certilogo golf white paper - i wanted a bargain and got a fake instead_a report on how online...

“I wanted a bargain and

got a fake instead.” A comprehensive review on how consumers get scammed when purchasing online and the effect it has on brands.

Business white paper | All Rights Reserved © MG Digital, LLC and Certilogo, Inc. 2015 - A review of consumers scammed online

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Table of contents 3 Overview on how consumers get scammed

4 Focus 1: A large majority of fake purchases are unintentional

5 Price is important but convenience is a major driver

6 How consumers are led down the path to fake purchase

7 It’s the mutual responsibility of consumer and brand to seek and confirm AUTHENTIC purchases

8 Focus 2: Referring FAKE business to AUTHENTIC is a business opportunity

9 Conclusion / Sources / Contact Information

Business white paper | All Rights Reserved © MG Digital and Certilogo, Inc. 2015 - A review of consumers scammed online

Overview on how online consumers get scammed

The counterfeiting business has radically changed in recent years.

This white paper describes why and how consumers get scammed and is a report based on research conducted by Certilogo, a leading global anti-counterfeiting and brand loyalty company.

Certilogo interviewed several hundred customers of brands that have been protecting their products from fakes with the Certilogo tagging solution. The responses and customers in this survey received a “FAKE” result from the Certilogo Authenticator regarding their product purchase. We asked customers why and how they ended up purchasing a fake product. Their responses are outlined below and it’s something every brand and customer needs to be mindful of.

The quality of many counterfeited products is steadily improving and every day

consumers are lured into rogue websites that are both skillfully crafted and

professionally promoted. Education from brands geared toward customers will

continue to play a pivotal role in protecting customers from fake products. As

technology and convenience continue to affect our shopping habits,

counterfeiters too will adapt to create harder to spot fakes and make them

more accessible using the tools and technologies we are most familiar with.

4 areas of focus with regard to fake purchases:

1. A large majority are unintentional

2. How were customers led down the path of purchase to a fake

3. Where does responsibility lay for protecting consumers from fakes

4. What is the business opportunity for brands to recognize and help recapture fake purchases and turn them into authentic


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Focus 1: A large majority of fake purchases are unintentional Emarketplace’s, like Ebay, are now giant outlets where sellers of fakes make

good profits claiming that their merchandise is authentic. But this is

something we all know already. The adage “if it’s too good to be true, it

probably is” and common sense protect us from easy to spot fakes online. But

a key area that is overlooked or overshadowed due to higher priorities in brand

education and protection is the unintentional fake purchase. All brands and

authentic retailers can speak about the importance to buy from an authorized

retailer.

But what about happens when a well-intentioned buyer couldn’t tell the

difference?

Is it solely the responsibility of the customer to know the authorized

partners of every brand?

Diversified distribution channels can make it hard for a customer to know

authorized from unauthorized sellers.

Recognizing the issue As a consequence, unintentional purchases of fakes on the internet have been

growing fast. Certilogo research estimates that 38% of all fakes have been sold

online and 76% of all consumers who bought a fake product did it

unintentionally. Three quarters of fake purchases are unintentional. Those

customers and those purchases could be providing valuable feedback to both

the brand and the customer if the product was information enabled with a

clear and quick response before or after purchase.

Certilogo, a developer of brand loyalty and product traceability solutions, has

been adopted and by more than 40 fashion and sporting good brands has been

used more than a million times by consumers around the world to authenticate

products. Certilogo conducted 500 online interviews with consumers who

discovered they bought a fake product online on marketplaces or direct

ecommerce sites. Participants confirmed there were no intention to buy a fake

and downloaded from Certilogo’s site their personalized product purchase

“Fake Report”.


Price is important but convenience is a major driver. The Fake products checked by consumers relate to a mix of fashion and

sportswear brands that have been tagged with Certilogo’s solution since

2009/2010. Research found the following reasons why consumers buy online;


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How consumers are led down the path to fake purchase Search engines are

still the major

referral to

ecommerce sites

selling deceptive

fakes.

Marketplaces should

do more to protect

their consumers and

increase trust.

