A recent report by London-based Internet brand protection specialist NetNames contends that counterfeiting is becoming a huge problem due to online commerce. In 2014, online e-commerce channel sales of counterfeit goods jumped 15.6 percent. However, only one in 28 purchasers of counterfeit items did so intentionally.
The report points to China as the source for much of the counterfeiting activity; indeed, retail statistics in the report state that about 70 percent of the fake goods seized worldwide originate in China due to the country’s abundance of raw materials and inexpensive labor.
According to the International Chamber of Commerce (ICC)-created Business Action to Stop Counterfeiting and Piracy (BASCAP), the sale of pirated and counterfeit goods sucks nearly $1 trillion from the global economy every year. Fake websites, online auctions, and digital piracy are spurred by a fragmented Internet ecosystem, in which anyone can register a domain name quickly and anonymously. Commonly counterfeited products can include software, movies and music due to the relative ease of copying digital material. A 2011 NetNames estimate suggests that piracy makes up nearly 24% of the world’s Internet traffic.
“Brands have a responsibility to safeguard their customers. Revenue can be diverted by shoppers unknowingly purchasing counterfeit items online and a brand’s reputation can be damaged when shoppers—or their partners—are disappointed with the quality of the product. For online retailers and luxury brands, safeguarding genuine customer traffic and protecting the legitimate route-to-market is of paramount importance to maximize the opportunities that the online channels offer to grow sales,” said Gary McIlraith, CEO of NetNames, in a February 2015 press release.
Counterfeiting is not the only threat posed by the unregulated online environment. With the digital evolution of retailing, companies must also safeguard against other types of online fraud, including phishing and cybersquatting (another term for unauthorized registration of another’s trademark with the intent of profiting from it).