Counterfeit products are not a new phenomenon, but today, with the ongoing rise of influencer culture and increasing market vulnerabilities, they present a greater threat than ever before.
As the cost of living continues to squeeze consumers, and with social media platforms increasingly being used to market consumer goods, including counterfeits, Adem Kulauzović, Director of Automation at Domino, explains how brands can safeguard their business from illicit trade and raise consumer awareness of the dangers associated with counterfeit products.
The rise of counterfeits
Globally, annual counterfeit sales are estimated to be between $1.7 and $4.5 trillion. Fake products account for 5% of all goods imported into the EU and, in some regions, may represent as much as 40% of all goods sold. While counterfeiting is not a new issue, it is undoubtedly on the rise. Data from the Pharmaceutical Security Institute indicates that illicit medicine trafficking in 137 countries increased by 38% between 2016 and 2020, with the majority of counterfeit medicines reaching North America, the Asia-Pacific region, and Latin America.
Young people are particularly vulnerable to purchasing counterfeit goods online, driven by limited spending power compared to older generations, price increases at luxury brands, financial struggles due to economic conditions, and “thrift culture”. In fact, among 22,021 individuals aged 15 to 24 surveyed by the EU Intellectual Property Office in 2022, 37% admitted to buying at least one fake product in the previous 12 months, up from 14% in 2019.
Counterfeit products and materials
Counterfeit products can be classified into two categories: deceptive and non-deceptive. A non-deceptive counterfeit is easily recognisable as fake due to its price, quality, or where it is sold. For instance, consumers understand they are in a ‘buyer beware’ situation when purchasing from certain online sellers offering luxury brands at a fraction of the retail price.
In 2021, a report for the Intellectual Property Office highlighted the significant influence of social media on consumer purchases of non-deceptive counterfeit products. Of 1,000 women aged 16 to 60 surveyed, 13% admitted that social media endorsements had encouraged them to buy counterfeit goods, and some websites actively promote ‘dupes’ on social platforms.
In contrast, deceptive counterfeit products closely resemble genuine items in price and packaging but not in quality. Consumers believe they are buying authentic goods, only to receive something substandard that may break within weeks and, in the worst-case scenario, cause direct harm.
A recent test by the US Government Accountability Office suggested that up to two in five branded products available through third-party online retailers may be counterfeit. Other studies indicate that over 25% of consumers have unknowingly purchased counterfeit goods online.
Counterfeit products are not limited to high-end designer brands, electronics, and fashion. Some of the most commonly counterfeited goods on the market include medication, supplements, makeup, and skincare – with influencers playing a particularly active role in promoting these latter items.
Business & consumer impact
The production and sale of counterfeit products can affect a business in numerous ways, from initial losses in sales to strained relationships with business partners. Legitimate businesses are often left to manage the fallout, requiring substantial investments of both time and money to address the damage caused by counterfeit goods.
Counterfeit products also present a serious risk to consumers. While a fake lipstick or perfume may seem harmless, these products are frequently found to contain harmful or untested ingredients, rendering them entirely unsuitable for their intended purpose, with potentially severe consequences.
In fact, some of the most dangerous counterfeit items are cosmetics. In recent years, counterfeit beauty products have been discovered to contain hazardous substances such as cyanide, arsenic, mercury, lead, urine, and rat droppings. According to figures from the National Crime Prevention Council (NCPC), fake goods are responsible for approximately 70 deaths and 350,000 serious injuries annually in the US.
Taking collaborative action
The most effective way to combat counterfeiting is through collaboration, where supply chain partners, consumers, and authorities work together to detect counterfeit products, share intelligence, and prosecute offenders. For businesses, a key starting point is ensuring that products are equipped with unique identifiers, enabling verification of product legitimacy and traceability of source materials and ingredients.
In recent years, countries worldwide have introduced legislation requiring unique identifiers and product-level serialisation in specific sectors, such as prescription pharmaceuticals, medical devices, tobacco, and over-the-counter medicines. These measures aim to facilitate track and trace systems and prevent illegal, stolen, or counterfeit products from remaining in the supply chain.
These regulations are supported by databases and systems that allow the tracking of serialised products, enabling retailers to verify the authenticity of their goods. The same technology can be adopted as best practice, allowing logistics partners, retailers, and consumers to verify product authenticity, even when a brand is not legally required to do so.
Consumers can also use serialised, smartphone-readable QR codes or Data Matrix codes on product packaging to verify a product’s authenticity. These 2D codes can direct users to a website where they can confirm legitimacy. Although counterfeiters can replicate packaging, they cannot create QR codes with valid and unique serialisation that would successfully trick legitimate systems into verifying them as authentic.
For smaller businesses, the costs and efforts associated with managing serialised codes to ensure effective product tracking along the supply chain can seem overwhelming. However, many logistics providers, such as Amazon Transparency, now offer services to help manage unique serial numbers and track shipments for a modest fee, recognising the importance of protecting brand reputation.
Additionally, technology firms specialising in traceability services are rapidly growing, offering comprehensive turnkey solutions that integrate seamlessly into existing production lines. Although these services may initially appear costly, many providers offer flexible solutions, including hardware, support, and maintenance, at an affordable monthly rate. This shift from capital expenditure (CAPEX) to operational expenditure (OPEX) has made advanced traceability measures more accessible to a wider range of businesses.
Conclusion
The fight against counterfeiting is a global issue that affects every industry, from industrial goods, electronics, and automotive to food and beverage, life sciences, and personal care. In today’s climate, with economic pressures on the cost of living and the rise of social media-driven influencer culture, the threat of counterfeit products is more pronounced than ever.
Ensuring traceability and transparency within global supply chains, alongside raising consumer awareness of product authenticity, will be crucial for both regulated and unregulated sectors. To remain resilient, brands must collaborate with their supply chain partners, tackling counterfeits through product identification and data sharing.
