The lucrative counterfeit fashion industry costs fashion brands billions every year. Brands have virtually been unable to make a significant dent in this illicit global trade. With counterfeiters getting bolder on social media, is there hope for manufacturers? Advanced anti-counterfeiting might be the answer brands have been looking for.
The global industry of fake fashion has been the bane of brands for over a hundred years. As customers started to aspire more and more to luxury products and premium apparel and accessories, the biggest names in fashion made it big for decades. But the counterfeiters didn’t stay behind. The overall fake goods industry is estimated to be more than 3.3% of global trade and rising.
Brands lose a good chunk of their annual sales to a global network of counterfeit fashion goods. And with counterfeiters constantly evolving their distribution and marketing methods — using the likes of Instagram — it’s high time brands responded with innovative, highly advanced anti-counterfeiting technology.
Counterfeit Fashion Industry – How Bad is the Problem?
Fake fashion products have technically existed for 150 years in some form or other but the current counterfeit fashion industry has now evolved into a near-invincible behemoth. It is a burning problem that affects both legitimate fashion brands and consumers worldwide. Counterfeit fashion products include both luxury and mid-market items that are manufactured and passed off as genuine to mostly unsuspecting customers.
In terms of magnitude, the global counterfeit industry as a whole is estimated to be worth over $3 trillion annually. Fashion and luxury goods like clothing, shoes, and leather items happen to be some of the most counterfeited products across all industries. Brands like Gucci, Louis Vuitton, Michael Kors, Adidas, Nike, and Levi’s are some of the worst affected by this international plague.
Counterfeit fashion products are sold through a variety of online and offline channels, including ecommerce sites, street vendors, and even some reputed brick-and-mortar stores. The growth of online marketplaces and social media has further worsened the problem and made it easy for counterfeiters to peddle their goods globally to a larger audience.
The counterfeit fashion industry is not only responsible for billions in lost sales every year but also for damaging brand reputation and the brand’s perceived value. When customers think they’re buying a genuine product and instead get a sub-par counterfeit product, they mistakenly blame the original brand. Plus, when a consumer knowingly buys a counterfeit product of a luxury item, it decreases the perceived value of the luxury brand as a large number of people own the product.
Besides, this illicit trade also gives rise to a host of environmental and public health issues and fuels organized crime and money laundering activities. Brands have largely failed to combat the issue as conventional anti-counterfeiting techniques have proven ineffective in weeding out fakes.
What Kind of Fashion is Counterfeited the Most?
Luxury goods feature in fashion counterfeits but the bulk of the global counterfeit trade happens in categories like shoes, clothes, handbags, and watches — premium but affordable products. You can easily spot fake goods masquerading as Nike, Puma, Converse, Gucci, Chanel, or Prada products, being sold by street vendors or through Instagram ads.
Of late, there has been an increase in the counterfeiting of fast fashion products as well. These products attract customers due to their lower price points as compared to luxury goods, making them more accessible to a wider range of consumers. Counterfeit fast fashion products are sold online or through street vendors, and they often copy the designs of popular high-street brands such as Zara, H&M, and Forever 21.
Any fashion product with a sizeable market can be a prime target for counterfeiters. They simply need to piggyback off the huge marketing investments made by the original brands while manufacturing fakes at the lowest possible cost. The bigger the branding and marketing push by genuine fashion product manufacturers, the bigger the potential profits are for counterfeiters.
Recently, over $30 million in fake bags and clothes were seized by the US Customs and Border Protection at LA and Long Beach ports. These counterfeits were being passed off as genuine Gucci, Louis Vuitton, Chanel, and Fendi products, among others. A premium retail store in Mumbai’s Oberoi Hotel was found to be manufacturing and selling counterfeit Louis Vuitton bags.
The Global Network of Fashion Counterfeiting
From manufacturing to distribution and sale, counterfeit goods are supported by a global network of unethical labor practices, widespread criminal activities, and sometimes complicit customers. Counterfeiters typically establish manufacturing operations in illegal sweatshops mostly in developing countries, leveraging weak oversight and cheap labor costs. A USPTO report showed that around 80% of fake goods sold worldwide are produced in China.
