The impact of counterfeiting

Security features on banknote in UV light protection

Nowadays manufacturers have to manage and put strategies in place to deal with organised crime activities. Some forms of organised crime activities include counterfeiting, cybercrime, white-collar crime and corruption as well as other violent crimes including hijacking and theft of products. Of specific relevance to this article, is the impact and solution to reducing counterfeiting and truck hijackings.

As a brand manager and/or manufacturer, have you found yourself confused as to which item is fake and which is genuine when making a comparison between your product and a counterfeit product? If this is the case, can you imagine how confused your clients and potential clients may be? Product counterfeiting is a fraudulent imitation of something that is of value.

Nowadays, due to advancements in technology, printing and the development of products, counterfeit manufacturers are able to replicate products to an extent that it is difficult to distinguish between the fake item and the authentic product. Perhaps if consumers were able to distinguish the fake from the genuine product, they would be more likely to choose the genuine product. Despite this, passing lesser goods as high quality merchandise so convincingly only compounds the negative impact that counterfeit goods have had on the global economy.

According to the International Chamber of Commerce, counterfeiting accounts for between 5-7% of world trade that is worth an estimated US$600 billion per year. Not only is the counterfeit industry worth billions, but the distribution of the fake products is also widespread. It was found by the World Customs Organisation that in 2008, counterfeit products were destined for 140 countries across the world (REF). This means that governments, consumers and registered manufacturers globally bear the brunt of this illegal commerce.

Government loses precious taxes due to this crime. This is because counterfeit manufacturers generally operate criminally by evading tax and circumventing customs and government agencies when bringing goods into other countries. The consequences to consumers buying and using fake and counterfeit goods are even more serious than those experienced by government.

Consumers may be exposed to health risks, especially when purchasing counterfeit drugs or cosmetics. These criminal organisations generally have no sense of responsibility for the items that they supply, so quality and the safety of their clients are not a concern.

Perhaps, the least obvious of the three, legitimate manufacturers suffer indirect consequences as a result of this forgery. Legitimate manufacturers suffer a loss in profits due to the counterfeit products taking market share. Consumers sometimes don’t question the reason for the seemingly genuine product being sold at a fraction of the price. If consumers do question it, the low cost and the similarity in the look and feel of the replica may make it hard to refuse.

In addition, manufacturers are losing money due to their brand and reputation being damaged. As discussed before, consumers often cannot distinguish the fake from the genuine product. Consequently, consumers associate the bad experience of using the fake product with the brand it imitates. Something needs to be done as the consequences are far reaching.

Manufacturers in South Africa have another costly crime to contend with. There has been a recent hike in truck hijackings. Trucks are taken by criminals, sometimes violently from truck drivers while they are delivering product to shops or warehouses. Over 1 200 trucks were hijacked in 2014 across South Africa, which is 10% more than the previous year (Engineering News). According to the Road Freight Association losses per incident range from R1 million to R7 million, which represents a total cost of R1 billion per year to business and insurers (IOL). According to another source, the cost of one truck hijacked amounted to approximately R12 million (Citizen).

Gavin Kelly, technical and operations manager from the Road Freight Association, explained that one of the reasons that trucks are hijacked is to target the contents of the truck trailer for their resale value (Engineering News). Some of the industries hit hard for the theft of their products include cigarettes, fuel, food, and electronic goods. Organised crime syndicates are often responsible for truck hijackings and target trucks based on orders (IOL). Once the truckloads are obtained, the products are distributed for resale.

In a bid to tackle this counterfeiting, some of the main actions taken by the United Nations include encouraging collaboration and coordination between countries, creating public awareness around the scale and dangers of counterfeiting, providing assistance to developing countries and lastly using technology to help law enforcement gather intelligence to fight this crime (Organised Crime Ref). Technologies available are of specific relevance to this article. Anti-counterfeit technologies can be broadly classified into the following categories:

  • Use of overt and covert features
  • Serialisation, track and trace
  • Forensic techniques

Anti-hijacking efforts

Private security companies and their management systems are often used by organisations to prevent hijackings (Engineering News). Trucks can be monitored and located using GPS positioning. In some instances the management systems are even able to measure tonnage and where and when the truck offloaded cargo. In-cab video and audio systems are also being developed to help in the fight against truck hijacking.

Some of the established methods used to fight these forms of organised crime, are effective in many ways. There is a solution available that combines some of the established methods and extends their effectiveness into a secure long-term solution to fighting truck hijackings and counterfeiting.

Knowing your customer

Although the solutions already discussed are intended to slow or stop organised crime, there is another benefit for manufacturers to integrate this solution into their supply chain. Manufacturers could run other marketing campaigns and loyalty schemes using the Pelta codes. Consumers could be encouraged to scan their products, fill in personal information and by doing so, win complimentary products or trips away, for example. These campaigns could be geared at getting to know the demographics of the clients purchasing products.

Manufacturers could develop new products, up sell or cross sell to their clients as a result of the information obtained, just from scanning these codes.

Perhaps the power of the outlined solution lies in the fact that consumers will have the power of knowing whether the product they are about to purchase is fake or genuine. This knowledge does not necessarily mean that they will decide against purchasing the product, but at least consumers will be better positioned to make an informed choice. This is especially important when it comes to buying counterfeit medicines. Nevertheless, the purchasing of counterfeit goods is likely to reduce as a result of this knowledge.

Lastly, this solution enables any ‘Joe Soap’ to help in the fight against selling and buying stolen goods. These stolen goods are likely to become less desirable as consumers will be empowered to know whether what they are buying was procured ethically or not. Street vendors or shady retailers would be at the behest of their customers. This is likely to result in a decrease in demand for stolen products and thereby decrease the incidents of truck hijackings for cargo.

                                                                                                                                                                                                                                                                       Kyle Parker




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