Retailers whose brands are prized by customers as trendy or luxurious are almost inevitably targeted by fraudsters infringing on their intellectual property rights.
Growing numbers of imposters rack in easy sales by counterfeiting popular brands online and sometimes even replicating legitimate websites, resulting in tarnished brands and lost sales.
An estimate from a 2015 report commissioned by the International Chamber of Commerce placed the size of the global counterfeit market at more than $1.7 trillion in 2015, up from $600 billion in 2010. Those sales are estimated to increase to $2.8 trillion by 2022.
Given the time and money that retailers need to spend combating these threats, many companies are turning to specialists who use sophisticated algorithms to find counterfeit listings and remove them.
Outsourcing saves “significant time and money and is much more effective than what we were able to do on our own,” says Joe Spallone, customer service and intellectual property rights manager for Los Angeles-based MVMT Watches.
MVMT, a fast-growing international brand created to meet a need for high quality, stylish watches at affordable prices, launched its website in 2013. It also has distribution in about 80 Nordstrom stores throughout the United States.
Spallone says the company discovered growing incidents of brand counterfeiting about a year after its launch. After trying to deal with the incidents and becoming frustrated by the amount of time it was taking — “about two days a week,” he says, “and these were 50 hour weeks” — MVMT turned to Red Points, a company dedicated to brand and copyright protection.
Six months after MVMT’s partnership with Red Points began in November, Spallone says Red Points’ Magda software program had found more than 25,000 listings of counterfeits of its watch brand on 80 marketplace sites. The typical price at which the counterfeits were being sold was between $5 and $15, for items that retail for $95 to $160.
Red Points uses its algorithms to scan all the places where counterfeit listings are posted including large well-known marketplaces as well as thousands of lesser known sites.
Red Points also found 11 incidents of counterfeit websites effectively replicating the look and feel of the MVMT website. When customers would order a watch from one of these websites, the owner of the site would take the order, then order that item from the legitimate MVMT website, effectively using MVMT to “dropship the order to the customer,” Spallone says. “The fraudsters were making money because they were buying from us using promotional discounts, plus they were charging higher retail prices.”
So far, Red Points has shut down all but four of those sites, he says, with the threat of lawsuits hanging over the rest.
“When we were doing the search for counterfeits, we had only found about 1,000 counterfeit listings, so we were very pleased with how effective the Red Points program is,” he says.
“They were not only able to find a number of websites with counterfeit listings that we were unaware of, they were able to tackle fake Facebook pages and Instagram accounts that were advertising counterfeits of our watches. It was huge.”
The distribution of illegal content online “is huge and growing,” says Laura Urquizu, CEO of Red Points.
“Today, everything can be counterfeited,” she says. “You can find fake products online everywhere. And when we see a trendy product, we know there is going to be a counterfeiting problem.”
When a company has a brand that it wants to protect from counterfeiting, it gives Red Points all the information that Magda needs to detect a counterfeit with a high degree of probability. That typically includes the brand’s retail price, websites where it can legitimately be found, approved distributors, any words or claims unique to that brand and countries where the brand will and will not be sold.
Since Magda is a self-learning program, Urquizu says, each time a brand adds another piece of qualifying information about its items, Magda gets better at assessing the probability of an item being counterfeit.
Spallone says getting started with Red Points was easy. “I gave them an Excel document documenting the websites we were aware of selling counterfeits of our brand. I also gave them images of our products and information in the form of keywords about our brand, price points, where we have distribution — all the information their software needed to be able to detect counterfeits.”
Red Points uses its algorithms to scan all the places where counterfeit listings are posted including large well-known marketplaces as well as thousands of lesser known sites, Urquizu says.
As Magda discovered probabilities of items being counterfeited, Red Points’ analysts posted that information and images on a cloud-based portal. Signing in to MVMT’s section of the portal, Spallone could see the items and validate whether they were indeed counterfeits.
Once validated, Red Points contacts the websites where the items are listed, requesting that they be deleted; most of the time, the contacted websites react immediately to their requests.
“When I was doing that myself, I’d often wait weeks for the websites I contacted to review my requests and react,” Spallone says. “With Red Points, because they have relationships and contacts with so many marketplaces, deletions typically happen in about 24 hours.”
Because Red Points “works with so many verticals, we know where brand abuse is happening,” Urquizu says. “And we have lots of other detail information such as where counterfeits are likely to originate.”
If the website is a fake website, “we work to shut it down,” she says. “Almost 100 percent of the time we are successful.”
Since Magda is housed in the cloud, a retailer or other brand manufacturer can log into their section of the portal and see all the data it needs to keep track of counterfeiting issues, such as how many listings has Red Points discovered or how many listings have been deleted.
Spallone says he worries less about losing sales to counterfeiters and more about the brand image and the time and money it takes for him to deal with the problem.
“Someone who buys what they think is one of our watches for $5 or $10 is probably not likely to spend $95 or $100 to buy from us,” he says. “What we worry about is our brand image and negative impacts on our customer service reputation. Also, the fact that this was causing so much more work for customer service.”
MVMT is still a relatively small and unknown brand, so finding over 25,000 fraudulent listings on 80 websites in a six-month period is impressive. Urquizu says Red Points finds more than 100,000 counterfeit listings each year.
Liz Parks is a Union City, N.J.-based writer with extensive experience reporting on retail, pharmacy and technology issues.