Serious Online Threats to Retailers
By Simon Jackson
As retailers move larger parts of their business off the high street and onto the internet, they are opening their brands up to a host of threats. Online brand protection specialist NetNames advises brand owners on how they can actively monitor and take action against those selling fake products online so that customers are protected, brand reputations are safeguarded and online sales are maximised. Here, Chief Commercial Officer, Simon Jackson explains how retailers can stay one step ahead as they move their brands online.
The very size of the internet and its global nature makes it a vast vacuum with no government or regulator able to truly impose their authority. This means that brands are not always able to see the dangers facing their companies online, which range from phishing attacks and brand abuse to domain name hijacking. However, the threat of most concern to retailers is that of counterfeit and pirate goods.
One in six products sold today are counterfeits. In the UK alone it is an industry worth £25 billion whilst globally it accounts for £225 billion in international trade. If counterfeiting were a country it would be sitting at number 33 out of 182 countries in the Gross Domestic Product league table – the level of Sweden.
Counterfeiting is not just big business, it is big criminal business. Today’s cybercriminals are clever and the black-market goods market continues to grow as the fake websites look more realistic, and the offers are made to be more enticing.
“Let the buyer beware” certainly applies to consumers tempted by cheap counterfeit products but the effect of buying fake ‘knock off’ goods has a ‘knock on’ effect on the price of legitimate products. Every pound spent on counterfeits is a pound not spent with the retailer, reducing the savings from economies of scale that can be passed on to the consumer. Production costs, support costs, marketing costs and legal costs are all higher, which the brand owner must pass on to the consumer – so both lose out.
Looks tend to take precedence over substance when it comes to consumer goods. Many people are still willing to trade in internal quality for the sake of external appearance, fuelling the counterfeit markets. Imitation may be the greatest form of flattery in the academic world but in the manufacturing world, it is simply called counterfeiting and intellectual property theft.
Fake clothing not only harms real manufacturers but could also potentially hurt consumers who believe that they are buying legitimately discounted brands. Unfortunately, as many retailers find out, more often than not, the fakes are filled with substandard materials that fail to provide the standard associated with the brand.
How can retailers take on this threat?
The scale of the counterfeiting problem online is so large that often brand owners don’t know where to start in order to tackle the issue. The good news is that with an effective brand protection strategy, companies can quickly take action against their goods being counterfeited.
Fortunately, the vast amounts of fake products are sold online, which means that fraudsters have to use searchable terms to attract traffic to their websites. With an effective brand protection strategy in place, organisations can simply use the same methods to find the goods themselves with the aid of brand protection specialists. With the right expertise, the fraudulent websites themselves can be shutdown very quickly. It also helps to have good relationships built on respect and trust between the brand owner and the marketplace site which can be critical to eliminating online sales of counterfeits listed on common online marketplace websites.
It is never too late to take action and only takes a few hours to start a full-frontal attack on criminals and brand infringers. There are some simple proactive actions retailers can take in order to stay one step ahead of the online fakers, fraudsters and counterfeiters.
Take control of your domain names.Your domain names are your visibility on the internet; they are the most important and valuable online asset that you own. If you control the names you control the part of the internet that matters to you. Know what domain names you own, centralise the registration and management of them, ensure they never drop, and enforce rapidly and robustly against cyber-squatters and copycat sites selling counterfeit goods.
Make sure you have visibility of the online brand threats that pose a risk to your business and identify the areas that pose the most risk. Even if you decide not to take action against them, having visibility of the threats reduces your risk and puts you back in control.
Be clear about the desired outcomes from your digital presence. Is it customer reach? Increased revenues? Improved brand awareness? Construct a strategy that supports these goals.
You are not alone – there are organisations that specialise in supporting companies in developing their online strategy, securing and growing the value of online brand assets, monitoring for brand threats and enforcing against brand infringements. Use them, they will save you time and money. Retailers also need to ensure that visitors to their website stay and buy. This means guaranteeing they offer the highest levels of security by using an SSL certificate, as well as ensuring their website is free from any malware.
Fake receipts: a growing danger
It’s not just the final consumer products that are attracting the attention of counterfeiters – there is another growing industry that could have massive financial consequences for some of the high street’s biggest names. Type “fake receipts” into a search engine and you will discover thousands of websites offering such a service.
On many occasions, the goods returned are stolen by criminals who use the fake receipt to gain cash. In this instance the retailer at least gets his merchandise back. But a new trend, driven by the technological advances of scanning and printing, has enabled criminals to produce perfect imitations of valid receipts.
Of course, producing such items is illegal. One of the main concerns for this illegal practice is that it encourages the growth of counterfeiting and piracy and starts to do serious damage to retailers as well. For instance, if you buy a fake t-shirt, you damage the brand in two ways. Firstly you spend your hard earned money with a roguish trader rather than in the shop, and secondly the cheap imitation will damage the retailer’s brand reputation. But if you now also buy a fake receipt and take the t-shirt back to the shop for a refund, you are defrauding them again.
Retailers are becoming increasingly concerned by this latest attempt to defraud them. According to retail experts, return and receipt fraud cost brands something in the region of £9 billion annually. Brands need to walk a fine line between protecting against this growing type of fraud and driving shoppers away with complex returns policies.
So what can they do about it? Fortunately there are answers out there. Many brands are ditching the traditional scraps of paper for something more sophisticated. Watermarks, holograms and invisible ink are being used in production methods now to stop the illegal practice, but still the best prevention is vigilance. Shops need to take extra time and care when processing refunds.
Ultimately, as with all threats facing retailers online, awareness is key. Once these dangers have been clearly identified, they can be addressed effectively with a few simple steps.
Simon Jackson is the Chief Commercial Officer at NetNames. He joined Group NBT as Chief Commercial Officer in July 2012. Prior to this he was Commercial Director of The Cloud, which was acquired by BSkyB in January 2011. Previously he was Retail Director at BSkyB, responsible for indirect sales and marketing; Head of Consumer Partnerships at British Telecom, responsible for broadband channel sales and strategic partnerships; and an executive at WestLB Panmure and Dresdner Kleinwort Benson where he worked on small cap UK corporate finance transactions.