73% of the scammed consumers were loyal brand clients and had already

bought a product from an authentic brand owner.

E-commerce sites are able to deceive consumers especially when the buyer is

new to online purchasing; 77% where scammed by ecommerce sites at their

first purchase.

Search engines are still a big part of the problem. They currently refer 67% of

the traffic to deceptive e-commerce sites selling fakes.

The study asked participants

Why didn’t you buy directly from the official/authorized

shopping site of the brand?


Why did you decide to buy through that site?

It’s the mutual responsibility of consumer and brand to seek and confirm AUTHENTIC purchases

Brands should increase pressure on counterfeiters, providing tools to alert

consumers and help them to get their money back. In 75% of our cases the

“Certilogo Fake Report”, helped customers obtain a refund.

Consumers put high energy in asking for reimbursement. They complain to the

seller/ecommerce site 48% of cases, and with credit card and payment

companies 35% of the time.

Industry interviews and consensus from customer service departments and reps

report that more than half of their customer related inquiries are related

verifying a product purchase.

Consumers should be viewed as important allies in the anti-

counterfeiting online battle.


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Sales =

$900M

Potential Counterfeit

Loss $103.5M

FAKE purchases intended

to be AUTHENTIC

$67.2M

FAKE purchases become

AUTHENTIC within 6 months $23.5M

Focus 2: Referring FAKE business to AUTHENTIC is a business opportunity

Control the entire experience.

In 35% of cases in this study

consumers that purchased a

known FAKE product, then went

on to purchase an AUTHENTIC

within the next 6 months.

The economic impact of informed and loyal brand customers In a report done by the Anti-

Counterfeiting Group (2003) “Why should you care about counterfeiting?” it

stated that the sport goods sector loses up to 11.5% of total revenue were due

to counterfeiting.

Turn lemons into lemonade.

What’s the impact? Let’s take for an example, a look at the 2014 revenues of a

publicly traded industry leading golf equipment manufacturer, with sales of

approximately $900 million in total revenues.

Potential Counterfeit Loss

(based on ACG research data)

11.5% = $103.5 Million

At least, 63% of FAKE

purchases are intended to be

AUTHENTIC

$67.2 Million loss to misled loyal consumers 35% of identified FAKE

purchases become

AUTHENTIC within 6 months

$23.5 Million brought back from brand loyal consumers


Conclusion There are many good and sustained efforts by industry, rights organizations, police, customs and trading standards that are beginning to bear fruit. The $23.5 million dollars of revenue in our example remains unrealized without consumer engagement about their purchases. It’s clear that business and consumers are aligned on the issues and the

awareness of counterfeiting, however, there still remains the need to be

aligned on practical solutions that engage the consumers to help prevent and

reduce a growing $6 billion dollar counterfeiting problem in the golf industry.

As we write this report, many new initiatives have been launched, to combat the issue. The vision of Certilogo is to part the internet sea of “good” and “bad” sellers. Certilogo has existing partnerships with Ebay (Certilogo Authentic Seller button) and the World Customs Organization to drive collaboration among consumers and empower brands, authorized sellers and custom agencies to create information enabled products to ultimately protect us from fakes.

Take the next step We hope that these findings will help industry and government to deal effectively with intellectual property theft, which is now a major threat to global well-being and stability.

Sources: Anti-Counterfeiting Group 2003: “Why should you care about counterfeiting?” Certilogo Research Report September 2013: “I WANTED A BARGAIN AND GOT A FAKE INSTEAD” - A study on how consumers get scammed when purchasing online.

About CERTILOGO Located in San Diego, CA, USA M.G. Digital is the exclusive distributor for

Certilogo for the golf industry. Please contact us via email please visit our

website at golf.certilogo.com to learn more. To receive a copy of this report

or to request the full Certilogo research reports please contact us at

golf.certilogo.com or email us at [email protected]

Contact: Nick Matthews, Business Development Director Phone: 619-342-8031 x110 or Email: [email protected] [email protected]

mailto:[email protected]

mailto:[email protected]

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