2011-2013 felt like bad years for fakes in China. When writing the Skinny it seemed like there was a new exposé every week to include, whether it be rat meat dressed up as lamb, fake Apple stores that even fooled the staff or even fake chicken eggs.
These days there is an occasional headline about a police bust of counterfeit condoms or infant formula, yet the constant bombardment of media about fakes has subsided. There has been a genuine increase in public and private resources and direction, coupled with more positive court rulings. Beijing’s clampdown on corruption and the growing number of Chinese brands with their own IP to protect has increased the focus on fighting fakes. But don’t be fooled – just because we’re not often hearing about counterfeits, the dark underbelly of fake products remains rampant in China.
Just this month four separate gangs were arrested in Guangdong with millions of dollars’ worth of fakes from wine to health supplements. This is just a drop in the ocean of the wholesale counterfeiting happening in China, noted in a 2016 US Chamber of Commerce report that Mainland China was the source of 72% of global physical trade-related counterfeiting. Add Hong Kong to the mix and you’re up at 86% – an estimated $397 billion. 12.5% of China’s 2016 exports were calculated to be fakes. Whereas some Chinese consumers are attracted to cheap rip-offs, many are duped unwillingly. As recently as Singles’ Day last November, 40% of cosmetics purchased from cross border platforms were fake.
China’s fake endemic spans far beyond products. The latest wave to sweep ecommerce sites is fake advertising using stock images of weathered old men, praying on consumers’ empathy to ‘help poor rural farmers’ selling fruit.
For brands, there are a host of steps businesses can take to minimise the risk of fakes. The first and most obvious is ensuring you’ve done all necessary trademarking in the relevant classes. Here are seven other ways businesses can fight counterfeits in China from Harvard Business Review.
One of the recommended steps is to join forces with ecommerce firms, the most obvious being Alibaba. Alibaba has long been labelled a villain in the counterfeiting world – the enabler for vendors to get their fake products to the market. While many argue Alibaba could be using more of its immense technology resources to rid its platform of fakes, listing on the NYSE in 2014 and then being booted out of the prestigious International AntiCounterfeiting Coalition in 2016 were catalysts to up its game. The company now uses algorithms to scan the 1.8 billion listings on its platforms, runs test-buying programs that seek out fakes, and assesses reports from brands and rights holders. Members of its AACA (Alibaba Anti-Counterfeiting Alliance) receive priority treatment, which has helped increase its membership from 30 last January to 105 today.
Beyond the Harvard Business Review recommendations, there are numerous smart marketing and channel initiatives to reinforce your products’ authenticity with consumers. Agencies such as China Skinny can assist with this.
On another topic, for our Shanghai-based readers in the food & beverage/FMCG categories, next Wednesday 23 May China Skinny’s Mark Tanner will joining speakers from Mondelez, Coca-Cola, Starbucks, Hema, Meituan-Dianping, Wahaha, Bain, Zespri and Yum at AmCham’s A Taste of Tomorrow: Innovation in Changing Market discussing the exciting opportunities presented by China evolution into New Retail. More information here. We hope to see you there. Go to Page 2 to see this week’s China news and highlights.