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Why counterfeits should be on every risk register

Developing and building a new product is one of the most exciting, laborious and stressful events an entrepreneur will ever experience. Taking an idea from concept to market is full of highs and lows, but when their product is finally ready to hit retailer shelves (virtual or physical), their sense of achievement will be unsurpassable.

It is therefore not surprising that when an entrepreneur discovers their product has become a victim of piracy, their feeling of devastation will also be like no other. 

The unfortunate truth is that many product developers and manufacturers will experience a problem with counterfeits at some point in their business. While counterfeits were traditionally linked to luxury goods like handbags and designer clothing, today I’ve seen how copycats present a huge market for products ranging from toothbrushes to fish food.

For many, illicit, counterfeit or grey market goods are merely an irritation. For others, there will be lost revenue, brand damage or safety concerns associated with poor quality fakes. When products are copied, the pirates will not adhere to the strict safety tests genuine manufacturers employ, and this could mean a dangerous product is being marketed and sold under their brand, causing irreparable damage to their reputation and putting their customers at risk.

For instance, take a cosmetic company whose products are being counterfeited and sold online for much cheaper. Purchasers could be attracted by the low cost but may not know the products are fake, which could cause serious health issues if the ingredients have not been tested properly. As well as potentially putting people’s health at risk, it could also cause brand damage through negative reviews, complaints and even legal action against the genuine cosmetic company.

To put the counterfeit problem into perspective, a recent report from the OECD revealed that in 2019, it is estimated that “the volume of international trade in counterfeit and pirated products amounted to as much as USD 464 billion in that year, or 2.5% of world trade.”

The massive figure should put tackling and monitoring for counterfeits at the top of the agenda for any product manufacturer because the unfortunate reality is they are likely to experience the problem firsthand.

When it comes to addressing counterfeits, the first call to action should be adding the threat to risk registers. This will ensure businesses are proactively monitoring for counterfeit versions of their products and have a pre-planned response when any are found. In essence, this means maintaining a live, working document with designated responsibilities and defined KPIs for mitigation.

When it comes to weeding out counterfeits, there are also some best practice steps organizations should take to ensure their efforts are impactful:

1. Run global searches for illicit products and get them removed

Through regular monitoring of e-commerce and social media sites, you can identify illicit products. Use different territorial search engines, particularly those based in Southeast Asia, South America and potentially the Middle East or Africa. When you identify a counterfeit of your product, use your trademarks, design rights and copyright to prove your products’ originality and get the online marketplaces to remove the fraudulent links. You do not need to use lawyers, but you do need to have registered IP or copyright (even if the latter is unregistered). By identifying and removing the illicit listings, you remove their visibility along with the opportunity for sale, export, import and further distribution.

2. Carry out spot difference tests.

If you find a good copy/fake, buy one to compare it with the original. If possible, update your own manufacturing specifications to create almost invisible differences so anyone in the know can determine the genuine from the fake. Finding your first rip-off can be devastating, but it is not a personal attack. Your business has created something desirable and someone else wants a slice of its commercial revenue. 

3. Don’t forget about the supply chain and take stock.

Depending on your supply chain, the accidental mix-up between genuine and illicit stock must be considered. Fakes get through to customers because shortcuts appeal to busy people. A lack of resources or time may curtail detailed stock inspections and record-keeping may be inadequate; a scarcity of supply may mean welcoming what appears to be surplus stock. To prevent this from happening, never skip stock inspections, and train your staff about counterfeits so they can spot the differences between genuine and counterfeit items.

Counterfeiting is a big business and can damage an organization’s brand, revenue and the safety of their customers. While no industry is truly safe against the threat, by adding counterfeits to risk registers and remaining vigilant, businesses can take a proactive approach to address the issue. This will ensure counterfeit products are detected quickly and taken down before they have a chance to harm any customers or cause irreparable brand damage. 

This piece first appeared on Forbes on 30th Nov 2021.


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