A recent article in the Sunday section of The New York Times featured a counterfeit shoe factory in China and introduced us to some of the key players in the counterfeit shoe supply chain. Interestingly, we learned that counterfeiters can no longer rely on espionage or bribes to corral the latest product blueprint or model because the security in factories has been ramped up. Instead, counterfeiters have taken a simplified approach to production – they buy a pair of shoes and reverse engineer it as a knock-off, a tactic which has proven fruitful.
By far, the most salient development in the world of counterfeiting over the past years is that counterfeit products are now almost indistinguishable in quality to the legitimate goods. This means there is now a range of knock-off goods, from low to high end, which target different buyers and have fueled the growth of the counterfeiting business.
What consumers now see in the marketplace is a mix of genuine goods, knock-offs of differing quality, and grey market goods infiltrating the supply chain. Even as new legislative measures such as the ACTA trade agreement and the Combating Online Infringement and Counterfeits Act (COICA) bill are in discussion, brand owners need to implement a brand protection strategy to secure their products and ensure consumers are offered authentic goods.
The most effective way for footwear brand owners to combat counterfeiting and product diversion is to deploy the following three-component strategy.
1) Protect Your Product – Best practice footwear and apparel companies apply a multi-layered solution to enable the authentication of fake versus real.
- Authentication – A key requirement for product authentication is incorporating the security device as an integral component of the product during the manufacturing process. For maximum protection, the security device should be permanently affixed to garments and shoes to prevent attempts at removal.
- Verification – A variety of overt and covert technologies should be included in a multi-layered security solution for verification by different stakeholders. Forensic authentication is available if required as legal evidence. The multiple features allow for multiple methods of authentication by consumers, customs, law enforcement, or investigators, without any individual party knowing all the security features.
2) Secure Your Supply Chain – To protect against the infiltration of unauthorized products (i.e. third shift operations) and the diversion of genuine goods, footwear and apparel companies can implement measures to protect their supply chain.
- Product Tracking – Capture full royalties and reduce grey market diversion through product tracking. This consists of item-level serialization and authentication to prevent grey market diversion.
- Production Control – Only authorized contract manufacturers should be allowed to order authentication labels to be affixed to authentic goods. Quantities of the security device must be carefully controlled. As an illustration, the security label can be thought of as a “ticket to make an authorized product," and the quantity of “tickets” distributed must be carefully controlled.
- Contract Compliance – Implement thorough brand protection audits for contract manufacturers and implement controls for non-compliant activities by these channels.
- Online Monitoring – Gather intelligence on brand abuse and unauthorized distribution through an Internet monitoring program. Analyze online channels and e-commerce platforms for suspect products, sellers, and distribution networks. Conduct sample purchases from suspicious sources.
3) Enforce your Rights – Successful brand protection organizations use both online and field investigations to determine the extent of infringing and unauthorized activity. Collecting data intelligence allows a brand to take action and enforce its rights.
- Enforcement Actions – Pursue enforcement action against IP infringers including termination of infringing listings on e-commerce platforms, delivery of cease and desist letters, etc. Work with law enforcement to pursue seller networks and repeat offenders.
Taking these precautionary steps can give brands more control of their supply chain, online retail outlets, and significantly reduce unauthorized sales on the grey and black market.
Learn more OpSec's Anti-Counterfeiting Solutions for apparel and luxury brand owners.