How Counterfeit Products Affect Revenue
The trade of counterfeit goods is a phenomenon that no longer concerns solely manufacturers of luxury watches and designer handbags. Counterfeiters now target a huge variety of goods from pharmaceutics, makeup and perfumes to car parts, sporting goods and electronics. Brand infringement can have a huge negative impact on businesses, affecting not only sales in a direct sense but also image, brand reputation and brand loyalty, leading to indirect sales losses in the long term.
When counterfeiters initially target a brand, the impact on the authentic product’s sales will be relatively small as the knock-offs produced are few and far between. However, as counterfeiters increase their production and start to benefit from economies of scale, trademark holders may notice a bigger dip in their sales. At this stage, shoppers will begin to be deceived by fraudsters because, at a glance, copies can look almost authentic. Yet when using their new ‘fake’ product, consumers will soon feel let down by the poor quality, but still believing it is genuine. This is when the rightsholder’s reputation takes a hard hit and brand loyalty drops significantly.
If the production and sales of the illegal copies continue to increase these may eventually become more widespread than the actual authentic product. This will cause confusion on the market, and a huge drop in the value of the brand. Eventually, the hard-earned image the company had worked so long to achieve will be lost entirely, and the sales of both the authentic product and the knock-off will deteriorate.
It is extremely important that brand owners take action against counterfeiters early on, and do not allow a negative spiral to begin. Rights holders should make preventative efforts as well as taking reactive measures as soon as a brand infringement is detected.
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