Economic Downturn & Rising Counterfeiting: What you must Know about the Dangerous Duo!


Will a probable economic downturn be the reason for Rising Counterfeiting practices?

Will Brands have to bear the impact of the Recession?

Economic Downturn & Rising Counterfeiting: What you must Know about the Dangerous Duo!
Photo by Jp Valery on Unsplash

It may happen that recession occurs and disrupts the entire economy.

But will it affect the revenue streams of stakeholders, including Brands and Logistics firms associated with IP-oriented assets?

We will find out in this quick read what are the probable prospects of the Upcoming Economic Downturn on the Rise of Counterfeiting by discussing…

The contribution of the recession on Counterfeiting practices,

The factors contributing to Counterfeiting result in higher unemployment rates, lower consumer confidence, and reduced purchasing power.

Will the potential recession impact the Brand Owners’ Budgets?

The Role of Advance Technologies to curb these impacts and contributing factors

Recommending Brands and SMEs an efficient solution to include Brand Protection Strategy in their Budget

As per 51% of the economists, excessive Fed Hikes pose the biggest challenge to the already slumping economy, down from 65% in December 2022.

Within a year, the federal fund rates have jumped from zero in March 2022 to 4.5–5% in March 2023.

With this alarming rate of interest rates, it is a no-brainer to say that consumers will give preference having bread on the table rather than a luxury watch on the wrist.

However, even if the fed fund rates are spiking and consumers are unwilling to lose their pockets, world-renowned brands and emerging SMEs must keep their brand protection strategy consistent with additional accessory activity.

Considering the times, IP right holders are sliding on thin ice — as counterfeiters perceive recession as a contributory opportunity to flood markets with incredibly-priced and dubious fakes.

What is the contribution of the Recession to Counterfeiting Practices?

A challenging economic situation always fuels Counterfeiting and Organised Crime practices.

As much as history says, recessions find it more accessible for counterfeiters to invade newer markets and pervade heavily into existing ones.

A common phenomenon during an economic downturn is inflating interest rates on aspirational assets, which in turn is followed by excessive “dead supplies” — leading to reduced purchasing power.

Connecting the dots, this reduced purchasing power evolves into counterfeiters shelving their shady products against consumers’ slumping purchasing patterns.

Furthermore, these hidden manufacturers gauge marketplaces’ increasing needs and desires — cornering authentic items with aspirational values.

A notable example is the “unprecedented development of luxury counterfeit watches from the recession 2009.”

“…note that high-end timepieces, those with prices from €6,000 to over €50,000, have been most affected by the recession. The most expensive models are aimed at collectors who, though passionate about Fine Watches, are no less astute investors. Prices of counterfeit watches cover less of a range, with differences depending mostly on the quality of the materials used. A “customer” can expect to pay no more than €600 to €700 for a “quality” counterfeit watch.”

These contributing factors take the shape of globally affecting — Higher Unemployment Rates, Lower Consumer Confidence, and of course, Reduced Purchasing Power.

But why and how do these factors contribute to these downhill phenomena?

The increased circulation of counterfeits during the recession puts authentic products out of the shelves, leaving brands generate no revenue.

Additionally, the spiking interest rates on aspirational products tend to bring down sales — considering the gap created between the retail price and expenditure limit of a customer.

This gap eradicates the transactions that could’ve occurred, driving the sale of authentic items. But contrary to the conventional situation, it leads to Reduced Purchasing Power.

And soon, the slumped purchasing power translates into Brands having meagre possibilities for their sales, leading to inefficiencies in cash flow — eventually followed by mass layoffs, only to sustain their business.

It creates a disproportionate situation of ‘excess job applications against negligible job requirements’ — thus inflating the bubble of Unemployment rates.

Apart from these two occurrences, the masses are gullible of falling into purchasing counterfeits, though unintentionally, making a purchase only to realise that they have been deceived.

Eventually, impacting consumer confidence in a trustworthy name — which again serves the other two phenomena through loss in sales.

Each of these interdependent phenomena puts unnecessary burdens on Brands to focus on the operational and functional aspects of the business — leaving behind the fundamental aspect: IP Rights, for long-term sustainability.

This catastrophic collapse of the aspirational purchase economy compels brands, and especially SMEs, to slice their annual budgets by treating Brand Protection Strategy as a secondary activity.

The question is…

Will Brands have to bear the impact of the Recession on their Budgets?

As a response against the growing counterfeit markets — as many as 42 million items were detained last year — brands tend to downsize their teams and slice their budgets.

