In today’s competitive business world, companies allocate a lot of effort and spend money in order to create quality products, build relationships with customers and create a solid presence in the market. But counterfeit products may undermine all these activities. Products that are fakes or not officially authorized by companies to represent the official product may create various problems.
It is important to understand the impact of counterfeit products on brands for manufacturers, distributors, retailers and the brand owners themselves. The problem of counterfeiting products is not merely in the loss of sales, but also in undermining consumer confidence, brand reputation, customer dissatisfaction and lack of control over distribution channels.
Counterfeit products are unauthorized products which mimic the look, packaging, brand, or identity of the legitimate products. Such products are usually produced and marketed without authorization from the respective brand.
Counterfeits can be found in many different industries, such as FMCG, pharmaceuticals, automobiles, electronics, lubricants, cosmetics, agricultural products, construction products, among others. As e-commerce platforms become more popular, counterfeit products can also be marketed through a variety of routes.
This poses a significant problem for brands because consumers may not always be able to tell a legitimate product apart from its counterfeit version by the packaging alone.
Major Impact of Counterfeit Products on Brands
Revenue and Sales Loss
The first effect of counterfeiting can be traced to the losses in revenue. When customers buy counterfeit products instead of genuine products, brands miss out on sales opportunities.
Counterfeiters are likely to sell their products at cheaper rates since they do not incur costs in researching, developing, manufacturing, quality control, marketing, distribution and creation of brands. This puts real firms in a competitive disadvantage.
With time, counterfeit products may take some of the market share that belongs to the original brands and reduce sales.
Damage to Brand Reputation
Brands develop reputations over time as one of their most valuable properties. Regrettably, counterfeits can harm such reputations even when there is no relation between the counterfeiter and the brand.
In case a customer buys a defective counterfeit product and experiences difficulties in its use, they will relate the experience to the original product regardless of the manufacturer of the product.
This means that the effect of counterfeits on brands is one of the biggest problems in the business industry.
3. Decline of Consumer Trust
Consumer trust is one of the critical elements in customer loyalty. People purchase products of the recognized brands expecting them to be genuine, secure, and reliable.
In case when counterfeit products get into the circulation, consumers may start doubting the authenticity of products. Thus, consumer trust can be affected negatively, which will impact future purchasing decisions.
In order to provide customers with an opportunity to verify the authenticity of the products, digital authentication systems can become essential for today's brand protection.
4. Increased Complaints and Customer Dissatisfaction
Due to the presence of counterfeits, an increased number of complaints associated with the issues regarding product performance, quality, packaging, and warranty concerns can appear.
For instance, a customer can purchase a counterfeit electronic device and face a problem, which he/she can attribute to the original brand. The same situation can happen with counterfeit automobile parts and lubricants.
In this case, there will be additional workload for customer support staff and disputes caused by misunderstandings.
5. Reduction in Market Share
The manufacture of counterfeits can slowly eat away at a brand’s market presence. This will happen if people realize the availability of counterfeits and begin to purchase cheaper options because they think that they are buying genuine products.
This can make it difficult for brands to sustain themselves within the market, particularly in cases where products are price sensitive.
The situation can become even worse for companies when counterfeits come into the market through non-authorised channels.
6. Increased Compliance Risk
Another risk associated with counterfeits is that of legal and regulatory issues. Companies have to monitor unauthorized sales of their products, detect counterfeit production, safeguard their intellectual property rights and coordinate with the concerned bodies for any infringements.
Counterfeits in certain industries like the pharmaceutical industry, automotive industry, electrical industry and agriculture industry create other risks as well.
Therefore, protection of brands from counterfeits is not only about the identification of counterfeits once they come into the market.
Why Traditional Ways of Protecting Brands Are Not Sufficient
These include measures such as printing serial numbers, packaging design, labels, and standard holograms; however, fraudsters are always finding new and creative ways to replicate these forms of protection.
In today’s market, brands need something which not only provides physical protection but also digital verification and timely information.
An authentication system for a product creates a digital identity of the product, and the product can be verified by any customer or dealer through an appropriate authentication procedure.
How Digital Product Authentication Helps Brands
Product authentication technology may assist in creating an even greater bond between the product and its digital identity for the brands.
For example, a secure authentication system based on the use of QR codes can let consumers scan the code and get the results of the authentication process. Depending on the chosen system, the brands will be able to identify the authentic product, duplicate scanning attempts, fraud activities, and other forms of authentication.
VCQRU offers advanced anti-counterfeit solution that enable companies to secure their products within different industries. VCQRU's solution involves verification through secure QR technology, intelligent labels, and serialization of products, consumer verification channels, and fraud analytics.
Such technologies will enable brand owners to progress from solving counterfeiting issues to the complete management of the authentication process.
Strengthening Supply Chain Visibility
Products can reach markets via complicated distribution channels. This means that the visibility in the supply chain is an essential element for brand protection as well.
The track-and-trace technology allows brands to follow the flow of products through various stages of the supply chain. The combination of this technology with product authentication will be useful in detecting unusual scanning, unauthorized distribution, repeated authentications, and possible market leakage.
This will help businesses detect issues that need to be investigated further and improved regarding distribution.
Read also: How Product Authentication Protects Brands and Consumers from Counterfeit Products
Building Consumer Confidence Through Verification
The consumer’s interest in checking the authenticity of the items that he purchases is increasing. Offering them a way to verify will go a long way in ensuring that.
With digital authentication, all that a consumer needs to do is scan the product on any channel that is supported and get an authentication response. VCQRU offers several means to do so: scanning through mobile, brand portal verification, its platform, WhatsApp, and USSD authentication.
This makes consumers an integral part of brand protection as well as providing visibility to brands.
Protect Your Brand from the Impact of Counterfeit Products
The impact of counterfeit products on brands can go beyond just loss of revenue. Brand can be affected by the practice of counterfeiting with regards to reputation, trust, loyalty, market share, transparency of supply chain and business growth among others.
This is why it makes perfect sense for brands to put in place a measure that will help prevent counterfeiting. A combination of secure packaging, product identification, digital authentication, track and trace services, and fraud detection could provide a better solution for brand protection.
Furthermore, technology may help a business spot suspicious authentication efforts and learn about potential areas of counterfeit risk. Our VCQRU anti-counterfeiting system has authentication and fraud analytics solutions aimed at detecting counterfeit activities, duplicate scans, market leakage, and other risks.
The term counterfeit products include not only fakes but is considered a serious challenge to brands in terms of business threats. The consequences can be from losses in finance to loss of market shares, reputation, or consumer trust. Counterfeit products can affect negatively almost any part of business.
These risks could be prevented by using latest technologies that ensure both authentication and counterfeit. It will enable building transparent and establishing trust relationships between brands and customers by ensuring uniqueness of the product and its authenticity.
Taking into account the fact that counterfeiting techniques continuously evolve, brand protection has become an important aspect. Product authentication helps protect brands and consumers, as well as their reputation and positions on the market.
