Fakes eating into business fate

As India’s retail is still dominated by age old mom n pop stores, the fake products easily make their way to the shelves.  These fake items not only affect the sales of the genuine products but bigger concern is the disinterest of the consumers in buying those genuine branded products due to sheer lack of awareness. This is coupled with the advent of technology which is giving the fraud manufacturers immense scope to replicate the original products to near perfect, duping thousands of consumers. 


Affecting the market

Fakes have been a part of the Indian retail market for a long time now. We can add to this the weak regulation and even weaker implementation mechanism of these regulations which has given us a perfect environment for the fakes to prosper. Sandeep Dahiya, Sr. Vice President - Consumer Products & Communications, Viacom18 Media Pvt Ltd opines, “It definitely affects the market in a way where the interests of copyright-holders, trademark-owners and licensors/licensees suffer. So, while someone else invests millions in creating strong and differentiated properties/brands, it is others who take away a significant chunk of the revenues.”

Akhilesh Kumar Rai, IP Head, AZB and Partners comments, “Since there are no invoices given for fake products, the government loses out on revenue which could be used for the development of infrastructure, etc.”

Beyond depriving property owners of rightful revenue and government of taxes, fakes are flouting laws of the land.  “It adversely affects licensed brands due to poor quality of products and puts consumers at risk as counterfeit products rarely adhere to safety standards and quality norms. Overall, it’s a ‘loss’ situation for all,” avers Jiggy George, Founder and CEO, Dream Theatre Pvt Ltd.


Loopholes of legal system

One of the primary reasons for piracy to flourish in India is the gaping price difference between authentic and fake products.  Rai comments, “In my opinion, the Indian legal system, especially the civil remedy, is one of the best. The problem is that the Higher Judiciary in metropolitan cities is more tuned to the menace of fakes and is more willing to come to in aid of the manufacturer. The same cannot be said about the lower judiciary and that too in smaller towns.” “There are no specialised courts to handle IP matters. In my opinion each court should have a specialised IP court to handle IP matters,” he further adds.

India currently lacks a strong anti-counterfeit cell that monitors/stops fake products during the imports itself. Prateek Maheshwari, Director, Brand Concepts Pvt Ltd says, “As of now, no original document or authorised letters from the brand is required during any imports into the country. This gives an easy way for fake products to be sold openly in the country without any problems.”

George opines, “More than reforms, piracy needs greater awareness creation and strict enforcement.”


A licensing programme can help

Fake products take up the place on retail shelves as the supply or reach of the particular brands are not available to the consumers in spite of the demand. Licensing can make available the products under the official brand thus reducing the fakes in the market. Maheshwari comments, “Once the original products are available which are far better in quality, the retailers tend to stay away from fake.” The biggest advantage of a licensing programme is to forecast and feed latent supply at the optimum prices. It needs to deliver on the brand promise and the brand experience which no fake product can equal,” adds George.

Dahiya shares that there could be three ways in which a licensing programme can help to deal with fakes. It can be done by partnering with the local law-enforcement agencies to bring the perpetrators to task. He comments, “We’ve seen the music and home entertainment industry over the last few years is getting moderate success through this mechanism.” It can also be done via constantly investing in creating newer product-lines that makes it financially unviable for the fake-products manufacturers to follow.  Rai has a different viewpoint here. He avers, “I do not see licensing helping much to overcome the situation except in cases where the products are manufactured abroad and imported into India, since the duties that are levied increases manifold.”

Working on the pricing strategy

Rai explains by giving an example. There is a huge price difference between an original and fake. A Puma product may not sell for less than Rs 1500. A counterfeit on the other hand with the same design, etc can be purchased for anything between Rs 100 to 200. Being in a society where one finds affluents flashing brand names, the desire to own something like them is there.

Dahiya says, “The fakes will always be cheaper, since they do not have to invest in R&D and neither do they have to adhere to quality guidelines.”

Also, proper market studies are not carried out by brand owners as far as pricing is concerned. Rai avers, “In some cases I have come across clients who state that their target customer base is not the ones who buy fakes. Luxury products, such as Mont Blanc, get their profits by targeting the affluent ones who do not go to pick up fakes.”


To conclude

At any given point, branded original licensed products cannot compete with the fake ones on pricing due to cost constraints and the amount of input goes into designing and maintaining high quality standards for the products. Maheshwari says, “Depending upon product to product, a smart price raise that justifies the product quality, look and trust factor, increases the consumer’s interest in buying an original one instead of the fake.”

While authentic products cannot match pirated goods’ prices as a strategy, there exists some scope for rationalisation of duty structures to make prices competitive. George comments, “Constant product innovations, superior design and quality and availability are means of staying ahead.”     


At a glance

  • The retail market in India is close to 93% unorganised and therefore the presence of fakes is not unexpected.
  • We can compare the above to a developed market, where close to 95% of the retail market is organsied.
  • There exists a great economic divide. In India, less than five per cent of people have almost 90% of India’s wealth.
  • One of the key effects of fake products is ‘loss of goodwill of original products’.
  • When finances do not allow people to buy originals, people go in for fakes.
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