Counterfeiting…who will stop it?

It is quite extraordinary if you chance upon certain counterfeit items, the extraordinary lengths the counterfeiter will go to, in order to replicate the original detail. It is believed that many counterfeit products come from the original factories. The channels of distribution are varied. In the past we, in the UK, would generally come across counterfeits on street markets, boot sales, pubs, or the backs of vans. Today, the volume comes through the internet.
Some within the party market, would say fortunately it is not something they come across. If only that were true. There is a huge amount of counterfeit product arriving on our door step and mainly through the internet. What is particularly odd, is that it appears very open and obvious.

As far as we are concerned there are a number of types of counterfeits that affect our market.

• Branded licensed product

• Generic designs but counterfeit EU labelling (costumes and party items)

• Counterfeit copyright design graphics. This is more copyright infringement rather than actual counterfeit product. There is a legal difference but the effect is the same.

Branded licensed product

This takes various forms. An example is say a Frozen costume. It is not difficult to find this particular item. You only have to log into EBay, type in the description and it won’t be long before some examples appear. At the time of writing, the first 6 entries were based in China or Hong Kong. As to whether they are counterfeit, the reader would not be qualified to know but the price and image would suggest that they probably are. Within Amazon it is not so obvious. However, if you dig deeper, it would not be long before you find offending articles and from UK sellers. To quote a review from a happy customer on one resellers shop ‘….it is not Disney product, but it was not a Disney price…..’

Generic Designs

This refers to a design such as a Pirate costume that does not infringe anyone design or copyright but generally comes directly out the Far East and where relevant, has never seen the inside of a testing lab yet carries a CE mark plus text to say it conforms to the relevant EN procedure. This does not involve just costumes but also party products eg latex balloons, plastic party items , in particular loot bag toys, blowouts, party poppers, and numerous other ‘accessory products’.

Counterfeit copyright design graphics

Licensed party product and decoration, where the design is infringed.

A further form of counterfeiting which is rather more furtive. There are online sellers who will use the bar codes, descriptions of well-respected brands to make the sale but then substitute it with cheaper and inferior product.

It is a big problem and will only get bigger, especially when players like Alibaba & Aliexpress become more focused on the European markets. It would appear on the surface that the big players seem to be doing little about it. There is an argument, mainly promoted by the likes of Amazon and EBay that the problem is so big that it is too big to police. There is, undoubtedly, some truth to this. However, speaking to UK resellers many would say that they are very quick to pounce on them with dubious and often fallacious claims of selling counterfeits. One reseller said they were upbraided by Google+ for using a genuine logo with a genuine product .

This would be appear on the surface to somewhat bonkers, as surely, one way to identify brands is by using genuine logos. Having been shown sites that clearly do not have genuine products, and do not pretend to use logos purely words Frozen and Winnie the Pooh for example. Surely it is not beyond the wit and ken of these behemoths to write software that high light such anomalies.

Perhaps the more honest conclusion is that the legal complexities between nation states makes this a complete nightmare. A leading law firm ‘… said there has been a sharp rise in European litigation and soaring costs for businesses trying to stop the theft of their trademarks, products and content…’ makers of the Rubik’s cube have said it has sued the European Court of Justices over delays in trying to trademark its shape. The case began in 2006.

Local primary suppliers in the UK are trying their best but ultimately it is a bit ‘King Canute like’. One method they are trying to use is encouraging their customers not to cut prices. This is not a convincing argument , as increased margins only increase the motivation to counterfeit.

This problem is not going to go away. It is very difficult to see how it will get any better. Licensors (the Brand owners) not the licensees need to work closely with the online masters of the universe. A further simpler but less likely step would be to convince the consumer that they are getting a fair deal and value for money as opposed to looking elsewhere because of the perception of a ‘Disney Price’.

If we can sit on our sofa, make a few taps on our screen, have a video conversation with a friend 12,000 miles away or make a purchase that arrives the following morning, surely the technology giants can stop a load of hooky gear being sold. Stopping deals in dodgy played in out of the way pubs, or gear being flogged on the street corner, back of the van , all very nefarious and tough to police. But when counterfeit product is blatantly flouted in the virtual shop windows of the worlds biggest on line retailers, it is hard to swallow .

This a shortened version on article I have written for Party Party, which should be published in the next edition. However, as it consistently rears its ugly head, I felt that any thought or discussion would not benefit from waiting a couple of months.

New idea ….Shops!

AO one of our largest online retailers for home appliances has just announced whilst there are no immediate plans to open High street shops, it is an option they would consider.

This is nothing new . Or rather let me clarify, before a reader claims they once went into a shop, it is not new for an online operator to open or consider retail outlets. Both Google and EBay have had pop up shops and Argos, whilst not solely an online operator are probably the nearest, you currently get to a web site with shops.