Once produced, these counterfeits are shipped via shipping containers to locations thousands of miles away from their origin. Through a network of designers, manufacturers, suppliers, distributors, and customs and border officials, these goods find their way to both legitimate and illegitimate retail channels. And with the explosion in social media platforms like Facebook and Instagram, counterfeiters can easily market their wares to customers, deceiving them into buying fakes.
Counterfeiters often replicate manufacturing skills and crafts to produce products that can be near impossible to distinguish from their genuine counterparts. Many customers willingly buy fakes due to their lower prices. They get to buy into a select club sporting luxury products at a fraction of the original cost. This behavior of customers is another factor promoting the trade of illicit and fake goods.
The Far-Reaching Costs of Fashion Counterfeiting
The detrimental impact of the counterfeit fashion industry includes economic and reputation loss for brands, health dangers for customers, and negative effects on the environment.
For fashion brands, counterfeits represent illicit competition that leads to more than $50 billion lost in sales every year. Besides this immediate loss, counterfeiters are also responsible for irreparable damage to brand reputation as customers lose trust when faced with fake products. This damage to brand IP can force brands to abandon certain retail channels like Nike did when it stopped selling on Amazon.
The production of counterfeit fashion products often involves using cheap and harmful materials that can pose health and safety risks to consumers. Fake fashion products are often of poor quality and may contain harmful chemicals that can cause allergic reactions, skin irritation, and other health problems.
Besides, counterfeiters routinely employ exploitative labor practices in unregulated sweatshops, not only giving the fashion industry a bad name but damaging the environment in the absence of strict manufacturing regulations.
The pervasiveness of the counterfeit fashion industry also fuels organized crime and inevitably contributes to money laundering and other illegal activities. Counterfeit goods are often used as a means of financing criminal activities and even terrorism, making them a significant threat to global security.
Anti-Counterfeiting to Combat Fashion Counterfeits
Fashion brands have been using overt solutions like QR codes and holograms but to no avail. Counterfeiters find ways to easily replicate these techniques and continue to mislead customers and hurt brand sales and reputation.
Unlike these overt solutions, covert solutions are nearly impossible to replicate, and due to the sophisticated technology involved, it isn’t financially worth it for counterfeiters to even try.
Today’s advanced anti-counterfeiting solutions like AlpVision Fingerprint and Cryptoglyph can be implemented without major changes to product packaging. And customers and brand owners can verify the authenticity of products with just a smartphone app — no need for cumbersome verification equipment.
AlpVision’s anti-counterfeiting solutions modify the surface of products with invisible micro-defects. Therefore, they’re impossible to replicate and products like apparel, shoes, bags, and more can be scanned by customers on their smartphones to verify that they’re genuine.
Fashion brands can also explore a combination of covert and overt solutions to offer multi-layered protection against counterfeits. The benefit of retaining overt solutions like a unique visible identifier is that customer trust will be assured. In the absence of visible protection measures, some customers might incorrectly presume that genuine products are fake, simply because they don’t have a hologram or unique QR code.
Combining the tamper-proof protection of covert anti-counterfeiting solutions with the assurance of overt techniques, fashion brands can finally offer a strong response to the counterfeit fashion industry.
Spreading awareness among customers about the existence of these covert solutions is also key to the success of anti-counterfeiting. Fashion brands can use the same social media platforms used by counterfeiters to educate customers on using their smartphones to verify the products they’re purchasing. In addition to this online push, brands can also leverage their offline store staff to make customers aware of these protection mechanisms.
Counterfeit Fashion Industry is Not Invincible
While the scale and reach of the counterfeit fashion industry might appear intimidating (and it certainly is), it’s not immune to a concerted, technologically-powered offensive. Fashion brands need to first acknowledge the gravity of the problem and ensure stakeholder buy-in for taking lasting action against counterfeits. They should then implement covert anti-counterfeiting technology to ensure tamper-proof protection for their products.
It’s also a fact that every anti-counterfeiting solution might not apply to every product and brand. Brands can refer to our whitepaper on selecting a fashion anti-counterfeiting technology to know the best possible solution to safeguard their products against the menace of fake fashion products.
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