Trump Administration Expected to Crack Down on Marketplace Sites in New Counterfeit-Centric Memo

Almost 10 months after Donald Trump signed a memo aimed at combatting the import of counterfeit goods into the U.S., with an emphasis on “third-party online marketplaces,” including “Alibaba, Amazon, and eBay,” and less than two weeks after reports that the $1 trillion behemoth that is Amazon will do more to prevent the sale of fakes on its sites, the Trump administration released its official plan to cut down on the ever-increasing counterfeit trade. 

A booming industry, the total trade in counterfeit and pirated goods tops $1.5 trillion across the globe, according to the International AntiCounterfeiting Coalition. Counterfeit and pirated goods, as well as trade secret theft, cost the U.S. economy, alone, as much as $600 billion a year, or 3 percent of the U.S. gross domestic product, Steve Shapiro, the unit chief for the FBI's intellectual property rights unit told CNBC.

Given the jurisdictional issues when it comes to counterfeit sellers (most are located outside of the U.S.) and other practical roadblocks at play, the fight against fakes is a complex one. “Foreign sellers face little risk of prosecution,” an administration official told Reuters. As such, strong U.S. government action "is necessary to fundamentally realign incentive structures." 

Speaking to CNBC on the heels of the signing of Phase One of Trump’s trade deal with China this month, which follows from claims of rampant infringement of American intellectual property by Chinese entities, Peter Navarro, the Director of the National Trade Council at the White House, revealed that as of now, “if you’re an intellectual property rights holder, whether you’re Michael Kors or Louis Vuitton or Pfizer selling prescription drugs, the onus is really on your company to police the internet, where a lot of this counterfeiting occurs.” 

“That’s not right,” according to Navarro, who says that “the Amazons and the Alibabas, Shopify” – which “have been facilitators of the Chinese counterfeiting” – need to act on their “responsibility to police the problem.” He further noted that sites like “Amazon and eBay” are “making a bunch of money … selling this counterfeit stuff,” without “accepting [their] full responsibility,” which is almost certainly a reference to marketplace sites’ recurring attempt to disclaim liability by asserting that they are not the “sellers” in such equations but merely middlemen. This is what Amazon argued in a recent case over the sale of a defective dog leash that a consumer purchased from its site. 

That case – which could have sweeping impacts for Amazon and its vas third-party marketplace – is still underway, with a Third Circuit Court of Appeals hearing en banc expected this year.  

As for the Trump administration’s latest counterfeit-specific plan, on Friday, the Department of Homeland Security’s Office of Strategy, Policy & Plans released a report entitled, “Combatting Trafficking in Counterfeit and Pirated Goods,” stating that at the forefront of the “best practices for private sector stakeholders” is “the idea that e-commerce platforms, online third-party marketplaces, and other third-party intermediaries such as customs brokers and express consignment carriers must take a more active role in monitoring, detecting, and preventing trafficking in counterfeit and pirated goods.” 

An increased focus on the crack down on counterfeits will be a welcome development for fashion and luxury brands, in particular, which is a particularly hard-hit segment of the market when it comes to the scale of the manufacturing and sale of counterfeits. After all, luxury goods are amongst the most commonly affected, with fake luxury products – from logo-bearing sunglasses to fake leather goods and shoes – accounting for “between 60 to 70 percent” of the total sales of counterfeit goods, per Harvard Business Review, “ahead of pharmaceuticals and entertainment products and representing perhaps [the equivalent of] one quarter of the estimated $1.2 trillion total trade in authentic luxury goods.”

With that in mind and given the need for luxury brands, in particular, to maintain the image of exclusivity associated with their valuable trademarks, brands routinely spend tens of millions of dollars each year to police unauthorizes uses of their trademarks. HBR reported in May that LVMH Moët Hennessy Louis Vuitton, the parent company to 75 luxury goods brands, including fashion houses like Louis Vuitton, Dior, Givenchy, and Celine, “employs at least 60 lawyers and spends $17 million annually on anti-counterfeiting legal action.” 

All the while, luxury titans have been busy lobbying governments “to extend enforcement bodies’ powers to seize and destroy fake goods, and to block access to websites that sell counterfeit goods,” per HBR. If the impending memo is any indication, the Trump administration is willing to up the ante. oa here

The sneaker collection of every woman's dreams: Meet the uber stylish 24-year-old with a running shoe closet worth more than $58,500 - but she's never shown her face

An up-and-coming Danish Instagram star owns what is arguably the coolest collection of sneakers on earth, but despite posting daily pictures of her remarkable wardrobe, she's never shown her face on social media.

