PIRATES ARE GETTING SMARTER
Fake ‘luxury goods’ are no longer so easy to spot — and are reaching more and more customers
One in three luxury items submitted for sale to a leading high-end merchandise retailer which deals in new and used goods are counterfeit, and this is having a detrimental impact on genuine brands.
While the sale of fake goods is not a new problem, the scale of it is. The total worldwide value of counterfeit and pirated goods hit $3-trillion in 2022. This is triple the amount reported in 2013, according to the Organisation for Economic Co-operation & Development.
While it’s difficult to quantify the problem locally, Michael Zahariev, co-founder of luxury reseller and authenticator Luxity, tells the FM that among the most counterfeited brands are Michael Kors, Gucci and Louis Vuitton, based on their growing appeal to middle-upper market segments.
While most consumers think they’re adept at identifying counterfeits, he says about 70% have unknowingly bought a fake.
The proliferation of what he calls triple A-grade fakes is largely because scammers peddle them online. Websites account for 41% of these sales, followed by online marketplaces (32%) and social media sites (28%).
“Most people who buy from a flea market know they are getting a fake, but many of those buying through online channels such as Instagram aren’t aware and are being duped.”
Social media analytics firm Ghost Data identified about 26,000 active counterfeiter accounts operating on Facebook between June and October 2021, and more than 20,000 active counterfeiter accounts on Instagram. WhatsApp has been the preferred communication channel for crooks to reach and talk with their customers, with 75% using the platform.
Among mass-market brands, Nike, Levi’s and adidas are the most copied.
Damage to original brands is enormous, Zahariev says, in terms of revenue loss and integrity. “When sales go to the illicit market the knock-on effect is that brands lose out on sales due to counterfeit products costing significantly less. It can also be damaging as the appeal for the brand is based on its exclusivity and brands cannot directly control counterfeit market volume, which lowers appeal.”
Brands, he says, must also divert resources from important projects and redirect them to fight counterfeiters.
Zahariev says luxury brands are constantly looking for new ways to prevent counterfeits and to authenticate bags.
Louis Vuitton has started placing chips with encrypted information on each bag to confirm authenticity as well as other item-specific data. He says many brands are looking to use blockchain technology to help with authentication.
South Africa is an aspirational market and this leads to a high demand for status and luxury goods, and in turn counterfeit goods, he says.
With Instagram and other online shopping options becoming available, as well as better counterfeits, more middle-upperclass people and even celebrities are engaging in the counterfeit market because it allows for cheaper access.
But with the growth of online shopping many consumers are being fooled into paying close to retail prices for sought-after items such as Chanel or Birkin bags offered by counterfeiters running sophisticated systems.
Zahariev says customers need to be aware of offers with no returns or exchanges because swindlers don’t allow these. And, “if the price looks too good to be true, it probably is”.
While the prices of triple A-grade fakes might not be as high as the genuine item, they’re high enough to make someone believe they’re forking out a significant amount for what could be an original. Often shoppers will be fed a story about why it’s a bit cheaper. Counterfeits generally resell for up to 35% of the original price, though there are exceptions, with some sophisticated counterfeiters charging up to 80%.
Zahariev says counterfeiters might also tell customers there’s a two- or threeweek waiting list. This is because they’re importing copies from China on order and not from original suppliers, as buyers are told.
In the past, a common way to catch counterfeits was by checking the material and stitching on an item. This is no longer the case, he says, because crooked sellers have got better over time at getting this right. “Nowadays, to the untrained eye, it can be close to impossible to tell if an item is counterfeit or not.”