Online Counterfeiters: Getting Smarter and Now Enlisting Customers’ Help

With the arrival of the holiday shopping season came a renewed wave of online fraud. The recent Wal-Mart episode revealed an interesting new twist in this game. The often-complex relationship between "traditional" brick-and-mortar retailers, "new" online e-commerce platforms, and the people that drive all of these — i.e., the consumer — took a whole new turn.

Two weeks before Black Friday, Wal-Mart announced the heroic if somewhat kamikaze move of offering to match online prices on select products. What paraded past Wal-Mart's cashiers were a number of fake Amazon.com listings showing $400 Playstation 4 consoles being offered at $100 or even lower. This turned the practice of "showrooming," wherein consumers test products in physical stores and then go online to check pricing and get the best deal, inside out. Faced with fake ads, most likely for fake products, and a price-matching policy to boot, what's a retailer to do?

The evolution of consumer behavior toward using the ultracompetitive environment to their own advantage should have brand owners sitting up and taking notice, as well as paying closer attention to activity on e-commerce platforms. In this case, Wal-Mart was able to stop the bleeding pretty quickly. It simply and nimbly put an end to its price-matching policy. However, many retailers haven't made the investment in the kind of behind-the-scenes "intel" that would enable them first to understand what's happening, and then to rapidly and effectively respond to the ever-morphing reality of online counterfeiting.

How Do Counterfeiters Operate?
Many big retailers and brands have likely had a brush or two with websites that are faked up to look like theirs. But these are only the tip of the iceberg; there's plenty more going on. More broadly, even though legitimate online marketplaces such as Amazon have stringent policies for policing vendors, sellers of counterfeit goods still slip through their net.

It's been well documented that online marketplaces such as eBay, Alibaba and Amazon find themselves having to deal with the listing and sales of counterfeit and gray-market goods on their platforms. Some platforms are more active than others at removing these listings from their sites, thus protecting the real rights holders of those products. But criminals are fast and adaptable, and therefore the work of identifying them and taking them down is ongoing.

Mobile apps and social media are two other new frontiers. Social media networks are used to promulgate links to counterfeit products on both online marketplaces and rogue websites. Copycat social media pages can use a given company's name and logo to lend greater credibility to fraudulent activity. Some even accept payments for "orders" — orders that in some cases are never fulfilled.

What Can Retailers Do to Protect Themselves?
Of course, the loss of trust and credibility in a retailer or brand has huge ramifications. Therefore, not only do fake websites have to be taken down, but online marketplaces that support counterfeiting and fraudulent Facebook pages need to be constantly challenged.

However, if fake listings from legitimate sites are now being used to obtain price reductions, where does responsibility lie to stop this from happening? The e-commerce platform? The person who lists the fake or grey-market product? The consumer who uses the listing to challenge the vendor's pricing promise? The vendor that's being challenged to match the pricing?

This is a complex set of circumstances, and it's unfolding as we speak. However, it can be done. There are several clear-cut ways to identify and catch online fakes and track down retail fraudsters.

Retailers and brands have a responsibility both to themselves and their customers to actively impede the spread of online counterfeiting. This starts with acknowledging, as did Wal-Mart, that the problem is real and immediate. Cyber criminals trafficking in counterfeit products are ubiquitous, and constantly changing their game. Becoming vigilant and taking action provides a sure and very rapid return on investment.

Removing such infringements directly and positively impacts the core metrics of internet retailing — more traffic, more conversions, more satisfied customers. Here's something to take seriously this year: many companies are completely unaware of breaches of their copyrights, brands and other critical online assets. Standing by idly is no longer an option.

Haydn Simpson is product director of brand protection at NetNames, a provider of global online security, brand protection and anti-piracy services. Haydn can be reached at haydn.simpson@netnames.com.