The benefits of a watch certificate of authenticity are many, yet many brands still struggle to keep counterfeits out of circulation. Indeed, it’s always been a concern in the watchmaking industry for as long as we’ve been manufacturing them.
Here’s a look at why you shouldn’t downplay the impact of counterfeit watches and what you can do as a brand to protect consumers.
Overview of the U.S. and international watch markets
When analyzing the U.S. watch market, segmentation generally falls along the price spectrum. Depending on the retailer, watch costs can range from the low-to-medium side or all the way up to luxury prices of several thousand dollars or more. But the caveat for the watchmaking industry at large is this: production costs remain high, and counterfeiting may be a significant contributor, although measuring the impact is difficult statistically speaking.
Still, the consensus is that the market in the U.S. alone reached $16.85 billion in 2020, and experts anticipate a compound annual growth rate of 4.10 percent through 2026, an impressive figure for an industry that’s centuries-old worldwide. But comparatively, the Chinese watch market is the only one that successfully weathered the COVID-19 pandemic’s impact on imports; whereas the top 20 markets suffered losses in 2020, China recorded a 17 percent increase in revenue. As you might expect, Switzerland remains the largest exporter worldwide, with a total of $18.4 billion in imports in 2020 alone.
Notwithstanding that level of success, there are also risks you have to account for, such as the persistent problem of counterfeit watches reaching unwitting consumers before brands, retailers, and distributors can accurately and consistently identify lookalikes.
Producer overview
Many of the top-selling watch companies in the world are nearly household names. Swatch, Seiko, Patek Philippe, and the iconic brand Rolex are prime examples of names you may recognize; however, other brands like Tudor, Zenith, Cartier, and even Apple have sizable footprints worldwide, especially in the Asia-Pacific market.
In the smartwatch space specifically, Fossil and Samsung are two more brands leading the way innovation-wise as more consumers become more familiar with the benefits of wearing a smart device. Smartphone use may be ubiquitous, but wearable devices haven’t reached that level of saturation – at least not yet.
No matter how you look at the numbers, you can find plenty of reasons to be optimistic about the watchmaking industry shortly; however, counterfeit products and counterfeit certificates of authenticity remain problematic, and a distributed supply chain is the culprit.
Supply chain risk
The just-in-time manufacturing model ideally keeps operational costs low for watchmakers. Affordable parts and components – mainly electronics – eventually make their way onto the shop floor, but only after they have traveled across the world in some cases.
Costs stay low, undoubtedly, but this extended, global supply chain also introduces the risk of counterfeiting. Fraudsters and con artists take advantage of the just-in-time model by selling substandard or intentionally defective components. By the time brands realize it, consumers have already purchased products they believe are authentic.
The counterfeiting problem
According to the U.S. Department of Commerce, counterfeit watches and jewelry account for 13 percent of all seizures at airports and ports of entry throughout the country.
At a glance, here’s a breakdown of the black market’s dynamics, and it explains why even the most successful watchmakers keep struggling to develop reliable counterfeit protection and certificates of authenticity fraudsters can’t fake.
Why?
Statistics about any black market are hard to come by, and the integrity of the figures is inevitably suspect. Having said that, there’s no doubt that the negative financial impact is significant though challenging to quantify.
One online source pegs the damages at approximately $1 billion annually for counterfeit watches alone. Without a doubt, counterfeiters have plenty of financial motivation to ply their illegal trade, and they do it successfully – and have done so for hundreds of years since watches were invented.
Essentially, counterfeit goods exist because:
- Fraudsters can take advantage of consumer expectations (i.e., exclusivity)
- Quick profits are possible with an e-Commerce business model
- Brands can’t keep up with the number of known counterfeits in circulation
Where?
While counterfeit products can originate anywhere globally, the main offender is still China and other nations in the Asia-Pacific region like Hong Kong and Thailand. Although it’s worth noting that not all fakes come from this part of the world, Swiss-made and U.S. counterfeits are also in circulation, just not at the scale of international counterfeiters who take advantage of a global supply chain.
Who suffers?
Counterfeiting and fraud cost the global economy billions in lost revenue. They may actually hurt the job market in developing countries since companies can’t grow their brand power with millions of fake products in circulation.
Yet, ultimately, it’s consumers who suffer the most, but watchmakers also feel the pain. Here’s how fraud affects each one.
Risks for brands
The most significant risk is refurbishment, which comes with a high cost to the manufacturer from a brand’s perspective. The last thing a luxury watch vendor wants to do is return counterfeits to the distributor or the party responsible for ensuring authenticity.
The damage to brand power and consumer trust is difficult to measure, but the consensus is that it’s high. If counterfeits become too prevalent, consumers won’t be able to distinguish fakes from genuine products.
Risks for consumers
The most significant risk is paying full price for a fake product that costs several thousand dollars or more from a consumer’s perspective. Even worse, someone could inadvertently try to sell the used item as an authentic piece, yet the certificate of authenticity turns out to be a forgery. Worse yet, consumers have no recourse when they encounter a fake watch other than reporting it to the authorities.
Challenges to protect watches
Overall, the main challenge is ensuring that genuine watch certificates of authenticity reach the consumer after going to the retailer or vendor. Making a certificate is one thing, but is the consumer actually receiving it when they purchase the product? That’s the main challenge facing the watchmaking industry today.
Current anti-counterfeiting solutions
Surprisingly, the current anti-counterfeiting solutions aren’t very high-tech for the most part. There are databases of known fakes and forgeries, but that doesn’t tell how many products are actively in circulation.
The most obvious solution is to produce items with subtle differences in typography or other details that a legitimate vendor can quickly use to identify a fake. Still, this method isn’t reliable since counterfeiters catch up eventually.
Not only that, but so-called “super fakes” have been identified, and they can be up to 99 percent accurate compared to a legitimate product – almost impossible to tell with the naked eye.
New solutions for counterfeit protection with a watch certificate of authenticity
The damage to your company’s brand can be substantial if consumers can’t distinguish an authentic product from a forgery. Ideally, certificates of authenticity put consumers at ease, but what if the certificate itself is fake? In this situation, the brand will receive the lion’s share of the blame.
So, to thwart counterfeits and fraudsters, our technology and complimentary services include two versatile yet powerful solutions: Cryptoglyph and AlpVision Fingerprint.
Cryptoglyph – Packaging and Label Protection
In short, Cryptoglyph is AlpVision’s digital anti-counterfeiting solution, and it works best for packaging and labeling protection, a watch certificate of authenticity in this case. The process involves imprinting thousands of microscopic holes in areas of the certificate that counterfeiters can’t replicate.
Without a doubt, our Cryptoglyph solution allows you to scale up counterfeit protections efficiently and at a lower cost. It’s even more effective when combined with our AlpVision Fingerprint technology.
AlpVision Fingerprint – Physical Products Protection
AlpVision Fingerprint is a system to pinpoint fake products at the product level, a capability that used to be incredibly difficult to develop. Essentially, the solution works by tracking every item, including supplier components, and every fabrication process in one system. The technology takes images of the product throughout its manufacture. When inconsistencies appear, the solution will alert you of the problem before items reach the open market.
But combined, both protections – Cryptoglyph and AlpVision Fingerprint – make it significantly more challenging for con artists and counterfeits to keep operating with impunity.
Are you ready to hear more about how we can help your brand protect against counterfeiting?
Download our new white paper to learn how to pick the best anti-counterfeiting solutions available