Copying Machines: Counterfeiting used to be called a nuisance. Now, there's a new word for it--epidemic July 02, 2009 What follows is a feature produced by Incentive's sister publication, Adweek, about the growing proliferation of counterfeit goods. While the story is well written and worth reading, the point for incentive planners—especially at corporations that have been trying to reduce program expenses by cutting back on the use of outside incentive houses and manufacturers' rep firms—is that now more than ever, these savings can prove costly indeed.
As the article goes on to discuss, the Internet makes it increasingly easy for counterfeiters to look professional while providing the employees you're trying to motivate with knock-off junk rather than the aspirational merchandise awards you're paying for. And nothing says "We value your hard work, commitment and success" like a genuine Rulex watch.
One simple way to make sure you're dealing with reputable merchandise fulfillment houses that buy directly from manufacturers and manufacturers' representatives is to turn to the incentive industry organizations, such as the Incentive Manufacturers and Representatives Alliance (IMRA), and companies that sponsor and exhibit at industry trade shows including The Motivation Show in Chicago and the New York Incentive, Rewards and Recognition Expo.
Adweek's article begins below...
By Robert Klara
In lower Manhattan, the diagonal crisscross of 19th-century streets creates a number of oddly shaped blocks. One of them is a pie slice of ramshackle buildings carved into being by the intersection of Canal, Walker, Centre and Baxter Streets. Here, on an average day last year, 32 storefronts opened to the bustle of the sidewalk. Inside were 150 workers, unpacking boxes and calling out prices amid the din of traffic. The shops were open 10 hours a day, seven days a week. None of this was unusual for Canal Street, a seemingly endless tourist trap of keychain racks, CD stands and T-shirt stalls. Certainly, it was nothing worthy of the newspapers.
At least, it wasn't until the predawn hours of Feb. 26, when a battalion of police officers stormed the gated storefronts with bolt cutters and pry bars, slapping bright orange "Closed by Court Order" notices on the bricks. A tractor-trailer truck idled nearby. Soon, its cavernous interior echoed with the thump of industrial grade trash bags landing one by one, bursting with handbags, scarves, shoes and accessories bearing the most expensive brand names in the world: Dolce & Gabbana, Coach, Louis Vuitton, Prada. By the time the raid was over, the cops would haul off $1 million of merchandise.
And every last thread of it was counterfeit.
Ersatz goods selling on Canal Street isn't exactly news in New York, even though Mayor Mike Bloomberg staged an impressive photo op amid a mountain range of purses. But the size and stealth of the raid on what cops called "Counterfeit Triangle" seemed to verify a change that many in the brand community have sensed for some time. Counterfeiting is no longer a localized nuisance akin to Three-Card Monte games. Thanks largely to the deadly combo of the recession and the surge of e-commerce, it's fast becoming an epidemic threat to global trade, garnering headlines and the serious attention of local and federal law enforcement.
Simply put, not only is there a lot more phony stuff out there, but it's better made, easier to get, fetching higher prices and taking a bigger chunk out of brands' earnings -- as much as $250 billion annually, according to the International Anticounterfeiting Coalition. The U.S. government seized more than $270 million of counterfeit merchandise in 2008, a 38 percent increase over the previous year. The value of the goods seized spiked by 100 percent in the same period. According to a 2009 study by the CMO Council, more than 29 percent of senior-level marketers now believe that more counterfeit products are "flooding the market," and you don't have to look far for proof. "There's no question we're seeing counterfeits proliferating into all sorts of products and channels that we haven't seen before," says Alan C. Drewsen, executive director of the International Trademark Association (INTA). "The seriousness is increasing."
So is the fear. "There's a growing concern about the number of counterfeits in the marketplace," says Milton Pedraza, CEO of the Luxury Institute, whose own recent survey of wealthy consumers aged 18-39 showed that 72 percent of them believe that the buying of counterfeit merchandise will continue to grow in the coming years.
The glut of fakes has triggered an unprecedented response in the business community -- from stepped-up efforts by brands to protect their trademarks to the possible passage of a trade treaty that might regulate e-commerce across international borders. But the problem shows no sign of abating. To complicate matters, the rising profile of counterfeit goods has raised some uncomfortable questions within the brand community itself, including how much of the responsibility brands bear for fighting the problem and even, to some degree, for having helped to create it.
The Recession Factor The forgery of brand-named goods -- luxury ones especially -- is nothing new. Georges Vuitton, son of luggage maker Louis Vuitton, first developed canvas monogrammed with the company's famous interlocking "LV" in 1896 for no other reason than to discourage Paris counterfeiters knocking off his family's brand. But modern counterfeiting has reached the global proportions that would surprise even Mr. Vuitton, and there are several reasons why it's at epidemic levels today.
Foremost is the economy. "The aspirational consumer who was buying real luxury still covets that luxury -- but he can no longer afford it," Pedraza says. Valerie Salembier, svp and publisher of women's fashion magazine Harper's Bazaar and a leading voice of the anti-counterfeiting movement, agrees. "We're living in a very complicated economy right now," she says, and a good many shoppers "want more for less."
Brand executives know it. According to the CMO Council, nearly 33 percent of senior marketers in the U.S. believe that "a softer economy is encouraging more knockoffs and fakes." Those in Europe are even more pessimistic. London-based intellectual property firm Marks & Clerk has found that 97 percent of senior brand officials in the U.K. fear that the recession will increase counterfeiting activity. The finding was part of a white paper titled "Brands Report 2009," which also revealed that 80 percent of executives consider brands to be at greater risk due to both the recession and the growing profile of e-commerce.
Indeed, says Marks & Clerk attorney and intellectual-property expert Pamela Withers, it's those two forces acting in consort that have made the counterfeiting problem particularly intractable. "In the current climate, low-price fake goods will be of increased interest to consumers looking to make their money go further," she says. Add the Web as a limitless, unregulated vehicle to do that, Withers says, and you've got a runaway train for counterfeits.
Winners and Nominees for Incentive's 1st Annual Motivation Masters Awards We announce the finalists of our first annual Motivation Masters awards. These 13 finalists are already the recipients of a 2009 Motivation Masters award in one of seven categories. On Dec. 6, we will announce the ultimate winner, the Motivation Master of 2009, at the 6th Annual Las Vegas Incentive Marketplace.
Frito-Lay Kudos to Million-Mile Safe Drivers PepsiCo's Frito-Lay North America is recognizing 95 delivery drivers who this year have reached the career milestone of driving more than 1 million, 2 million or 3 million miles accident-free.
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