Where is the counterfeit market heading?

Oct 10, 2023

‍Berlin, March 2023:The market for counterfeit goods has been growing rapidly for several years. Counterfeiting reduces the intangible value of a company, its sales and its competitiveness. Consumers see themselves exposed to increasing risk - the more counterfeit car parts, electrical components, medical products, fashion or headphones, the greater the damage to society.

The damage in figures
In 2022, the brand protection software provider Sentryc GmbH conducted a qualitative survey in which companies from the IT sector, the construction and mechanical engineering industries, the automotive industry and the financial services sector, among others, took part.
According to the survey, the annual damage caused by counterfeiting is usually between one million and 50 million euros. More than 60 percent said that copies of their products had already been in circulation, which poses a risk to end customers. The good news is that thanks to the active use of brand protection software, fraudsters have discovered a not inconsiderable proportion of the counterfeits.

Four currents under observation
In 2023, the real and digital worlds will, as expected, flow even further into one another. But the further development of virtual shopping also opens up new avenues for counterfeiters. This poses a challenge to brand manufacturers, the industry and those involved in trademark law. The following trends, developed by Sentryc GmbH, summarize four key developments and the resulting approaches.

Current 1: Creator with counterfeits: Fakes in social commerce
As a result of the growing popularity of social networks such as Facebook, Instagram and Facebook, companies are increasingly selling their products directly via these channels and implementing dedicated social commerce strategies. Hyped products promote their own shopping dynamics.coveted products advertised via social media attract counterfeiters. The accounts of the product pirates - social bots controlled by software algorithms - use the same hashtags as the sellers of the originals to draw attention to their fake products and fake stores. Super apps such as WeChat and Aliplay also offer scope for imitators. In addition to messenger functions, these apps cover e-commerce and payment features. Due to their almost closed system, including payment processing, they serve as a lucrative platform for counterfeit products, and pirates exploit the complex and non-transparent structure of these apps for their own purposes. Superapps have so far been found primarily in Asia, but the path to the German market has already been mapped out. To provide support from the political side, the EU is planning a new law with the Digital ServicesAct (DSA). The regulation obliges platform providers to establish the identity of dealers and to ban illegal, reported products. It requires manufacturers to take targeted measures themselves to protect their brands in all relevant countries. They are supported by Brand Protection software, which monitors social media and reports suspicious products.

Current 2: Fakes and brand abuse in the metaverse
In the meantime, many brands are pushing into Web 3.0 and establishing presences on various platforms. The metaverse offers enormous sales potential for brand manufacturers, but some of the new legal, regulatory and social frameworks have yet to be opened up. In terms of cybercrime and fraud, they are more vulnerable than other digital platforms. Closing security gaps is of great importance. How can the next stage of the Internet be sustainably secured? Intellectual property owners should seek compelling legal advice on whether to register their trademarks for virtual products and services, for example. It is also advisable to monitor online environments for infringements. Because monitoring different platforms involves considerable effort, far-sighted companies allocate a legal budget for the Web3 in addition to a marketing budget.

Current 3: Conscious buying decisions for counterfeits
A recent study states that 26-32 year-olds in particular would buy counterfeit products. [1]Reason: the lower price. By buying counterfeits, consumers accept lower quality. Even if the knowledge of a purchased counterfeit is available, the complete knowledge of the phenomenon of plagiarism rarely resonates in the purchase decision: From the supply chain to the procurement of raw materials to distribution, people and the environment suffer from the precarious conditions, and end consumers ultimately feel the qualitative and health consequences. In order to counteract the threat to human rights, climate protection and health and to bring about a change, comprehensive information is provided to educate buyers. Legally, the responsibility lies with the manufacturer and brand owner. That is why Nicole Jasmin Hofmann, Managing Director and co-founder of Sentryc GmbH, recommends including detailed information about the consequences of counterfeit products in your brand communication. The information is spread via press work, articles on websites and partner online stores.

Stream 4:Risk management will play a greater role in business
In the risk field between cyber incidents, loss of reputation as well as fraud games, trademark infringements are playing an increasingly important role. Companies know that plagiarism and Brand abuse have an impact on sales. In order to avoid corporate misjudgement of the risk, internal transparency is becoming more important. The following assumption applies here: As soon as a product is in demand on the market, there is an economic interest in copying it. It is therefore important to exploit the many technical, mechanical and process-related options available during production in order to make counterfeiting more difficult. Distribution of production steps to different production sites, unique identification features such as watermarks, and software- and AI-supported monitoring of trading places and sales markets represent some of the methods. Companies should check whether they are doing everything they can to prevent fakes in terms of security and due diligence, and critically question their risk management and prevention measures. Legal departments should also pay more attention to this topic in the future.  

To prevent losses due to counterfeiting, manufacturers and brand owners must take active action against plagiarism. In-house legal departments or criminal charges filed may help in the aftermath, but by then the copy is already on the market. As the results of the study mentioned at the beginning of this article show, a rethink is currently taking place in the review of the market situation and in the enforcement of product and brand rights. The task now is to continuously monitor the online market and new channels in order to stay one step ahead of plagiarists.


About Sentryc
Sentryc GmbH is a Berlin-based technology company founded in 2019. The current35-strong team led by managing director Nicole Jasmin Hofmann offers companies a digital solution with its proprietary brand protection software that can be used to detect and stop product piracy and brand abuse on online marketplaces. The online experts provide their customers with a cloud solution that scans websites for products, identifies and documents potential counterfeits, and then automatically reports them for deletion. Renowned companies rely on Sentryc's product protection made in Germany. Prioritizing data protection, the company hosts in Germany and operates in a DSGVO-compliant manner. For more information, visit sentryc.com. Follow Sentryc on LinkedIn.

[1] https://www.ey.com/de_de/forms/download-forms/2022/07/ey-studie-produktpiraterie