Three Ways Brands Can Protect Against Counterfeiting, Knockoff Products

Fake Off-White x Nike sneakers. Birkenstock’s departure from Amazon. The footwear industry has seen its share of counterfeiting. Increases in online shopping mean brands need to be more protective than ever of identity preservation.

And Kathleen Egan, VP of customer success at Wiser Solutions Inc. — a company that aims to help businesses make data-driven decisions — said the growth of e-commerce and international outsourced manufacturing means it is becoming increasingly easy to distribute fake items.

“Shoes are one of the most counterfeited goods in the world,” she said. “There’s been massive growth in the industry that has attracted the attention of counterfeiters.”

Egan explained that while the footwear category was not the first to thrive in online shopping, the success of e-tailers such as Zappos coupled with better shipping and return policies, as well as online reviews, have changed this.

“Footwear, by most accounts, has not hit 20 percent of sales coming from online, but it’s heading that way fast — I’d expect to see some carnage in the traditional shoe retailer industry, similar to what has happened to toys,” said Egan. “So all footwear brands need to be planning the management of their brand in a fully digital world.”

Fortunately, Egan said there are several ways footwear brands can preserve their identities online — but all of them have trade-offs.

“The first [way brands can protect themselves] is to limit distribution: Two opposite examples are Nike and Rothy’s. Nike is sold almost everywhere, and its lack of control has hurt its brand to the point where it need to recast their distribution strategy to take their brand back,” she said.

“On the other end of the spectrum, Rothy’s is available only on their own website,” Egan continued. “They have complete control over their brand identity online and in-store. The trade-off here is growth. Can direct-to-consumer brands grow big enough and fast enough with a single channel of distribution? Due to evolutions in digital advertising and 3PL supply chain, I think that they can do it today better than any other time in history.”

Another way brands can aim to be protected, Egan noted, is via unique SKU assortments.

“Through either a sub-brand or just a limited-release collection, brands can limit assortment in certain channels without avoiding them completely. Brands can also make specialized SKUs for certain retail channels,” she explained. “For example, Nike will produce special SKUs for large footwear retailers such as Famous Footwear that are not carried by any other retailer. This enables them to have better control over each SKU in its channel. The [point of concern] here is time and cost. It’s more expensive to design, produce and manage separate styles for specific channels.”

The third thing brands can do, said Egan, is set a minimum advertised price (MAP).

“Manufacturer or brand-controlled pricing is a tool that was designed for in-store distribution, but it is even more necessary online,” she advised. “The trade-off here is effort and [again] cost. It’s not cost-free to implement, maintain, investigate and enforce a MAP policy. It can take a lot of time away from other selling activities.”

Finally, the exec pointed out that luxury brands in particular face the unique challenge of preserving their brands while maintaining exclusivity.

She urged these brands to lessen the appeal of fakes by offering incentives to buy the authentic version (Egan pointed to Disney’s reward program), teaching consumers about how to spot fakes and why it’s critical to dodge them. “Ugg does a great job at that,” she commented. Egan also said brands should use “distinguishing features” in their products, like Nike’s embossed text on the leather tongue of its Air Jordan 4 style that “counterfeiters didn’t catch on to right away.”

Policies and monitoring features, she added, can help too. “Automate price monitoring online, including web stores and especially [on] marketplaces like Amazon,” Egan urged. “Oftentimes, pricing that is significantly below MSRP, or MAP is a red flag for counterfeits.”

While no silver bullet for brand protection exists, businesses can take precautions to shield against counterfeiting threats.

As Egan put it, “If you are a premium player, you will need to balance the need for short-term growth with the need for long-term brand equity. If you are a value player, you are likely to have increased competition with lower costs — either way, I’d suggest that you need competitive intelligence to help you navigate.”

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