No matter how well companies establish their brand and communicate the brand positioning to their core target audience effectively, counterfeits will always exist, unless there is a standardized process of authentication throughout the supply chain.
Along with other brands like Ray Ban, Rolex, Louis Vuitton, etc., Nike is known to have the most number of counterfeits in the world, as it has a huge demand. Many consumers are willing to spend a little less on their footwear knowing they are buying counterfeits. This phenomenon drives the need for counterfeits to exist in the market.
The bigger problem is consumers who are looking to buy genuine products are fooled into purchasing counterfeits. Moreover, these products are also associated with illegal activities and social issues such as child labor and an extremely underpaid labor who happen to work in a dangerous environment.
Why is footwear an attractive industry for the counterfeiters?
Products associated with fitness and health have generally experienced a boom recently because of massive celebrity endorsements worldwide over the digital medium. It has thus made appealing for the customers to spend money in this category to follow the fashion trends, but has also made it difficult for them to afford it; hence, some rather choose to buy counterfeits which justifies counterfeiters to produce fake goods.
It is important to investigate why it is easy for the counterfeiters to produce a fake Nike product. The reason is its very simple swoosh logo which is very effective for the brand positioning, but is also very easy for the illicit business owners to copy.
According to a report published by the Organization for Economic Cooperation and Development in 2013, fake products or counterfeits account for 2.5 percent of the global trade that approximates to $461 billion. This percentage has increased by 0.4 percent since 2008 and was worth $200 Billion, previously. The report further pointed out that Nike sneakers of around worth $31 million were seized in Chile.
The brand, Nike, has existed as a valuable sports brand for a long time and has been able to generate a revenue of worth $32.4 Billion with a market capitalization of $19.12 Billion in the year 2016. Unfortunately, the company is experiencing a loss because of the counterfeits being available in the market. Another major consequence is the dilution of their brand image and a question to their authenticity and credibility.
It is important to note that it is getting troublesome for the brand to spot these fake manufacturers; the track-ability is even difficult as the culprit business owners are now switching their illegal means to the digital format. So even if it was not possible for someone to get access to the brick and mortar stores, previously, it is getting easier for the businessmen to reach to a wider base of consumers through an online medium.
Furthermore, it is rather convenient for the port authorities to catch the bulk orders, instead of the individual parcels being sent to customers all over the world. The companies not only use Facebook or the websites to sell their products, they also use mediums like WhatsApp, to offer a very individualistic communication to their customers, with minimal chances of being caught.
The product that been a major victim of counterfeiting is the sneaker.
So from where exactly are these counterfeits stemming?
Not a surprise, these counterfeits are mostly emerging from China. According to one study, 8% of China’s GDP represent counterfeits’ industry.
A few years back, police in China, caught two minivans which had around 200 pairs of shoes and 1000 more in the warehouse in Xiamen. The police was further able to find 10 more manufacturers of fake Nike products.
Very recently, a New York resident, Su Ming Ling, was caught by the US Department of Homeland Security, importing Nike sneakers of worth $250 million. It has been found through investigation that a bundle of technologically advanced and old yet effective distribution tactics, worked for Ling to establish his illicit business. He used the New Jersey Port to smuggle these products to US from China and fraudulently portrayed himself as a credible representative of the actual import business by using deceptive emails and domain names.
So how much has Nike actually lost as a result of these counterfeits?
This is an important question to consider here.
In reference to the case mentioned above, Homeland Security was able to find 29,500 pairs of Nike sneakers in one of the container, which if marketed through official means, could have been able to generate sales of $1.5 million. Wondering how Ling was able to get these containers to the port? Well, he misrepresented the trade documents.
This was one case, and there are many others to mention, but the exact figures of the quantitative loss to the company is unknown, as numerous counterfeits’ manufacturers are still hidden.
Very recently, Customs and Borders Protection caught tens of thousands of dollar worth of fake Nike Air Jordan sneakers in Virginia. These were being shipped from Hong Kong and were misrepresented as auto parts in the trade documents.
The company has taken some serious measures for consumers to be aware of fake products, to maintain its brand image and save it from dilution, as Nike itself has more to do with its appeal and design, instead of its functionality.
The Final Solution Against Counterfeits
Completely eradicating Nike counterfeits is close to impossible. But, protecting all consumers who are looking to purchase genuine Nike products is easily achievable. Here at Bonafi (formerly knowsn as Group Project), we are developing the blockchain solution that will protect brands, retailers, and consumers from inferior fake goods. By integrating our Crypto-Tag™, mobile application, and blockchain technology, we will be able to provide a fail-safe authentication system that can be easily implemented throughout the supply chain.
Find out more to see how we are solving today’s international counterfeit problems.