Game-changing regulation may be coming, but for now at least—with willing and naïve customers and easy access to them—it’s a real good time to be a maker of fake goods.
At the product level and from a visual perspective, counterfeiters can now make goods virtually indistinguishable from the real thing. At the society level, they’ve somehow managed to remain out of the spotlight. The problems they create are well documented, certainly, but they haven’t generated the sustained vocal outcry or legislative retribution that might be expected for a $1.8 trillion problem often described as the world’s largest criminal enterprise.
Unabated growth in the counterfeit product market persists despite leaving a long trail of victims in its wake. Brand owners suffer most, losing a sale every time a shopper buys a fake and experiencing an erosion in brand value as poor-quality imitations infect the marketplace. Consumers also get ripped off when buying badly made or poorly performing merchandise, and they can pay a more substantial human cost when a bogus laptop battery ignites, anti‑freeze-laced perfume causes a burn, or if they discover in an emergency that their fire‑retardant gloves, well, aren’t.
In addition to the well‑documented direct safety risks to consumers, counterfeits cause problems downstream, explained Craig Crosby, consumer advocate and founder of The Counterfeit Report, which tracks bogus products sold online. “A fake $30 Chinese auto part can easily ruin a $2,000 car computer,” he said, noting the pain then extends beyond that one consumer’s financial harm. When that car’s brakes don’t work, many people can pay the price for that one counterfeit item. “Counterfeits are endangering consumers and destroying brands,” said Crosby.
Economic damage hits wholesalers and retailers too, with legitimate sellers losing out every time a knockoff is bought instead. Illegitimate product can also get comingled with a store’s inventory, hurting a retailer’s reputation with its customers. In one purchase test, for example, Crosby found that a third of a reputable electronic store’s cell phone cases were, in fact, counterfeits.
Despite store policies designed to prevent it, he’s also returned fake-branded winter coats only to see a major apparel store put the coat back on the rack for sale. And it’s not uncommon for major retailers to be scammed by individuals who purchase, say, a ten-pack of fragrances and then take back a shrink-wrapped counterfeit version to the store for a return. They then walk away with a refund or store credit and keep the original, authentic goods. It’s a tough problem for retailers to combat, said Crosby, because workers are obliged to satisfy customers, and challenging a customer who is returning a counterfeit runs counter to that.
Then there is the enormous expense of enforcing intellectual property rights and investigating and preventing counterfeiting. By 2028, for example, the anticounterfeit packaging market is expected to exceed $420 billion.
And the problem is wider than all that, say analysts. Counterfeiting funds terrorism, causes governments to lose tax revenues, causes investment dollars for legitimate businesses to dry up, results in a loss of US manufacturing jobs, fuels cross-border organized criminal networks, decreases innovation, slows economic growth, and hinders sustainable economic development in many countries. “Fakes kill jobs, innovation, and people,” said Bob Barchiesi, International AntiCounterfeiting Coalition president.
At lululemon, counterfeiting is a recognized risk, one that “is definitely on our radar,” according to Tristen Shields, senior director for global asset protection and corporate security, who notes that his company’s legal department directs the effort to monitor and address it. He likens counterfeiting—and the companion brand risks of bulk buying and reselling and organized retail crime sales—to “a big game of whack-a-mole.” You can get one illicit storefront taken offline but it—and others—immediately pop up.
Currently, the company is analyzing sales data and taking other steps to understand just how extensive the problem is of other people making money off their company’s brand to inform their decisions about how aggressively they should be in countering it. It helps, said one executive, to have a process in place that ensures all reports and complaints of counterfeit product, including those made through customer service channels, are directed to a single unit for aggregation, analysis, and investigation.
Counterfeiting presents an unequal risk to retailers, something several industry executives cited as a drag on collective efforts to combat it. Overall, though, there is plenty of pain to go around:
- The share of trade in counterfeit and pirated goods in global trade has grown significantly since 2013 to reach 3.3 percent of world trade, according to a study by the Organization for Economic Co-operation and Development.
