, and how urgent an attention it requires from the brand.
Counterfeits are a clear and present danger
The counterfeit industry today is estimated at over US$ 2 Trillion, making it the 10th largest economy in the world. It is growing at 11%, making it the fastest growing economy as well. No industry, no sector, no geography is spared.
Counterfeiters run highly sophisticated operations that reach every nook and corner of the globe.
They have access to advanced manufacturing facilities and global supply chains.
There are different levels of threat, depending on the product category you operate in, your market share, and the geography of your interest. But if you are selling a physical product, and have a reasonable amount of market share, you are likely to have counterfeits irrespective of product category or geography.
The scale of counterfeits can range from 5% to 75% of your revenue.
If you are a brand, you have no choice but to take this issue seriously. It is an existential threat to you with short term and long-term implications on your continued success. It is often said that you can’t really stop fakes, or imitation is the best form of flattery. Our belief is that you can significantly cut down fakes, and imitation in this case is just theft.
It is time that business leaders wake up to this clear and present danger to their business. And that you can continue on your journey to the mountain top, without having to worry about leaches sucking your blood along the way.
Watch out for my next blog on “5 Don’ts for Successful Brand Protection“. If you liked what you read, do share in your network. You can follow my articles on LinkedIn and Twitter, or subscribe to My blog.
Tanmay Jaswal is the Founder of Chkfake, a start-up that is disrupting the anti-counterfeiting industry by creating an eco-system of all stakeholders to join the fight against fakes together. The Chkfake mobile app allows users to verify genuineness of any product irrespective of category or brand.
Tanmay has 26 years of global experience in business leadership, marketing and strategy in companies like Coca-Cola and Shell and is an acknowledged authority on brand protection. He has headed the brand protection function for Shell globally and has extensive experience in this space over the last 8 years.