Sally Javadi, an Iranian-born psychology graduate who lives in eastern Denmark, has a closet stacked from floor to ceiling with over 150 pairs of unique, colourful sneakers, collectively worth more than $58,500 (AUD).

Ms Javadi, 24, shares photos of her vibrant treasure trove on Instagram, and despite creating her account just one year ago, already boasts over 96,000 followers who are keen to keep up with her ever expanding collection.

'I've always had two sides of who I am, my sneaker obsession and my university psychology world. It's very contradictory, and that's why I haven't gone public with my face - it's sort of my brand now,' she told Daily Mail Australia.

Danish psychology graduate Sally Javadi (pictured) owns what is arguably the coolest collection of sneakers on earth, posting daily photos of her remarkable wardrobe on Instagram - but never showing her face

Her closet is stacked from floor to ceiling with over 150 pairs of unique, colourful sneakers, collectively worth more than $58,500 (AUD)

Sally's passion for quirky footwear runs deep.

She recently queued outside a store for five hours to get a sneaker in a specific colour, bringing her mother and sister along as company, but usually sources edgy pieces on US-based resale sites and consignment stores.

Her most expensive are a pair of brown, white and baby pink Travis Scott x Jordan 1s, a collaboration between the Texan rap superstar and footwear giant Nike which cost almost $3,000 (AUD).

Sally's passion for quirky footwear runs deep. sourcing edgy pieces on US-based resale sites and consignment stores

Her most expensive are a pair of brown, white and baby pink Travis Scott x Jordan 1s (pictured), which cost almost $3,000 (AUD)

Her favourite shoes are a colourfully mismatched pair of Nike Jordans, created by Iranian-American designer Melody Ehsani as a political statement against female oppression.

One shoe is orange, pink and red against a white background, while the other is green, blue and turquoise.

Both are adorned with a gold watch laced into the front panel and graffiti-style script which reads: 'If you knew what you had was rare, you would never waste it.'

Her favourite shoes are these colourfully mismatched pair of Nike Jordans created by Iranian-American designer Melody Ehsani as a political statement against female oppression

Both are adorned with a gold watch laced into the front panel and graffiti-style script which reads: 'If you knew what you had was rare, you would never waste it'

Although she owns a vast selection of sought-after pieces few collectors dare to dream of, Sally doesn't discriminate against simple classics.

'I love a simple pair of Nike Air Forces - they're my ultimate go-to sneakers,' she said of the globally popular all-white style, which cost roughly $150 (AUD).

Adidas Yung-1s - a modern take on chunky '90s sneakers - and Nike P-6000s - inspired by the divisive 'Dadcore' trend- are her other fail safe shoes, both of which retail at $150 (AUD).

'A classic can be just as good as a more expensive pair. It's not about the cost,' she said. oa here

The RealReal Will 'Dominate Digital Consignment Space'

Several digital native fashion retailers are worth taking a look at, according to DA Davidson.
Analyst John Morris initiated coverage of several fashion retailers Tuesday, including Revolve Group LLC RVLV 0.19% with a Neutral rating and $19 price target.
“As a digitally native brand, Revolve sits squarely at the intersection of sophisticated data-driven assortment planning and coveted fashion apparel,” the analyst said.

Inventory Overhang Remains A Concern

In the near term, Revolve is struggling with growing pains that are likely to last for several quarters as it "right-sizes" inventory and invests in future growth, Morris said.
Part of Revolve’s inventory overhang has been planned, as the company is building up for the launch of its superdown division and braces for international expansion, he said.
“Yet inventories have risen significantly faster than sales, most recently rising 31% in 3Q, ahead of 21% sales growth,” the analyst said.
A portion of the higher inventory levels have led to more discounting that weighs against gross margin upside, Morris said.
"We see these headwinds continuing for several more quarters."

The Real Deal

DA Davidson initiated coverage of The RealReal, Inc. REAL 5.2% with a Buy rating and $22 price target.
The RealReal is a brand destination with several first-mover competitive advantages in a market that is displaying accelerating growth, Morris said.
RealReal has a unique business model that makes it possible for the company to be a front-runner for trends like sustainability, uniqueness and individuality that are favored by the millennial and Gen Z demographics, he said.
"With a seamless supply chain, high customer retention, and substantial take rate, we expect REAL to dominate the digital consignment space,” the analyst said.
The RealReal’s authentication process has come into question of late, but this went unmentioned in the DA Davidson note.