Reckoning the already worsening situation coupled with the economic downturn, brands do not appreciate considering Brand Protection Strategies & Methods in their “tight budget”.

Undoubtedly, there will be an impact of the recession on brands’ annual budgets. However, excluding IP protection mechanisms will cost heavily in the long run, regardless of the negative impression.

Imagine not registering a valuable IP (Trademark, Design, or Patent) on evaluating the current situation of potential economic downfall.

Unregistered IP assets are exploited more, as you need to have standing grounds to prove the original innovation.

This lack of certification and documentation leads to counterfeiters taking advantage of your assets and selling them globally under your brand’s identity — thus causing harm to your reputation and even, in some cases, jeopardising the health & safety of the consumer.

Witnessing the deteriorating image, you will have to file lawsuits against the insidious IP-infringing bad actors eventually.

But, without a registered IP, you will have to expend enormous amounts of money, time, and resources into protecting your valuable assets.

Unfortunately, in some cases, that can even lead to shutting down your business.

Therefore, even though the current brand protection strategy might affect your budget in functioning your business, it surely will benefit and sustain your business in the long run — unlike businesses affected by IP infringement that are 34% less likely to survive in 5 years.

However, including a traditional brand protection strategy of monitoring fakes, dissolving dubious websites, and a reactive approach with law enforcement won’t suffice.

To sustain against the ever-evolving counterfeiting practices, brands need a “proactive” approach to stopping counterfeits using Innovative Anticounterfeiting Technologies.

The Role of Advance Technology in Curbing the Sale of Fakes and efficiently calibrating budgets

Traditionally driven methods of Brand Protection, like monitoring IP-infringing items over the internet and deploying mitigation teams to stop fakes, surely have become obsolete and less efficient.

Although, arguably, these methods are still effective in finding & locating counterfeits on the Internet, they do not have any implications on ground level, i.e. transit and delivery of a suspicious parcel.

The world is catching up with AI-driven methods — and approaches as a whole — to solve modern problems while reducing time frames and increasing efficiency.

It is time we start using AI-powered logistical solutions like Countercheck that act as a firewall, protecting customers from receiving products that pose a risk to health & safety.

Countercheck is a modern, easy-to-install, and scalable solution for Brands with Logistics firms who are looking to identify counterfeits traversing the supply chain and sideload them for further investigation with enforcement bodies.

It operates on -

  1. Capturing live images with OCR & image recognition mechanisms
  2. Then evaluate the data using machine learning algorithms
  3. Eventually, concluding the authenticity of each parcel in 0.5 seconds — thus capable of effortlessly intercepting 1000+ suspicious parcels within a month.

Moreover, with such speed and accuracy, along with no human involvement, it comforts the tedious task of identifying & verifying suspicious small parcels that require significant human resources & expertise.

Thus, when Brands and SMEs opt for such innovative technologies, they are already minimising the budget on the brand protection segment — which otherwise would have accounted for significant expenditures.

If that’s the case, how should Brands go about framing and optimising their budget to include an IP protection strategy while maintaining other conventional costs?

Recommending Brands and SMEs an efficient solution to include Brand Protection Strategy in their Budget

Framing a budget should always begin with clear goals and objectives, followed by aligning priorities regarding issues to be addressed.

As a world-renowned brand or even an emerging venture, it is essential to clearly identify and segregate the requirements and the corresponding spending on them.

And when it comes to investing in Brand Protection Strategy, it doesn’t have to be economically draining to implement Online or Offline Brand Protection methods.

“a lighter approach describes a different way of looking at it, that is taking a smaller step and focusing your efforts on the main challenges your brand is facing right now. It’s also a good way of appreciating the importance of online brand protection and to see real results in a relative short-term; and finally, may serve to think about what can come next, in the long-term, to assess the opportunity of building a more extended BP strategy, while tweaking your objectives and moving your focus on a wider scope.” says Mariachiara Anselmino in her Podcast with BRANDIT.

Thus, instead of framing an annual budget for brand protection strategy, brands must not hesitate to adapt to smaller budget tenures throughout the year — eventually widening the objective when needed.

Nevertheless, counterfeiting widens its reach in international markets despite the recession as new logistical passages open and forthcoming downhill possibilities occur.

The primary approach to not be burdened by economic circumstances is by being “vigilant and proactive” in an already emerging, intervening market of fakes.

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Countercheck - No Parcel Goes Unchecked

Scanning more than 60 million parcels every month, Winner Open Innovation Challenge INTA 2023, and Intercepting 1000+ counterfeits each month