07 Oct Four Ways Counterfeit Electronics Damage Revenue and Reputation: Loss of Revenue from Sales Diversion
Whether it’s fake memory chips sold through seemingly legitimate distribution channels, high quality knock-offs or recycled e-waste sold as new components, counterfeit electronic parts and assemblies flood the market in surprisingly large numbers. It is estimated that fake products cost brand owners $100 billion per year, and the best counterfeiters make components that look nearly identical to the real thing, allowing them to charge full retail price while stealing up to 10 percent of a brand owner’s revenue.
It’s a growing problem, to be sure, compounded when unhappy buyers contact the manufacturer for returns, warranty work and other services. These “genuine fakes” eat away at brand equity, hurt a brand’s reputation and hijack revenue streams.
Below is the first blog post in a four-part series that shows how counterfeit components, parts and assemblies may be eating into your profits and damaging your reputation, with a summary of the best ways to protect your brand and combat counterfeiters.
Problem: Loss of Revenue from Sales Diversion
Some companies see fake parts siphon off almost 20 percent market share for parts sold at full retail price. Counterfeiters steal even more when the brand offers special discounts. Even worse, one recent study found that about 18 percent of individuals who bought fakes believed the product was real, so they never even questioned the price.
Needless to say, this loss of sales cuts directly into your bottom line. These customers would have purchased a genuine product, but instead, they got scammed. Over time, this can impact future sales if the product is faulty and the customer has a bad experience.
Solution: Authenticate Genuine Products, Pull Fakes off the Market
The best way to reduce the purchase of “genuine fakes” is to identify and pull fake products off the market. Easier said than done, right?
One leading electronics company found it easier than they thought. When it discovered counterfeit products in wide circulation, the company sought a way to easily separate genuine products from fakes. The answer was secure serialization and real-time digital authentication.
Now, the brand’s security team can quickly verify products as genuine or fake and the customer service staff can authenticate products within an existing ERP, streamlining their systems for warranty work and returns.
Within months after implementing Verify Brand technology and stepping up enforcement, the brand reported raids on 162 storefronts worldwide, seizing nearly 30,000 counterfeit items, while another 39,000 fakes were removed from digital channels. In total, an estimated $1.3 million worth of bogus products were recovered and removed from the marketplace – a massive return on investment that went right to the bottom line.
Next blog post: We’ll take a closer look at returns fraud.