COVID-19 has created an unprecedented crisis resulting in the Indian government clamping down on the movement of people, goods and services. This has had an impact on every facet of business and has encouraged consumers to focus on their health and well-being. With social distancing becoming the "new normal", the impact of coronavirus on brick-and-mortar stores during the lockdown phase and post lifting of stay-at-home orders is likely to be profound. It is expected that consumers will avoid close interaction and crowded places such as malls and supermarkets in times to come. Thus, in the short to medium term, consumers' shopping habits will witness a gradual but definite shift from brick and mortar stores to online portals and e-stores. Brands in India are therefore increasingly focusing on setting up their own e-stores, creating arrangements and partnerships with online portals. Big offline stores such as Future Group (Easy Day and Big Bazaar), Spencer's Retail, Metro Cash & Carry and Walmart's Best Price stores have increased efforts to service customers online, building a comprehensive model to deliver groceries and goods. Many stores have started to partner with food delivery platforms such as Swiggy, taxi-hailing app Uber Eats, and bike taxi startup Rapido. This article focuses on how brands' sudden shift to online will need a strategic focus in terms of building a brand protection strategy.
How does the internet fuel online counterfeiting?
The past five years have seen a dramatic rise in internet use in India. An estimate puts India's current internet users at 566 million and the number is well on its way to reaching 650+ million users by the end of 2023. The reach of the internet and the ease with which it allows counterfeit goods to be displayed and accessed by consumers through digital channels, including online shopping portals and social media portals, have made online counterfeiting easier. As an example, anyone can create a WhatsApp group of up to 250 individuals and share product details with them. Recent trends suggest that counterfeiters are finding it cheaper and more convenient to sell goods through WhatsApp by creating a B2B marketplace in which to distribute their goods. Sellers can also create B2C networks, offering consumers the option of conversing directly with them and providing them with products according to their requirements. As such groups are unregulated, no legal or regulatory compliance is necessary either when the group is created or at a later stage. Thus the counterfeit goods can be sold relatively quickly with less fear of law enforcement authorities.
Further, many businesses dealing in counterfeit goods have set up product and company pages on Facebook and Instagram where they display images of original products and in the garb offer cheaper counterfeits. In particular, it is easier for counterfeiters to find their target audience by striking a sale through Instagram or any social media platform through the stories feature. As this stays only for 24 hours, counterfeiters can advertise/display products for a short period having less fear of exposure and direct traffic to their website. Counterfeiting is also being fuelled by the keywords advertising and search engine optimisation used by counterfeiters to lure buyers to their sites and social media pages.
What should brands do to cope with this "new normal"?
As a result of the current crisis, one can expect more people to continue to work from home and follow the social distancing norms. This trend is here to stay and will result in a meteoric rise in the online purchase of goods and services. This will be amplified by tighter budgets and people conserving cash in the current environment. Therefore, the availability of cheaper versions of branded products will likely increase and lure in many people.
In the current environment, to safeguard consumers from the influx of counterfeit products resulting in loss of revenue, which brands can ill afford in an already shrinking economy, the brands need a strategic push and focus on curbing counterfeiting activities.
Brands need to invest in monitoring the online space. With business moving online, the counterfeiters will increase their activities, including advertising and selling their products through a wide array of online channels, which includes B2B platforms, auction sites, e-commerce sites and social media platforms. There are several tools available that can help brands keep a close eye on the online space and work out a strategic plan of action.
This is the cheapest mechanism to bring down counterfeit products from online platforms. It can be used effectively by having a standard takedown notice ready. Generally, e-commerce portals comply though some of them may insist on an actual purchase. It is a generally useful tool but requires close monitoring and a streamlined plan, including escalation to take enforcement actions where necessary.
Join hands with e-commerce portals
Several portals have programmes in place to work with brand owners to control the sale of counterfeits on their portals. As an example, Amazon's "brand registry" and "project zero' and eBay's Verified Right Owners program (VeRO) are practical tools that can be made use by brand owners to keep a check on counterfeits.
Educating customers on how to identify counterfeits
There is no substitute for this, and it can be a productive consumer engagement activity as well. Another related business activity that brands can pursue is educating consumers about utilising refund and return policies, when in doubt, in particular when placing an order through a third party website/portal. The brands can also encourage consumers to report counterfeit products available on a third party website and provide a simplified reporting mechanism.
Brand owners can track trends by logging counterfeit incidents in a database to analyse which of their products are most susceptible to counterfeiting. Identify the regions and platforms to have a more focused approach in tackling them.
An upsurge in customer demand
Products and services which are experiencing an upsurge in customer demand should be more cautious about the online fake listings on e-commerce websites and related businesses that may be set up using their brand names. As an example, a recent boom in video calling apps to organise meetings and connect socially is resulting in consumer interest in IT goods, mobile phones, and accessories. And with work from home here to stay, the availability of counterfeit products in this sector will likely rise. Thus brands in the telecommunications and IT sector should watch their brand infringements and counterfeits more closely.
Audit suppliers and distributors
It would be in the brand owners' interest to ensure their suppliers and contract manufacturers are complying with the terms and conditions of their contract. They must keep the data and other confidential information secure. They must further ensure that suppliers and distributors are not coming out with their branded range of products, making use of IP and know-how shared by the brand owner in confidence.
What are the challenges?
Challenges that frequently arise in online combatting of counterfeiting are the following: a) the ability to reach the manufacturer and/or importer of the counterfeit goods infringer as the internet allows the anonymity of infringers; b) the ability to assess the number of counterfeits the infringer is holding based on its online listing and if it justifies the investment necessary for carrying out an investigation and taking enforcement action; c) the process of monitoring and taking action in an online environment is continuous and requires budget commitment.
The Indian courts have a robust legal mechanism for combatting online counterfeiting. The courts have been issuing John Doe orders, dynamic injunctions, blocking websites, and granting exemplary damages in cases of habitual infringers. At the same time, the contour of internet service provider liability and the availability of safe harbour is yet to be made stricter in terms of the role played by e-commerce portals. While the government has come up with new rules on ISP liability, they are yet to be implemented.
The functioning of businesses, not only in India but also globally, has changed in recent weeks. Their survival is dependent on wisely choosing resources and their optimal use. The economy may slow down in the short-run, but no one denies the massive potential for brand owners that the sizeable Indian consumer market has to offer.
Ranjan Narula and Payal Kalhan
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