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The Cost Of Counterfeit

The Cost of Counterfeit

When you hear of counterfeit you may think fake currency.

Then you might think of knock-off branded wares sold at a fraction of the price.

But when it comes to counterfeit extension cords that can and have burned down homes, it gets a whole lot more serious.

And it doesn’t stop there. There is even a host of fake medication you can get trapped into buying. Now it gets very serious. Imagine your grandparent with a heart condition taking a placebo!

In April 2016, the world lost one of the most talented artists of all time. Prince died from what appeared to be complications from medications he was taking.

And in April 2018 the world learned the truth – counterfeit medication was the cause of death.

Can you tell the difference?

Data Source: CNBC

The Back Story and Lead up

The internet re-invented retail in so many ways. It allowed retailers to create another platform to reach out to their customers, and market their wares. It also allowed customers to visit their favourite stores online. They also discovered quickly that they could shop around for the lowest price. And then the harsh reality set in.

The internet made it possible for the counterfeiters to create their own version of omnichannel. They no longer have to sell knock-offs in dark alleys. Branded ware sold at a fraction of the price from other countries can now be shipped right to the customer’s door.

The cost to retailers in significant. What we do know is that sales are diverted from the legitimate market. Retailers lose out – but we can not quantify the impact. The name brands lose even further in several ways, the loss of sales of course, but then there is the loss of brand value because of the knockoffs flooding the market.

Then there are the other major costs. At the risk of training scammers, there is very little media attention paid to the subject of refund fraud. As a visitor to this website, we understand that you are as a retailer trying to keep out of harm’s way, have a right to know, and a need to know.

It goes like this;

A customer named Brian (not his real name) bought a high end branded purse for his wife from a department store. He paid $1200.00 for the purse. He left the store with his new purchase and finds an “old school street vendor” selling an identical looking purse for $50.00. Obviously a cheap knock-off. Brian being cost conscious, but not wanting to cheap out on his wife buys the counterfeit, then puts the legitimate tickets on the knock-off, and returns the knock-off to the store, knowing they need an original receipt for a refund (which he has!!!).

The store employee remembers him, and without questioning or inspecting the product, refunds the $1200.00. Now Brian has the real product in his car and is only out $50.00.

To further add insult to injury, the store put the knock-off back on the sales-floor. Two weeks later Fred (another made up name) bought the knock-off he thinks is real and gives it to his wife as a gift. And guess what? Of course, his wife knows the difference.

The rest of the story is currently before the courts.

Anything and everything is being counterfeited right now.

Even medication!

Next episode

It is important to understand that the term grey market is being used very broadly.

In the next article on counterfeiting, I will outline the grey market and how real product hits the streets at a fraction of the cost. In fact, I will highlight an organized crime ring resulting in a buyer purchasing on behalf of a retailer, the exact same product that they previously purchased, albeit at what they now believe to be a discount.

Stay Tuned!

Hello, I'm Stephen O'Keefe. The information you read here is intended to help businesses answer some of the tough questions about everyday events in the retail environment. After spending over 3 decades in this industry we've seen a lot!
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About Stephen O'Keefe

As an independent consultant I leverage my experience and knowledge to help a number of companies achieve results. Clients range from non-retailers looking for guidance to serve their retail customer, to retailers looking for quick solutions to unique and costly problems, right to the Industry Association. Bottom line Matters!

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