The pandemic of fakes: in April 2021 the sale of counterfeit products marked an all-time high - the paradox of the era of sustainability.

In April 2020, exactly one year ago, we wrote our first newsletter dedicated to the Covid emergency and made the prediction that the Pandemic would cause a significant expansion of online sales and, as a consequence, an increase in the production and distribution of fakes.

Perhaps this wasn’t all that difficult to foresee, given that all we needed to do is apply common sense reasoning. Still, when we looked at the data gathered one year on, we were quite startled by the extent of the phenomenon and its negative impact on consumers. Those same ever more environmentally sensitive consumers to whom today the Fashion industry promises to commit to steer its supply chains onto the path of transparency, sustainability and conscious consumption.

It goes without saying that the growing attention paid to sustainability on one hand and the dramatic increase in sale of fake products are two glaringly conflicting developments, a circumstance that can no longer be overlooked. In fact, counterfeit products are by definition unsustainable because their environmental footprint is illegal, hence totally unwarranted.

Even before the pandemic, the counterfeit industry was frustrating the creative and financial investments made by brands, and thwarting innovation. Now, counterfeiters are also overshadowing their commitment to sustainability.

Let our numbers do the talking: one in 4 products is fake and 9 out of 10 fakes are sold online

In April 2021, the percentage of fake products intercepted through Certilogo’s technology reached 27% of total authentications, that is 8 percentage points higher than the average of the last 3 years, which was 19%. Today, one in four products sold is a fake, and if the growth trend we are observing persists, as we anticipate, we will see counterfeiters grab a third of the Fashion & Luxury market to the detriment of brands, of their customers and of sustainability initiatives, which will be deprived of the economic resources they need to develop.

As expected, counterfeit products sold on digital channels are increasing: nearly nine out of ten fake products are distributed online.

Fakes are ageless: 8 out of 10 counterfeit products belong to collections prior to the current year

The “circular economy” isn’t a buzzword anymore – it’s a material change in the supply and demand chain paradigm that is finally happening. Consumers know well that the value of a brand is timeless, and by extension so is that of the brand’s merchandise. That’s why the purchase of products belonging to previous collections is increasingly considered acceptable and even desirable, and the same is true for the resale of high-end products on the second-hand market, both to give new life to discarded garments and to monetize past purchases to make way for fresh new shopping.

Circularity creates opportunities for everyone, and so it comes to no surprise that today we see more and more brands promote recycling initiatives, the recovery of iconic vintage garments, the repurchase, the refurbishment and the resale of second-hand items.

Unfortunately, it is also no surprise that manufacturers and sellers of counterfeits find this growing market trend equally compelling. And in fact, more than half of the fakes on sale are copies of authentic products launched in the last two years, while the remaining half belong to collections prior to the FW 2018/19 season.

Eastern Europe has a leading role in the sales of fakes

The country marking a new record in the sale of counterfeit products in April 2021 is Ukraine, where the percentage of fakes detected as a percentage of the total authentications performed by consumers has exceeded that of genuine products, reaching an all-time high of 51%.

China and Russia record a percentage of fakes over total authentications of 30% and 28% respectively. Interestingly, China, which continues to be the largest manufacturer of counterfeits, has also become a relevant market for the legitimate business of many fashion and luxury brands. In fact, it ranks last in terms of percentage distribution among the countries mainly responsible for the trade of counterfeit items.

What do consumers say and do?

For starters, they say that the manufacturing quality of fakes is improving. They also say that they are increasingly conned, so they feel the need to verify the authenticity of a purchase because they are afraid that the alleged deal might actually be a rip off.

43% of consumers interviewed after discovering that the product in their possession is not original, say they are confused and surprised; 38% say they were suspicious at the time of purchase; 19% knew they were buying a fake.

Basically, out of a hundred products sold, 27 are fake and of these 12, almost half, are foisted on unwitting buyers. If you are surprised by this finding it is probably because you expect fakes to cost much less than the originals and therefore assume that the consumer will apply common sense adage that "if it’s too good to be true, it probably isn’t". Well, here’s a figure that will make you reconsider your assumptions: on average, the cost of a fake is only 15% lower than the price of a genuine product.

That being said, the sale of large volumes of fakes is also fueled by a non-negligible percentage of consumers who buy counterfeit products willingly: if 27 are the fakes purchased out of 100 products sold, 5 were bought by consumers who did so by choice. In 30% of cases they are found in Russia, in 27% in Ukraine and in 25% in China.

Conclusions

“Conclusions” might actually be an improper term for the closing lines of this newsletter. In fact, the story we’ve shared with you today looks open ended. One thing is for sure, though, namely that the growth in counterfeits is damaging brands more than ever, especially those who’ve resolved to walk the talk of sustainability. These brands know that fighting back by safeguarding the authenticity of their products is of paramount importance to avoid counterfeits from thwarting their sustainability projects.

One essential element of this strategy is to empower consumers to easily verify the provenance and authenticity of their purchases while at the same time identifying and neutralizing counterfeits flooding the market.