Have you ever come across any counterfeit goods or products? Take shoes for example. You are shopping in the market and you come across a shop which says that it sells Nike Air Jordan’s for 50% lesser than its original price. You get curious and you decide to pay a visit to this shop. You see that there are so many branded shoes and all are priced at a very low range when compared to the original prices. You pick up a shoe and see that the logo is a bit different. Well, that is one example of a counterfeit.
Counterfeit goods are all around us. Some of us might have purchased one unknowingly or knowingly. But have you ever wondered how it runs and how it impacts the economy? Well, lets dive deeper to know more.
In simple terms, a counterfeit is something that is copied off from a brand without their permission. Take Adidas for example, a counterfeit pair of Adidas shoes might have a longer stripe in the logo when compared to the original.
It is estimated that the value of counterfeit business is $600 billion. It is also estimated that 20% of this market consists of footwear. That’s a pretty large market. It is also said that most of these replicas are manufactured in the cities where the actual brands also manufacture their own original products. Sometimes these are so good that it becomes tough for the brands to differentiate between their own product and the replica.
Sometimes you might have purchased a bag from a shop claiming that its the original product, but later on you realize that you have been scammed.
Now lets look at how counterfeit business boomed in the recent years. The simple answer is internet. With almost the entire world being able to access the internet, the market expanded and made its presence known.
There have been many cases where these goods were sold on Amazon, eBay and other well know ecommerce giants. With the boom in drop shipping and ecommerce many websites have popped up which sell these counterfeit goods. Some sell goods with words such as “first copy” clearly mentioned on the product description, while others sell these claiming that they are original products.
There have been many cases where a company spends on research and development and launches a product on Amazon, only to see a large number of replicas appear after some days. Ecommerce giants have now taken steps to control these, but there is always a chance that some of these replicas will creep in.
With the rise in social media and influencers, people want to live the life that someone else is living. Everybody wants a Gucci bag or a Louis Vuitton Jacket, but not everyone can buy it. But most of us can buy a cheaper counterfeit of these products.
The other reason is supply and demand. Lets say a sneaker brand decides to launch a pair of shoes. Now people are really crazy for these shoes. Everyone in the sneakerhead community wants to own at least one. But the problem is that the company decides to sell only a limited number of these shoes and at a pretty high price. Now, the people who run counterfeit goods business decide to create a copy and sell it. They cash in on the hype and sell it to people.
The affordability of these replicas is also one of the major reasons for the boom. The original products are priced at a very high range and not everyone can afford them. But people can buy the replicas and satisfy themselves.
We should also look at the current economic situation. With inflation at a high, people do not have enough money to spend. Their money erodes day by day as inflation rises. Now some people may decide not to buy these branded products, but they still would like to buy a new jacket. In economics, there is a saying, “Wants are unlimited. A human is never truly satisfied.”
Even though people know that buying another jacket is just going to empty their pockets they still prefer to have it. If not the original product then the replica at least.
There have been many reports where fake health products and pharmaceuticals are seized at the airport. One never knows what is inside these products and there is a high chance that these can health complications.
Counterfeits business also could be funding criminal activities. These products are sold in the black market and the money that flows in could be sent out to criminal organisations.
They also can lead to tax loss. Governments make money from taxes. This is then used to develop the nation. It depends on how much of the taxes actually flows downstream to the publics benefit, but yes, the money made by these businesses usually does not go towards taxes.
The OECD also says that there two other reasons for this : Advancement in technology and emerging markets.
With technology developing at a rapid pace, it becomes easier and cheaper to create replicas and sell them. With development and peoples income rising in the emerging markets, the scope for selling replicas increases. This is because people would tend to have branded goods but since it might be extremely expensive they decide to settle for the replicas instead.
This was some insight into the world of counterfeit business. With governments trying to take steps to curb this, it is yet to be seen how successful they will be. What do you think of counterfeit business? Let me know in the comments below.
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