The concept of supply chains wasn’t something that worried most consumers until recent arrivals of Christmas supply chain issues. If a particular good or service wasn’t available from one retailer, it wasn’t too difficult to find another that could fulfill demand. When the global Covid-19 pandemic hit, a wave of panic buying became a new sport as shelves for certain goods emptied. Who knew that toilet paper would become as hot a commodity as precious metal or oil. At least that’s how it seemed across the world in 2020. These issues have since created a concerning demand for counterfeited goods.
We’ve now all come to realize that supply chains are actually quite brittle, despite the high levels of automation that technology has delivered. A lack of semiconductor chips has caused issues with new system deployment, and in recent months, we have seen a ship stuck in the Suez Canal as a quite literal blocker to global distribution. Now, supply chain issues in major economies such as the United States of American and the United Kingdom (which of course has its own issues related the movement of goods after Brexit to contend with) threaten to severely damage the supply of goods coming into the Christmas period.
When you add the busiest shopping period of the year with supply difficulties, you get an equation which equals the perfect conditions for counterfeiters. Unfortunately, global commerce today depends on just-in-time supply chains. When they are disputed by what seems to be unconnected events, they can lead to major distribution issues. This follows the principles of the Butterfly Effect, an economic theory that expands on the idea that a small thing (such as a butterfly flapping its wings) can have non-linear impacts on complex systems (such as a tornado striking hundreds of miles away). One impact of any disruption on supply chains is a rise of the demand – and consequently – supply of counterfeit goods.
These messages of impending doom about the Holiday season are driving many consumers – who understand the nuances of the supply chain challenges – to get into the ‘buy now’ mentality. This leads to shortages and empty shelves much earlier than we would have expected to see. But it isn’t just the empty shelves that will drive the supply and demand for counterfeits – higher prices will also drive lower income consumers to look for lower-cost alternatives.
Every year, the demand for the must-have toys and electronic devices almost always leads to supply issues. In recent years we’ve seen shortages of the latest models of Xbox, PlayStation and Wii Switch – which have led to fraudulent online activity as consumers become more and more desperate to find one of the in-demand items.
Mattel – one of the world’s biggest toy manufacturers – has already been forced to increase prices of some of their most popular items. According to CEO Ynon Kreiz, sales of Mattel’s action figures rose 50% in the third quarter and 76% year-to-date. Wholesale price increases tied to higher costs have “been accepted with no negative response from consumers.” Those increased prices could mean that as the weeks go on, the demand for lower-priced items increases and cost-conscious consumers are driven towards counterfeit items whether knowingly or not.
Understanding the distribution networks and end user pricing is key for brand holders as we get closer to the holiday season. Whilst they may be relatively powerless to increase supply in time due to issues with supply chains out of their control, a smart strategy is to monitor the most common marketplace websites for signs of potential brand abuse and counterfeiting. Using a product such as OpSec Security’s Online Price Radar allows brand holders to monitor and react to pricing anomalies which may indicate parallel or grey market importing or signs of counterfeiting and take the necessary action against the sellers. But it also needs the brand holders to be on the front foot in educating their customers on the dangers of buying counterfeit and some of the tell-tale signs of what fake products look like.
There is no short-term magic fix for the supply-chain issues we are seeing globally today. Whilst we may not want to hear it, there is more than likely going to be a knock-on effect in the next few weeks. However, that should not mean we give the fraudsters an easy route to spoil the holiday season with nefarious tactics and illicit practices that create Christmas supply chain issues. Brand holders and consumers need to both play their part in reducing the impact of counterfeits on our economies. Through brand protection strategies, education, awareness, and above all – remembering that if something looks too good to be true – it most probably is.