E-Commerce, Counterfeits, And The Holiday Season

Daniel Bennett,

While holiday season shopping events such as Black Friday and Cyber Monday present excellent opportunities for genuine brands, they also come attached with a risk from increased IP infringement.

In 2020, as bargain-hunting consumers scour online platforms for the best deals, they will also find vast numbers of listings for fake products. With social media and social commerce increasing in popularity, counterfeiters and IP infringers are also turning to those platforms to attract more buyers. In the below article I outline some of the interactions between the holidays, social media, and counterfeiting.

Counterfeits and holiday shopping 2020

Black Friday and Cyber Monday have become significant sales events for genuine companies, and the amount spent over the period is now thought to be in excess of $28 billion. Both holidays are also still growing. In 2019, online spending on Black Friday increased by 19.6% over 2018 and Cyber Monday sales were also up by 19.7%. The accompanying increase in online shopping traffic is considerable as consumers search for the best bargains.

Predictably, counterfeiters also take advantage of these online holiday sales by increasing their own activity. Although this is something that happens year on year, in the context of 2020, when the pandemic has fundamentally shifted e-commerce and consumer behavior, it’s perhaps more important than ever that brands pay special attention to how they can have the most impact when protecting their profits and IP rights.

How has the pandemic affected counterfeiting? Thus far in 2020, reports of customs seizures and legal cases against infringers have been less frequent and high profile than in previous years. Far from this indicating that counterfeiting activity has lessened, however, it seems more likely that the reduction in activity comes from law enforcement agencies focusing on public health and having reduced workplace access.

In fact, a recent report from the Japanese Finance Ministry showed that in the first 6 months of 2020 it detained 18.7% more fake products than the previous year. Indeed, these are its highest reported seizure figures for 3 years and it’s believed that increased online shopping as a result of COVID-19 has contributed to this.

Black Friday and Cyber Monday 2020

As instances of brand abuse and infringement may have been on the rise in recent months, the arrival of Black Friday & Cyber Monday means that many brands will be paying closer attention to how this year is different from those which have come before.

Clearly, the most significant change has been the overall growth in online shopping this year. As a result of national and local lockdowns, consumers turned to online channels, which resulted in record sales for many brands. Walmart, for example, recorded a 97% increase in online revenue during the second quarter of this year.

While shoppers have generally been buying more online though, the value of their purchases has not similarly increased. Financial insecurity and unemployment caused by the pandemic has been high, and there is evidence from McKinsey that the growth of e-commerce has been at the expense of brand loyalty and payment thresholds. McKinsey’s research shows that 36% of U.S. consumers changed their preferred brands, while 25% switched to cheaper, private-label goods.

With more consumers hunting for even cheaper bargains, where should brands look in order to best protect their rights from infringement?

Fakes on social media

Although online marketplaces such as eBay and Amazon remain a common way for infringers to advertise counterfeits, social media and social commerce also represent a growing challenge. IP criminals now regularly target Facebook’s 2.6 billion monthly users and WeChat's 1.3 billion monthly users because, to those abusing brand IP rights, these audiences represent an unmissable opportunity for sales.

One factor that makes social media hospitable for these bad actors is that social platforms are often more complex for brand protection professionals to monitor and enforce upon. Goods are sold through private groups and over encrypted messaging networks rather than in any public space.

In the same way that our brand protection teams have seen online marketplace infringements rise in advance of the holiday shopping season, it’s clear that social media has the same issues. Facebook’s own data on reported IP infringements in 2019 showed more complaints about counterfeits, trademark misuse, and copyright infringement in August, September, and October — the months leading up to the holiday shopping season — than any other period. In fact, in 2019 Facebook received more than 270,000 complaints during that period.

Tactics used by infringers on social media

Influencers and drop shipping

Drop shipping occurs when online sellers act as intermediaries between wholesalers or manufacturers (typically in Asia) and the general public. What is different from other forms of importation retail is that the drop shippers do not hold stock or touch the products, they simply facilitate the sending of the products direct to consumers.

One relationship with social media may come when drop shippers use the buyer contacts they make by using influencers. By supplying goods free of charge to prominent users of different platforms, sellers can ensure that figures with large social media audiences direct their followers to sales listings and websites.

One BBC investigation alleged that a pair of celebrities with more than 300 million Instagram users advertised imitation electronics items, while one 2018 case saw an Instagram couple with millions of followers accused of directing users to counterfeit watch websites.

Fake discount coupons

For one Corsearch client, our analysts discovered videos on YouTube which showed instructions for the creation of fake digital discount coupons. Through these codes, users could gain unauthorized discounts from the official website. Although the company had not detected that they were being defrauded in this way previously, the popularity of the videos suggested that they had been targeted and their brand infringed.

Social media adverts

Sponsored ads are another possible route for counterfeiters to find a social media audience. In many cases, owners of counterfeit-selling websites create free social media profiles in order to purchase ads targeted at users who follow different brands.

Such adverts may direct users away from the platform to websites selling fakes, and many of the ads even carry additional IP infringements within them. For some clients, we have discovered that infringers use only generic elements and keywords (to avoid detection), but the highly targeted nature of social media often means that they still find the audience they are seeking.

To learn more about how Corsearch is tackling brand risk on social media and all other channels (at all times of year!), please contact us today.

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*This is an informational opinion article of Daniel Bennett of Corsearch. The views and opinions expressed in this article are those of the author and do not necessarily represent official policy or positions of Corsearch or its clients. 

By Daniel Bennett
Daniel Bennett has held chief executive and senior management positions in global software, consulting, and online services firms across Europe, Asia, and North America. Daniel is considered one of the pioneers of the online brand protection industry in Europe. He is also a regular and passionate writer and speaker on the evolving online threats to brand owners. Daniel is Corsearch’s President of Brand Protection.

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