- More than one in four US consumers said they accidentally purchased at least one counterfeit product in the past year, according to a report by Sapio Research for software firm Incopro, Is Fake the New Real? Living in a Fake Society.
- US Customs and Border Protection (CBP) made more than 27,000 seizures of counterfeit goods in fiscal year 2019, which would have been sold for $1.5 billion had the goods been authentic.
- In an analysis of reviews on Amazon, ReviewMeta found that use of the descriptors “fake” or “counterfeit” in product reviews increased from 1.7 percent in 2015 to 4.3 percent in October 2019.
These are just a sampling of data points reflecting a massive problem. Troubling counterfeit statistics can be found in analysis of fakes by various vertical markets, the government’s annual intellectual property report, the US Trade Representative’s Notorious Markets List and its Special 301 Report to Congress on the state intellectual property protection by US trading partners, and others. The scale is also reflected in the sheer regularity of CBP press releases, for example, announcing the seizure of counterfeit Cartier jewelry worth $8 million one week and 170 counterfeit designer handbags worth $400,000 the next. Moreover, reports generally acknowledge that the percentage of counterfeit goods that evade detection is likely increasing and that enforcement authorities face difficulties in responding to the trend of increasing online sales of counterfeit goods because counterfeiters increasingly use legitimate express mail, international courier, and postal services to ship counterfeit goods in small consignments rather than ocean-going cargo to evade interdiction efforts.
These research studies and government reports often run hundreds of pages, publish year after year, and often boil down to this conclusion from the 2020 US Chamber International IP Index: “Overall, the mechanisms in place are outweighed by the sheer quantity of counterfeit goods available online.” For an unsolved and worsening problem, it is very well catalogued.
Fighting Back
A primary reason why it is so hard to put a dent in the supply of counterfeit products is that demand has never wavered. While many consumers don’t know when they’re purchasing counterfeits—“There is no way for a consumer to tell the difference between a real and counterfeit Duracell battery,” said Crosby—others don’t care.
There have been efforts to educate consumers about the negative impacts of counterfeits, but public attitudes haven’t really changed, according to Tiffany & Co.’s Charles Olschanski, senior director of global brand protection and investigative services. “Consumers are always going to do it if available,” he said. “There is no law to punish the consumer and no risk in purchasing it, and unless that were to change, you’re never going to see it.”
In a study on the perception of perceived consumer transgressions, published in the Journal of Leadership, Accountability and Ethics, nearly 40 percent of American consumers said they think it’s acceptable to knowingly purchase a counterfeit product, about the same percentage that said it’s okay to purchase a store item you know is mispriced too low. It’s actually worse to borrow a friend’s membership card to get into a museum without paying, people think, and three times worse to lie about your age to get a senior citizen discount at the movies. The Saphio Research study found similar results, with one‑third of consumers okay with purchasing counterfeit clothing, jewelry, and leather goods.
Bill Taylor, chief marketing officer for OpSec Security, a provider of anticounterfeiting solutions, acknowledges that some consumers don’t care about a product’s authenticity and knowingly welcome a chance to wear or show off a high-status product. But many more consumers aren’t shopping with the idea that they could be looking at a counterfeit and not a crazy-good deal. When safety is potentially at stake, Taylor noted, “it’s incumbent on the brand and solutions to teach the customer that those products pose a risk and what they should be looking for to know a product is authentic.”
For brands, he said anticounterfeit measures can bolster customer engagement and loyalty efforts, such as when consumers register their authentic product with the company. Consumer concern over brand impacts on the environment and a desire for circular-economy products also present brands with an opportunity to promote to consumers the importance of product authenticity, he suggested.
Like Shields, Olschanski likens the fight against counterfeiters to the game of whack-a‑mole. He says the “risk is ever present,” and that risks never really go away when a raid occurs or illegal activity on a particular online marketplace is disrupted. “The more you work on enforcement on one platform, they go to another,” he said. However, the arcade game comparison doesn’t fit in an important way, in that the term is often used to denote futility, whereas Olschanski thinks it is vitally important to stay in the game and, importantly, to keep score.