Stitch Fix: Rising Ad Spend Tempers Sentiment  

Stitch Fix Inc SFIX 2.34% reported a first-quarter earnings and sales beat Monday, and several analysts highlighted the company’s new "direct buy" feature as a catalyst for future growth.
DA Davidson took a more guarded stance on Stitch Fix, initiating coverage with a Neutral rating and $27 price target.
Morris said he is cautious about Stitch Fix’s growth prospects, cost efficiency and a lack of visibility.
"We rate it Neutral because the company is showing a decelerating client growth rate despite significantly increasing marketing spend at a time when its core business is more challenged by competition and the complexities of growth which is likely to erode margins in the near term."
Stitch Fix is chasing new clients, and its advertising spend as a percentage of sales increased from 3% in 2016 to 8% in 2018 — yet its client growth rate is decelerating, the analyst said.
The e-commerce site is expecting  advertising spend as a percentage of sales to settle at around 9%-11% in FY2020, according to DA Davidson.
Increased competition could threaten the company’s market share, Morris said.
“According to our industry sources, Amazon.com, Inc. AMZN 2.72% and Nordstrom, Inc. JWN 2.05% lust for the customer data gathered from a subscription service: sizes, style preferences, direct feedback, etc.”
The new fashion subscription service entrants Rent the Runway and Urban Outfitters, Inc.'s URBN 0.22% Nuuly are other competitors clawing for market share, according to DA Davidson.  oa here

Luxury makeover: Kering to go 'carbon neutral' by offsetting 2018 emissions

Credit: Sardaka

On Tuesday, Kering announced that the luxury group, which includes brands such as Gucci, Bottega Veneta, Saint Laurent and Balenciaga, will become carbon neutral across its operations and supply chain by offsetting its greenhouse gas emissions from 2018. The announcement follows Gucci’s own carbon neutrality pledge earlier this month and comes a day after Swedish activist Greta Thunberg’s emotional speech at the UN Climate Action Summit in New York.

"We are going a step ahead in the implementation of our sustainability strategy," says Marie-Claire Daveu, Kering’s chief sustainability officer. Kering’s sustainability initiatives to date have included work to reduce energy consumption and greenhouse gas emissions, as well as a push for the use of reusable energy, says Daveu. “Where we won't be able to have zero impact it's important to offset.”

Fashion companies are increasingly pledging to offset their carbon footprint as it shows a commitment to sustainability, but the benefits of these initiatives are not guaranteed. “There is nothing logical or innovative around carbon offsetting unless it comes with a very serious commitment to prevent and reduce the company's carbon footprint,” says Orsola de Castro, founder and creative director of Fashion Revolution.

Kering, which also led the formation of the Fashion Pact to combat climate change at the 45th G7 Summit in August, has pledged to reduce all of its operations and supply chain greenhouse gas emissions by 50 per cent by 2025. The ambitious goal sets the industry in the right direction, but de Castro points out that without an external policing body, there is no guarantee of accountability.

Gucci Spring/Summer 2020.

Since 2011, Kering has measured the group’s greenhouse gas emissions through environmental profit and loss accounting (EP&L) to implement changes in its supply chain and promote efficiency initiatives across the board. These efforts have focused on offsetting two of the three types of emissions as defined by the Greenhouse Gas Protocol, by operating on direct emissions from owned or controlled sources and emissions from the generation of purchased energy.

With its latest pledge, the group will offset all remaining emissions in the protocol, meaning upstream and downstream emissions in the value chain. For 2018, these remaining emissions will account for approximately 2.4 million tons of carbon dioxide equivalent. The group’s offsetting practices rely on Reducing Emissions from Deforestation and Forest Degradation (REDD+) projects, which include a partnership with the Wildlife Friendly Enterprise Network (WFEN) to promote the conservation of biodiversity in farming practices, and collaborating with the Savory Institute’s Frontier Founder initiative to encourage regenerative grazing practices. The company’s 2018 offset will equal around 2 million hectares of forests around the world.

Kering’s announcement pushes it ahead of other luxury conglomerates in its commitment to full carbon neutrality, but other groups have their own initiatives in place. Richemont has been purchasing carbon offsets since 2008, while LVMH introduced a carbon fund across its brands in 2015 to calculate and offset greenhouse gas emissions generated by its businesses. “Such an approach reaffirms how Kering is one of the companies leading the way in sustainability, and I hope other brands and retailers will follow,” writes Eva Kruse, CEO and president of the Global Fashion Agenda, via email.

But an overreliance on offsetting can be seen as sidestepping a larger issue.

“With this level of urgency [we need] a commitment policy on reduction, not just of carbon and fumes, but also of production,” says de Castro. “We need to disinvest from growth to invest in social and environmental supply chain prosperity and compliance.”
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