Brand Protection

Counterfeiting Industry: Trends and Challenges in 2023 and Beyond

Image of a person shopping online

In the midst of the rapidly evolving technological landscape of the 2020s, the convergence of cutting-edge advancements and intricate strategies has led to a series of significant trends that define the current state of affairs within the counterfeiting industry. 

This article cuts straight to the core, delving into these trends, their implications, and how they intersect with the ongoing battle between brand protection and counterfeiting.

We have identified four main trends for the current landscape of the beauty and cosmetics industry:

  • Evolution of Counterfeit Listings
  • Proliferation of Social Media as a Breeding Ground
  • Gen Z's Changing Perceptions of Counterfeits
  • Introducing AI Into Counterfeiting

Trend 1: Evolution of Counterfeit Listings

Brand protection is not a one-time initiative against a static opponent. As brands and IP specialists continuously employ more sophisticated strategies and tools, so do the counterfeiters. They are aware that their work is illegal, and refine their operations each year.

In particular, counterfeiters are motivated to avoid detection and enforcement in online spaces. As the technologies used to find fakes online improves, the counterfeiters adjust their own actions to make their listings harder to find and more difficult to remove through standard takedown channels.

Branded product names, trademarks, and key phrases are now often completely omitted from the ecommerce listings themselves. Counterfeiters know this is the easiest way for legitimate brands to find fakes online, so they are careful to use listing titles and product descriptions that avoid these words entirely.

Product images are also chosen carefully by counterfeiters now. With image recognition being more widely available, many counterfeiters opt to avoid using brands’ own product images in their listings, as they are so easily found and used to verify the product as fake. 

Even brands’ logos can be detected using AI, which further restricts the images available to savvy sellers. To counter this, counterfeiters will often take their own photos of the products for sale, while obscuring the logo to make it harder for AI to find it.

Trend 2: Proliferation of Social Media as a Breeding Ground

With the strategies of omitting key phrases and product images in play, counterfeiters can more easily hide their products and avoid having them be removed from online marketplaces.

Image of counterfeit DHgate Airbuds advertised on TikTok

But, this causes a new problem for them - promoting the products.  How can a beauty product counterfeiter sell their wares with these restrictions? The solution they’ve found is to lean more heavily on social media as a promotional channel - in particular, TikTok.

Counterfeit product advertising on TikTok has surged in popularity through RepTok, a sizable TikTok community, videos for which have recorded in billions of views. 

TikTokers create engaging videos to openly showcase counterfeit items, known as "dupes" or "reps" on the channel. These videos are incredibly open about the fact the items are illegal counterfeits, and involve real people bragging about their quality and low price.

The purpose of the videos is to garner massive interest, before directing viewers to intermediary channels like public spreadsheets and private messaging platforms such as Discord, Snapchat, and WhatsApp.

These intermediaries then guide users to listings online marketplaces like DHgate and Pandabuy for the purchase - though the listings are considerably more cryptic to avoid detection, as mentioned above.

Watch: TikTok's Reptok Reality Unmasking Counterfeit Advertising

Trend 3: Gen Z's Changing Perceptions of Counterfeits

Gen Z, the people born between 1997 and 2012, have developed a distinctive acceptance of counterfeit products. Often referred to as "dupes" or “reps”, changing attitudes towards counterfeits introduces a paradigm shift that both brands and consumers must navigate in the pursuit of authenticity and brand value.

This affinity for counterfeits and piracy is emblematic of a generational ethos that questions established norms, including conventional notions of intellectual property. A study by INTA, the International Trademark Association, reveals that a staggering 79% of Gen Z individuals purchased counterfeit products within the past year. 

This demographic's choices predominantly lean towards counterfeit apparel, shoes, and consumer electronic accessories, driven in part by the perception that such options are more financially accessible, while aesthetically similar enough to the legitimate product to fool their peers.

In a similar vein, a study by EUIPO, the European Union Intellectual Property Office, found that up to 50% of Gen Z find buying counterfeit products acceptable. These statistics underscore Gen Z's departure from the status quo and present a new reality wherein counterfeits are not just a market challenge, but a reflection of evolving consumer values.

As brands seek to navigate this shifting landscape, understanding Gen Z's relationship with counterfeit products becomes imperative in maintaining brand integrity and relevance. The embrace of "dupes" reflects a generation's unique approach to authenticity and consumption, setting the stage for a dynamic interplay between brands, consumers, and evolving market trends.

Trend 4: Introducing AI Into Counterfeiting

The final major trend in the counterfeiting industry is the adoption of AI tools by the counterfeiters themselves. With the widespread release of these tools to the general public, counterfeiters have found a major advantage in their ability to operate in digital spaces. 

Fake positive reviews are now extremely easy to create at huge scales by people selling fake products online. With free AI writing tools like Google’s Bard and Chat GPT made available to the general public, it’s possible to create thousands of fake product reviews in minutes. 

As customer reviews are a major way for consumers to identify whether a product is legitimate or fake, this will muddy the water in a major way and make shopping for authentic goods much harder. 

AI-generated product images are set to pose a burgeoning concern to brands. Enabled by rapid advancements in AI technology, and made available through products like Midjourney and DALL-E, counterfeiters are on the brink of unleashing a wave of convincingly false visuals across e-commerce platforms. 

Logo of generative AI platform, Chat GPT

For now, the technology has not quite reached the point of complete imitation, at least not the free versions. Additionally, AI art generators tend to have a cap on how much users can access the software, which limits counterfeiters’ ability to rely on this technology to create phony images. 

However, in 2023, we are on the cusp of these generated images becoming truly widespread, and with the speed of development within this technology space, it may not be long until online marketplaces are inundated with generated product images. These fake images have the potential to circumvent image and object recognition software, being clear to a human viewer but not comprehensible to an AI trying to understand the image. 

Virtual influencers, one of the most fascinating products of AI's advancement, have the potential to disrupt the counterfeiting landscape in a significant way. Already a reality with notable examples like Lu do Magalu, these digitally constructed personas wield considerable influence, boasting substantial followings on social media platforms. 

This emerging trend is set to harness these virtual personalities to deceive consumers, a practice that could have substantial consequences, particularly for the Gen Z demographic. As these virtual entities gain traction, the potential for misleading endorsements escalates, underlining the urgency for adaptive brand protection strategies, such as consumer education.

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