“We look at our data in real time in case management systems to know what the patterns are,” he said, and analyze every quarter to see if a shift in resources is warranted. Criminals tend to use the path of least resistance, he noted, so good results are possible by being aggressive and targeting what data shows is trending. “If we see a shift in how goods are being sold, we need to shift right then, not at the end of the year.” Annually, companies can do a more thorough review to see if they may need to recalibrate their overall anticounterfeit strategies, but retailers need to examine more frequently to align interventions with the threat, he said.
For a company that relies on a reputation for quality to the extent that Tiffany & Co. does, it’s natural that the company makes anticounterfeiting a priority. Each poorly fabricated, phony product chips away at the retailer’s revenue and its reputation. So it embarked on mission: contribute to advancement of the brand, sales, and profitability by controlling the visibility and availability of counterfeit products.
Tiffany & Co. team members have kept counterfeiters on their back feet and protected the company’s value with their dedication to tracking the problem, auditing, and remaining nimble in its response. They’ve followed the sale of counterfeits from fake Tiffany domains, to Amazon and other marketplaces, to social media, which has recently become a dominant driver in the sale of counterfeit merchandise. A sophisticated seller of counterfeit merchandise today uses algorithms to target potential customers in the same way legitimate sellers do, explained Olschanski. “If I’m searching, the ads will come after me, just like from a real business.”
Both Crosby and Olschanski noted the importance of staying current with the sources of the threat, which are persistent but fluid. The largest buyer of counterfeit products is the US consumer, according to Olschanski. China has been—and still is—the largest origin economy producer, accounting for 47 percent of world exports, although with labor costs creeping up there, he says he’s keeping his eye on smaller countries in Asia and India. A lot comes out via transit hubs, including Hong Kong, Indonesia, Turkey, and Eastern Europe, and while some fake goods leave through the back door of legitimate manufacturers, more are produced in converted apartment buildings that bely the sophistication of fakes they produce. The big change has been the move to online sales, specifically on platforms that allow third-party sellers. “Alibaba is the king of counterfeit,” said Crosby.
Keeping Score
Keeping score, through an extensive use of metrics, has been a driving force in Tiffany & Co.’s anticounterfeiting strategy and key to its brand protection success. It’s been even more critical as the amount of company resources to go after counterfeiters has tightened because of the economic upheaval created by the pandemic. For the last six to eight months, the brand protection unit has been focused on product seizures and asset recovery, with an eye toward being able to apply the money they’ve saved right back into the department’s anticounterfeiting effort. He said other data points, such as the number of fake domains discovered or fake product takedowns, are also vital to track and suggested questions for investigators and brands to ask:
- Do I track metrics that tell me the accurate extent of my problem?
- Am I using metrics to help shape my strategy?
- Am I tracking the metrics that my executive team is looking for?
Metrics enable a nimble response, which is more necessary now than years ago when Olschanski would go to flea markets with an eye out for fake Louis Vuitton handbags for a clue to where fake Tiffany & Co. jewelry might be changing hands. Technology has changed the way businesses operate, and that includes counterfeit ones, he said. “Technology has allowed them to be more nimble, more transactional, and more targeted in the way to do things,” he said. “Technology allows them to be more productive and enjoy the other advantages, except that they get to do it all without the restriction of doing things within the law.”
He said retail needs to think of counterfeiting operations as businesses—albeit illegitimate ones—that run professionally like any other but with less organization around leadership. Like all retailers, sellers of counterfeit goods take advantage of the latest systems to measure customers’ current appetites, retool production lines, and get their goods to market quickly. “The pandemic is an example,” said Olschanski. “Counterfeit personal protective equipment exploded last spring as people were looking to buy it anywhere they could find it,” noting that fake bike parts also became problematic as gyms closed and people began exercising more at home.
