News and Views
 

- July 24, 2007 -

 

From RetailWire: Counterfeits Causing Real Damage in Human Terms

 
 

Consumer Safety Trumps All Other Counterfeiting Concerns

 
 

 

This content from RetailWire is made possible through a partnership between RetailWire and Supply Chain Digest to share content relevant to each other's readers.

Each business morning on RetailWire.com, retailing execs get plugged in to the latest industry news and issues with key insights from a "BrainTrust" of retail industry experts. Here are excerpts from one of these unique RetailWire online Discussions, along with results from RetailWire.com's Instant Polls.

 
       
   
     
 

By George Anderson, Editor-in-Chief, RetailWire

Too often when the discussion of counterfeit goods comes up, there is an emphasis on topics such as intellectual property rights and the profits lost by major corporations. Recent events, however, suggest that the real issue at hand is the safety of consumers.

Fake pharmaceuticals, toothpaste, infant formula, extension cords and batteries are just a few of the products that have made their way into unsuspecting consumers' homes with deadly consequences.

A recent article in The Toronto Star discussed the experience of a senior Royal Canadian Mounted Police official who was given a pack of counterfeit batteries by a subordinate to illustrate the types of goods coming into the country, in this case, from China. A few months after receiving them, the batteries exploded inside the RCMP official's desk. The sound was compared to that made when a gun goes off.

The increase in fake goods hitting markets in North America has been staggering and low budgets and a lack of personnel have made it nearly impossible to keep these potentially dangerous items out of the hands of consumers.

In May, the Food and Drug Administration issued a press release that said it had identified three occasions when consumers had purchased counterfeit versions of the weight loss drug Xenical. Testing showed that none of the products contained orlistat, the active ingredient in Xenical. Some of the samples tested contained talc and starch as ingredients.

While China has been the focus of many international counterfeit fighting actions, and certainly many recent news reports, it is far from being the only country with criminals seeking to make a buck on a legitimate brand's reputation. Earlier this month, Unilever signed a deal with the Algerian customs director general to share information and step up efforts to prosecute counterfeiters.

Discussion Question for the BrainTrust panel: How big a problem, in terms of lost sales and profits, have counterfeit goods become for law-abiding retailers? What has been the impact on manufacturers? What should retailers and suppliers be doing to combat counterfeiting?

 

RetailWire Instant Poll Results:

RetailWire BrainTrust Comments:

It's easy to blame counterfeits for health and quality dangers. However, many retailers require their suppliers to list the retailers on their product liability insurance ACORD forms, so the retailers are covered, not just the suppliers. Given the alleged huge volume of counterfeits, no one has proven that the dangers are statistically greater, compared to genuine products. Even the most reputable brands (Apple, Motorola, Sony) have recalls from time to time.

- Mark Lilien, Consultant, Retail Technology Group

...Counterfeiting and piracy are huge issues with regard to lost sales by manufacturers and retailers, so what is happening is that business is now smartly using the safety issue to finally get tougher legislation and enforcement around piracy, including in one bill, tough sanctions against citizens who bring counterfeit goods purchased overseas into the country (a bad idea, in my opinion).

- Dan Gilmore, Editor, SupplyChainDigest

Dellmart & Company President, W. Frank
Dell II , Says :
The most common entry into the food store for counterfeit merchandise is through the diverting channel, so additional controls are required there. Retailers must keep their house clean.

What do you say? Send us your comments here

While working in Russia, we explored the concept of bringing American jeans into the country as there was great demand. When we looked at what was being sold, it was almost all fake [brand] jeans from China, thus no market for American manufacturers. Now, this is happening with food and drug products. Retailers must only buy from the valid supplier.

The most common entry into the food store for counterfeit merchandise is through the diverting channel, so additional controls are required there. Retailers must keep their house clean.

An internet sale of counterfeit merchandise does damage to the brand and is thus an issue that manufacturers must resolve. The use of RFID through the supply chain will likely be a longer term solution.

- W. Frank Dell II, CMC, President, Dellmart & Company

In the U.S., counterfeiters have found a haven targeting recent immigrants like the Hispanic consumer. It has been blatant, or as subtle as changing a letter on the name brand, a logo, or a color.

Considering the size of the market, the projections of growth, and the liabilities in brand erosion or worst, it is imperative manufacturers are aware of all distribution channels and critical for them to communicate the genuine brand attributes to consumer and trade.

- Carlos Arambula, Managing Partner, Arambula-Phillips Comm, Inc.

If the retailers refused to buy the counterfeit goods, the counterfeiters would stop producing the product, and the companies importing the products would change their business practice.

I recently visited a major retailer in the U.S. selling a "branded" item at 1/3 the cost of the normal price. On closer inspection, the product had an incorrect spelling on the back of the package. When I pointed this out to the store manager, he said that they carried the product all of the time, and that it was from a "different country" than the actual brand.

When retailers are unwilling to sell the product, the problem in the U.S. will start to dissipate.

- Joel Warady, Principal, Joel Warady Group

Read the entire story and RetailWire discussion at:

http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12292

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What are your thoughts on counterfeiting? Is it a huge issue for retailers? What's the impact on manufacturers? What should be done to combat the problem? Let us know your thoughts.

 
     
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