INNOVATION HUB
1:42 pm
Fri April 12, 2013

Counterfeit Culture

A look at counterfeited products — from fake handbags to knock-off perscriptions — with Alina Halloran, Vice President of Global Online Brand Protection Services at OpSec Security, and Renee Richardson Gosline, Assistant Professor of Marketing at MIT’s Sloan School.

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This Apple store is real — but a fake one might not look too different.
Credit kwramm / Flickr Creative Commons

Guests:

  • Alina Halloran: Vice President of Global Online Brand Protection Services at OpSec Security.
  • Renee Richardson Gosline: Assistant Professor of Marketing at MIT’s Sloan School.

About a year and a half ago, a very interesting store opened in Kunming, China.

It was a store you'd probably recognize: an Apple store. But there was something unusual about it — everything, from the storefront to the gadgets inside, was counterfeit.

Faux Everything

The story got a lot of media attention, but, of course, we're all used to the pervasiveness of counterfeit goods. There are many more fake Louis Vuitton and Gucci bags than there are real ones. And, as the $650 billion industry grows more powerful, almost everything is being counterfeited — from tennis shoes to cancer drugs.

“Any product that is popular and in demand is a target for counterfeiters,” says Alina Halloran, a vice president at OpSec Security

Halloran ties the beginning of the counterfeit industry to the outsourcing of American manufacturing to countries, like China, that do not have strict intellectual property laws. But while outsourcing may have created the industry, the Internet has grown it beyond imagination.

“The Internet now provides a global platform for counterfeiters to sell direct to consumers, as well as to online shop operators, or even brick-and-mortars who are looking for deep discounts because they are competing with big box retailers,” she explains.

This counterfeit Louis Vuitton bag was seized by Britain's Border Control.
Credit UK Home Office / Flickr Creative Commons

So who’s buying all of these fake goods? Renee Richardson Gosline, an assistant professor of Marketing at MIT’s Sloan School, says there are two types of counterfeit consumers. The first is the shopper who seeks out fakes — he doesn’t want to pay for the real thing. Next is the person who gets duped — he tries to buy the real product, but ends up with a knock-off. 

You may not think there are any downsides to buying faux designer shoes, but not all fake goods are harmless. Halloran reports counterfeit toothpaste made with anti-freeze — and the risks associated with counterfeit drugs are even greater.

“In some cases you may not have the active ingredient in the product at all,” she explains. “Or, you could have other ingredients that are harmful to the consumer — and that’s really what’s scary.”

Spotting a Fake

Fighting counterfeit goods is problematic because they’re  hard to spot. When Gosline gives someone two handbags and asks them to identify the fake, they can’t. That’s bad news for the legitimate producers — because when consumers can’t spot the difference between a counterfeit and the real thing, they aren’t willing to pay the higher price. But there is a silver lining. When consumers feel they can spot a fake, their willingness to pay for a legitimate product increases.

Holograms, like the one on this new baseball hat, can help prevent counterfeiting.
Credit Myrone Delacruz / Flickr Creative Commons

Companies looking to stomp out the counterfeiting of their goods should take a two-pronged approach, says Gosline. First, educate your consumers to sniff out a fake. Second, use technology to incorporate design elements that are difficult to copy.

“If you’re buying a Patriots jersey, you would look for that hologram on the hang tag,” Halloran explains. “We also have…security threads that can go into the label inside apparel.”

You might never know the threads are there, but Halloran says they make it easy for customs to spot a phony shipment.

But the best way to stop counterfeiting, Gosline says, is the preemptive strike.

“Many innovators and entrepreneurs come up with their new invention, put it on to the market, and only think about counterfeiting after the fact. It’s too late,” she says. “When you have success, the blessing is [that] you have success and all that brings. The curse is that other people will look around and say, ‘Hmm, I kind of want that too.’” 

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