The problem was highlighted in the US Annual Intellectual Property Report, released in January by Intellectual Property Enforcement Coordinator Vishal Amin. The report, subsequently removed during the transition to the Biden administration, cited a troubling trend in “opportunistic criminals taking advantage of the coronavirus health crisis, which led to an influx of counterfeit personal protection equipment and medicines, as well as the proliferation of online scams.” One major victim of counterfeit masks, 3M company, filed and settled a lawsuit against a third‑party merchant on Amazon’s platform it said was selling defective, damaged, and fake “3M N95 masks” for as much as $23.21 apiece, compared to $1.27 that authentic 3M masks were selling for.
The market focus of today’s counterfeiters is further evidenced by how they’ve since fine-tuned their bogus personal protection equipment (PPE) product lines, moving from a focus on N95 masks to masks that pretend to come from fashion houses. In January, for example, CBP stopped shipments of several fake designer face masks, including a shipment from Vietnam that contained more than 5,700 designer masks made to appear to be from Coach, Tory Burke, Chanel, and others.
Increasingly Sophisticated Scams
Counterfeiters are increasingly producing a wider variety of goods and hitting earlier in the product cycle, according to a 2020 study by the Department of Homeland Security (DHS), Combating Trafficking in Counterfeit and Pirated Goods. “If a new product is a success, counterfeiters will attempt, often immediately, to outcompete the original seller with lower‑cost counterfeit and pirated versions while avoiding the initial investment into research and design.” And with third‑party online marketplaces, counterfeiters have fast and easy access to consumers to capitalize.
The study points the finger directly at third-party online marketplaces for intensifying the problem to “staggering levels.” Historically, counterfeits were distributed through swap meets and individual sellers located on street corners. Today, they’re largely trafficked through vast e-commerce supply chains in concert with marketing, sales, and distribution networks, and “the scale of the problem will only increase, especially under a business-as-usual scenario,” the report concludes.
“While we still have the issue of pawn shops and flea markets, there is no type of regulatory body that protects consumers from stolen and counterfeit goods on online marketplaces, and that’s where we see the trend going,” said Michael Hanson, senior vice president for public affairs at the Retail Industry Leaders Association (RILA). “The sale of illicit goods is only going to increase, and we don’t see the trend of buying online changing.”
A counterfeiter seeking to distribute fake products will typically set up one or more accounts at online third‑party marketplaces to quickly establish attractive “store fronts” to compete with legitimate businesses. On these sites, online counterfeiters can misrepresent products by posting pictures of authentic goods while simultaneously selling and shipping counterfeit versions. “Counterfeiters have taken full advantage of the aura of authenticity and trust that online platforms provide,” notes the DHS report.
The rapid proliferation of selling platforms allows counterfeiters to hop from one profile to the next even if the original site is taken down or blocked. Some platforms scrutinize sellers, but on others, little identifying information is necessary to begin selling. Anyone can start selling a product if they provide basic information about themselves, such as credit card and tax identity. The reason for the lack of scrutiny is financial. A platform that permits more “frictionless entry” and reduces costs for sellers and buyers to join increases its likelihood to scale and succeed.
Social media is now a major player in the counterfeit game. In a 2019 study, nearly 20 percent of Instagram posts about fashion products featured counterfeit or illicit product, and more than 50,000 Instagram accounts were identified as promoting and selling counterfeits, a 171 percent increase from a prior 2016 analysis. Instagram’s Story feature, where content disappears, is proving particularly effective for counterfeit sellers.
“Instagram users, for example, can take advantage of connectivity algorithms by using the names of luxury brands in hashtags. Followers can search by hashtag and unwittingly find counterfeit products, which are comingled and difficult to differentiate from legitimate products and sellers,” explains the DHS study, which also notes the proliferation of “hidden listings” for the sale of counterfeits. “Social media is used to provide direct hyperlinks in private groups or chats to listings for counterfeit goods that purport to be selling unrelated legitimate items. By accessing the link, buyers are brought to an e-commerce platform that advertises an unrelated legitimate item for the same price as the counterfeit item identified in the private group or chat. The buyer is directed to purchase the unrelated item in the listing but will receive the sought-after counterfeit item instead.”