A financial journalist recently said in five years time entrepreneurs will start opening things called shops. It was not said with tongue in cheek. Retailers, both on and off line are beginning to understand the importance of some representation on the high street. Richard Perks , retail director of Mintel, says about the future of retailing that ….setting them against each other is a red herring…it’s more about bringing them together.

The point I am trying to make is that online accounts for just under 12% of retail sales. Conversely, 88% of purchases, are made in shops. That 12% will continue to grow but for some time the vast majority of purchases will be made in retail outlets. The primary motivation for any business has to be profit, or else it does not survive. This is why it is so important that …retailers look at bringing them together…

If you look through photography magazines, you will invariably see  a story on ….Jonny Snapshot has been running his local camera shop for over 350 years, but has decided to close because ‘them, there Internet people….’it is a crying shame’, said a local..’we have had a camera shop in this town since the 16th century ‘…The point being that there is a relationship between camera party shops. Both rely on customer service. In my own experience, having an interest in photography, Customer service is not always as evident in some independents, as it should be.

If you were new to photography, you would find it very difficult to buy the right gear by just going online. If all camera shops disappeared, they would have to be re-invented. I believe the same is true of party shops. If this were not true, why would Party Delights, the U.K’s largest party web site, be involved in a new retail outlet. 

Online operators, of all varieties, are increasingly finding it difficult to operate successfully. There are issues with operating costs, maintaining customer loyalty, brand awareness and increased competition. Couriers are finding it increasingly difficult to make the delivery at first attempt. Second and third attempts increase dissatisfaction and increase costs.

Retail outlets without an online presence, will be severely hampered to maintain their business. Web sites without a high street presence are just as exposed. Retail analysts talk about consumers making store visits as a leisure as opposed to a purchasing activity.  As a consequence, major retailers are looking at ways they can incorporate all three, online, in shop and leisure all in one location. The theory is the longer time spent in a retailer, the more likely loyalty will grow. 

With some ‘out of the box’, ‘blue sky’  thinking, and some hard commercialism, the party shop should be the ideal retail outlet to incorporate these three fundamentals, in shop, online and leisure.

As a footnote, with Amazon dramatic share price increase, the company value exceeded Walmart, the worlds largest retailer. I find this, especially, interesting, as an Amazon buyer tried to convince me at the NEC, that they were not as big as TESCO. 

The Banks of the Amazon….

Actually it should be the Bank of Amazon, but I didn’t think it would be as eye catching. But then when I started writing, it might behave been a better title. Just over two weeks ago Amazon announced a lending programme to invited resellers in the UK.

Yes, that is what I said they are offering loans to resellers. Or initially to resellers of their choice. My first reactions were that this was a very smart move by Amazon. The details are sketchy, as the announcement was a bit under the  radar, but they would select certain retailers and offer them funds to develop and they would take the repayments from commissions.

As a business initiative, it is pretty clever stuff. Amazon would have a company’s complete history on revenue flows, in much more detail than any bank or financial institution. It would also have a pretty good idea on the margins enjoyed by resellers. In terms of security, it would be a fairly sound proposition. If  Amazon saw a reseller experiencing falling revenues it could assist in increasing its revenues, until the repayments had been made. Clever stuff, but a double edge sword for the reseller.

However, on reflection, and a lot of reflection wasn’t needed for this, there are some nasty bits. Two come to mind.

Firstly, Amazon are building a huge data base, which will quite soon reach a level , unmatched by any other institution, of any description, in the world. They are accruing sales data at an alarming rate, now they will be garnering related financial data. 

Secondly, should they decide to extend this offer to other resellers, it raises the spectre of  the Amazon market place favouring resellers with loans against self funded sites. 

At the moment, this is all slightly hypothetical, as there are no details. I don’t know how the loans would be structured, apr’s, payment terms, plus how national governments would view or define these loans on a local level. In the USA, where they have already started the programme, the loans can be anything from $1000 to $600,000 and the repayments are generally over months as opposed to years. Moreover, it is not a totally new idea as a similar scheme has been run by PayPal. 

Whilst currently owned by eBay, PayPal is due to be siphoned off as a seperate company in 2015. Hence with the operating differences between eBay and Amazon, plus PayPal becoming a seperate company. There are few similarities.

As to whether it is a good or bad thing is too early to tell. My initial reaction is of concern with the long term attitude of Amazon towards their resellers who they are assisting with finance against those who are being self financed or funded by third parties. Commercial logic would suggest favouring those who owe them money.

I suggest it will not be long before we begin to see what are the intended consequences of this financial munificence.