Some online marketplaces have taken actions to make it harder for counterfeiters, but those industry efforts are insufficient. “Private stakeholders have fallen far short of adequately addressing the substantial challenges that must be surmounted if the trafficking of counterfeit and pirated goods is to be deterred,” the DHS study concluded.
Craig Crosby goes further, suggesting that companies making money off the selling of counterfeit goods are either incompetent or intentionally doing a bad job of removing bogus products and blocking illegitimate sellers. “It’s an ever‑evolving weekly challenge. The same sellers come right back,” he said. In frustration, some major brands have stopped selling online except through direct channels.
Crosby’s passion ignited a decade ago after receiving packages of counterfeit Duracell batteries, and he has since become a vocal anticounterfeiting crusader, helping consumers recognize the difference between legitimate and knockoff products and providing evidentiary support in claims against sellers—and having twice won court cases against eBay several years ago. He’s currently the lead plaintiff in a class action lawsuit against Amazon filed in the US District Court in the Central District of California alleging the company directly sold dozens of products containing fraudulent 18650 lithium-ion battery cells and misrepresented the products’ safety characteristics.
Crosby says the efforts to remove counterfeit products that large online marketplaces like Amazon vigorously promote seem mostly for show. “To me, their intellectual property enforcement is pure lip service,” said Crosby. “When you read the complaints and responses you can see it’s the intention of the e-commerce sites to keep this money machine going.”
What so frustrates Crosby is his belief that online marketplaces could easily do a more effective job of policing their sites. After all, he has identified and worked to get 400 million counterfeit product from e-commerce websites removed on the behalf of brand owners. And some product listings, he noted, announce their counterfeit status in their product title description, for example, a laptop battery with a milliamp rating that exceeds what is possible or a microSDHC memory card that lists a capacity that does not exist in the microSDHC standard.
In these and similar instances, no lab testing or other detailed investigation is required. The product is fraudulent on its face. Yet they can be found, perhaps even with the “Amazon Choice” label attached to them. “Here is something that you can see just in a search is a counterfeit,” said Crosby. “Something that simple that they say they can’t take care of.”
Powerful technology to uncover counterfeit online listings exists, agrees OpSec Security’s Bill Taylor. The company provides a range of solutions, including supply chain tracking and product authentication, which these days might entail security thread woven into products, QR codes, fine laser etching to create 3D holography, or even product authentication markers the size of a blood cell. In its online brand protection part of the business, the company deploys an artificial intelligence (AI) tool to scour marketplaces and social media product listings to compare price points, addresses, names, and dozens of other data points to identify the original source of multiple counterfeits listings. “In this way, we find the hubs that are the source of multiple bad actors in that game of whack‑a-mole and take out the central hub,” said Taylor, noting that on some marketplaces, the company can directly remove the fraudulent websites.
Basic protections may also need sharpening, according to the company’s research. It finds that 18 percent of consumers have unintentionally bought a fake product from a site that they believed was the brand’s genuine page. “This signals that some companies could still be doing more to ensure their brand is not being misused and their customers are being protected,” according to the firm.
Other LP executives stressed the importance of communication with and educating internal stakeholders, specifically noting the value of training employees to understand the problem of counterfeiting; simplifying reporting processes so that employees can easily report the incidents of counterfeiting they learn about; giving feedback to workers when they make reports; and educating law enforcement on what forms fakes of their products are taking. Providing officials with good cases is also important, Olschanski noted. “You want to develop a reputation for providing all the information they’re going to need in a way they can follow,” he said.
Crosby’s message for company brand protection units is to stay aggressive, although he’s confident that many get it. “Most know that just because they send in [a request for a takedown of a counterfeit product] doesn’t mean it was removed, or that it wasn’t just put right back up.” He thinks a bigger problem exists for companies that can’t afford the “huge financial burden” to wage an eternal war with illegitimate sellers—and that they will continue to be victimized until legislation is enacted to support them.
That prospect appeals to lululemon’s Tristen Shields, who noted that counterfeiting isn’t the only problem he sees. “It appears to me that it is a better business model to get the product at a lower price and then resell,” he said, and that, too, can erode brand value and harm a company’s reputation, degrade customer experiences, and create competition for main line stores. “When someone buys an item from an outlet for $10 and resells it online for $29, the customer is losing out. And from a customer experience standpoint, there is no formal relationship with us,” he explained. “It’s not a good thing to have someone have a negative experience with a seller and associate it with purchasing our product.”
Shields sees people selling lululemon products via online channels using pictures he can tell they’ve lifted straight from the company’s website. What would help? “The biggest thing would be if online retailers were more willing to work with us on how to control the situation. We don’t have the legal resources to put in cease-and-desist orders when the only result is that they change the name of their storefront and set up a new shop the next day.”
Legislative Momentum
Help may be on the way. RILA’s Michael Hanson said that in early 2020 the industry was seeing some legislative momentum, with federal lawmakers taking interest in the problem of online sales of stolen and counterfeit goods via third-party marketplaces, but that the issue hit a brief pause when COVID-19 hit, and businesses and legislators turned to the crisis. To push the issue, RILA launched the Buy Safe America Coalition, a diverse group supportive of efforts at all levels of government to combat organized retail crime (ORC) and protect consumers and communities from the sale of counterfeit and stolen goods. Rite Aid, DICK’S Sporting Goods, and Lowe’s are all coalition members, and all stakeholders in the fight are encouraged to join. “It’s an issue that affects such a broad spectrum of companies, and the more retailers that join, the more people that hear the powerful stories they have to tell.”
The major thrust currently is the Integrity, Notification, and Fairness in Online Retail Marketplaces (INFORM) Consumers Act, which would require online marketplaces to obtain and verify straightforward information from third-party sellers, such as their government ID, tax ID, bank account information, and contact information, and require third-party sellers to disclose their information to consumers. “It provides transparency and accountability, and more information to track down and prosecute [bad actors],” said Hanson.
With supporters of the legislation in ascendence in the Biden administration—Senate bill sponsor Dick Durbin (D- IL) is now chairman of the powerful Senate Judiciary Committee—Hanson speaks of a law passing as a probability rather than a possibility. “When it passes, and I’ll be that bold, the coalition will push forward the implementation of the law and to make sure consumers know about it.”
Some operators of third-party marketplaces are supporting the bill, including Walmart and Target, but it does have forces in opposition, notably Amazon. Arguments are that it somehow puts online sellers on unequal footing with physical stores, which doesn’t resonate with Senator Durbin. “In an era where stolen, counterfeit, and dangerous goods are increasingly offered for sale online, the INFORM Consumers Act will help promote responsible marketplace behavior, deter shadowy sales practices, and protect consumers,” he said in introducing the legislation.
The breadth and depth of the coalition working to support passage of the legislation is helping drive Hanson’s high hopes. And it’s only one hopeful sign of several that victims of counterfeiting are pushing reform through enhanced coordination. In January, the National Intellectual Property Rights Coordination Center (IPR Center) announced a formal partnership with the International Anticounterfeiting Coalition (IACC) to develop joint initiatives to educate stakeholders and protect legitimate manufacturers, retailers, and consumers by preventing illegal counterfeit goods from entering the US.
The INFORM Consumers Act won’t solve the problem, however. Crosby, for one, is skeptical of the good that information requirements on sellers can do because they have previously shown enormous creativity and success in getting around stricter requirements whenever they’ve been put in place, from listing their information in Chinese to gaming the address requirements. For more substantial change, he thinks Section 230 of the Communications Decency Act would need to be revised in such a way that online platforms could be held liable for products sold on their sites.
Hanson acknowledges that the INFORM Consumers Act won’t put the end to the fight against counterfeits, calling it a “great first step” and explains that its goal is to put in a “floor” so that marketplaces have measures built into their systems, so consumers are better protected. It’s also strictly aimed at high-volume third‑party sellers, defined as those making 200 or more sales totaling at least $5,000 in one year. So companies will need to continue both their individual and collective fight against counterfeits to ensure laws that are passed are effectively implemented, to deploy monitoring software and AI solutions to detect where counterfeit versions of their products live online, to develop metrics to measure the effectiveness of their efforts, to push authentication technologies forward, to educate consumers, and to push for additional transparency.
While acknowledging that the counterfeit challenge for a luxury goods company is different than for a pharmacy worried about fake medications, Olschanski would like to see brands and retailers work more closely together when they can. Collectively, retailers need to have a strong proactive approach to counterfeiting. Individually, they need to collect data to understand the problems they’re facing and maintain a level of humility sufficient to drive them to discuss and share strategies.
“A company getting beat up by an onslaught of social media listings should be able to reach out, find out who is good at managing that, and be able to learn from them,” said Olschanski. “The industry does well as a whole, but I’m hoping we can continue to make strides in collaborating and having open dialogue to share practical solutions that companies are finding effective.”
A Different Kind of Counterfeit
But the picture was not of M&S CEO Steve Rowe, nor was the “Marks and Spencer Store” Facebook page where it originated the retailer’s real account page. The URL linked customers to a bogus M&S branded portal that asked visitors for their names, addresses, mobile phone numbers, and bank details to “enter” the prize draw.
The impersonation by cyber criminals was an effort by fraudsters to scam valuable personal information and credit card details. On Twitter, @bouffant1 asked Marks & Spencer, “Is this real or a scam?” to which the company replied that it had been made aware of the advertisements, that it wasn’t genuine, and “our colleagues are investigating further.”
The fake advertisements were spotted by the cyber research team at Parliament Street, and cyber-security experts warn that online impersonation scams are likely to increase to take advantage of more and novice online shoppers. They say to expect growing numbers of “exclusive” or “one-time only” deals advertised on social media or in emails or text messages. Most will be legitimate, but many will not, putting personal data and log-in credentials of shoppers at risk.
Marks & Spencer or another retailer wouldn’t suffer a direct financial hit from such a scam, but retailers do experience harm. Maintaining a positive brand image is quite likely the most important element for a retailer’s future success, and a customer tricked by an impersonation scam is unlikely to shop at that retailer anytime soon.
In 2020 for a feature in LPM, several LP pros said they’ve increased their efforts to identify and address fraud that wasn’t causing losses in stores but was adversely impacting customers. Many noted that their organized retail crime units were increasingly providing victim-assisted fraud services, such as an employee being defrauded or a customer or guest falling victim to impersonation scams, like IRS scams where elderly shoppers will come into the store thinking they have to pay the IRS in the form of a gift card.
Joe Darnell, manager of asset protection services at Retail Business Services, explained how, in 2019, many elderly customers were falling victim to a gift card scam in which they were being enticed to purchase gift cards, would later share the gift card information over the phone, and then see the value of the gift cards erased. Its ORC investigators regularly undergo training to understand such schemes and to be able to help local authorities. In doing so, they eliminated a substantial amount of consumer fraud and customer losses.
Retailers need to extend that attitude to online victims as well, suggest analysts from CyberInt in the company’s Annual Threat Landscape Report for 2020. They insist that retailers’ concern with security should progress beyond their own infrastructures and employees to include protection of company brands and customers. Specifically, the report advises retailers to guard against allowing their customers to be targeted in phishing campaigns that misappropriate brands to lure victims into surrendering personal and financial data. Again, while retailers may not suffer direct losses from such schemes, they do pay substantially in the long run.
This story was originally published as a part of our March-April 2021 Issue, and was updated in May 2022.
