Why Competitor Poshmark May Be The RealReal And ThredUp’s Best Friend In Exploding Resale Market

Investment analyst Michael Binetti, Credit Suisse, is out with a bold prediction: “We believe the secondhand/resale market could grow much faster in the near-term than the +mid-teens growth that industry sources project.”

As current projections stand, the combined digitally-native resale and the traditional, largely brick-and-mortar thrift/donation secondhand fashion market will reach $51 billion by 2023, according to ThredUp, a major player in the resale fashion market and the primary source of the industry’s data.
By 2023, the resale segment is expected to account for 45% of the secondhand apparel market’s sales or $23 billion, growing from a mere 25% ($7 billion) of the total $28 billion in 2019.
The RealReal, the recently made public luxury resale company, the privately-held ThredUp, and social commerce peer-to-peer marketplace Poshmark are the current resale leaders.




Dynamic growth in the online sales channel will be the main driver of growth, gaining twice as fast as thrift/donation or over 30% per year from 2019 to 2023. This will be thanks to consumers, most especially women, gaining awareness of the convenience of this new model as an alternative to giving bags of old clothes to Goodwill, Salvation Army or local thrift stores.
As mentioned, Credit Suisse’s Binette expects it to advance even faster, though he didn’t speculate just how much faster it will grow. However, he said, “We’ve networked extensively with management teams across the secondhand retail category and the most consistent comment we’ve heard is that the industry unanimously believes it is barely scratching the surface with the addressable market of consumers that would consider re-selling/consigning online.”

Supply, not demand is the industry’s challenge

Increasingly, women are willing to give secondhand shopping a try, with ThredUp reporting the number of women who’ve purchased secondhand has grown from 44 million in 2017 to 56 million in 2018, roughly half of all adult women.
However, the linchpin for resale’s future is getting inside people’s closets and convincing them to turn over enough good-old stuff that online buyers will want.
After all, they have been filling their closets with off-price (Marshalls, TJ Maxx), fast fashion (Zara, H&M), value chain (Walmart, Target) clothing at an aggressive pace, but this isn’t the stuff that a vibrant resale market is made on. The ThredUp study, supplemented with data from Credit Suisse, estimates that about 35% of consumers’ closets in 2018 are accounted for by clothing from these three sources and their share has grown from 28% since 2008.
Instead, the stuff consumers are most likely to want to buy in resale is department store (14% share of closet in 2018) and other specialty retail (13%) brands, which they also may want to hold onto longer. Mid-priced fashion (Gap, J.Crew) that comprises 20% share of closet today may go for ThredUp or Poshmark, but not The RealReal.
It isn’t consumer demand that could hold the fashion resalers back. It’s getting their hands on enough stuff that their customers will want. As a result, each player’s consignment strategies are critical to their future success.

Getting real is The RealReal’s key consignment strategy

The RealReal identifies unlocking the ~$200 billion of luxury goods available in the U.S. for the resale market as its greatest market opportunity, as well its most critical challenge.
“The biggest obstacle to growth for REAL is acquiring the right level and types of supply,” writes Cowen’s Oliver Chen, in a report on a recent meeting with The RealReal’s CEO Julia Wainwright and CFO Matt Gustke.
“Management highlights it is more difficult to get someone to consign for the first time,” he explains, but adds that after their first consignment, The RealReal customers typically return two-to-three times a year.
With Gucci, Louis Vuitton, Chanel, Prada and Hermès its leading brands, The RealReal has found making face-to-face connections with wary luxury consumers critical to getting prime merchandise. So, it operates three stores, two in NYC and one on Melrose Avenue, Los Angeles, where well-heeled shoppers can come in and meet with authentication experts. Such personal connection raises their comfort level.
The RealReal also operates 11 locations nationwide for jewelry, watch and handbag valuations, plus the convenience of free “white glove” in-home consultation and pickup in 20 markets.
In a previous discussion with CEO Julie Wainwright, she shared that not only do the stores pave the way for better consignments, they also result in an order size twice as large as is typical online. “It is a marketing tactic and sales tactic and product acquisition tactic,” Wainwright said. “We find we get lots of high-quality consignments when we do pop-ups,” like one recently in Las Vegas.
The RealReal is approaching half a million buyers and if turning new RealReal buyers into consignors is its primary way to source new supply, it has a long runway.
According to the BCG-Altagamma True-Luxury survey among consumers who met a threshold of luxury spending (~$5,500 in past year), only half of the U.S. luxury consumers surveyed have participated in the secondhand market. Among the other half, 21% have sold and bought, 18% have purchased only and 11% have only sold.
The RealReal is still in the early days in tapping its potential market. “Resale drives a perpetual consumption cycle that fuels recurring consignments and purchases as it provides liquidity to consignors to purchase new and secondhand items – this should support solid GMV (gross merchandise value) growth over the long-term,” Chen writes.

ThredUp has it in the bag

ThredUp’s consignment strategy is literally in-the-bag with its “Clean Out Your Closet” service where a potential consigner requests a postage-paid Clean Out Kit to bag up unwanted items. These item can either be sold for cash or credit to use at Reformation or Polarn O. Pyret for childrenswear or donated to charity along with a $5 cash gift.



The company notes, however, that it is picky about what consignments it accepts: only items in pristine condition with no damage or alterations, including missing sizing information. Given those criteria, ThredUp reports it only retains about 40% of the items shipped for resale. The rejects can be returned to the sender for a small fee or donated to charity.
Right now, through October 20, ThredUp is hot on the trail for fall fashion, offering a 20% extra payout for seasonally-appropriate sweaters, coats, boots, overalls, jumpsuits and designer handbags. In-demand brands it is on the hunt for include Madewell, Patagonia, Lululemon, Everlane, Sorel, Eloquii and Torrid.
ThredUp is also crossing over into physical retail in new partnerships just announced with Macy’s and J.C. Penney. ThredUp departments will shortly open in 40 Macy’s and 30 J.C. Penney locations.
These locations will give consumers an extra dose of confidence and credibility to ThredUp when they first meet the brand there. No word that consignments will be accepted there, but one can imagine each department will have a stack of clean-out bags readily at hand.

Poshmark takes a do-It-yourself approach

Poshmark claims to be the No. 1 fashion buying and selling platform, with some 50 million sellers. A recent survey by Raymond James supports that claim, with 67% of women surveyed recognizing the Poshmark name, as compared with 44% who know ThredUp and 12% The RealReal.
But unlike ThredUp and The RealReal, Poshmark operates under a different business model. It doesn’t take possession of the clothing for sale. It works as a peer-to-peer marketplace where sellers list items and Poshmark takes a piece of the action once a sale is completed.
With its stripped-down business model, it gives sellers the tools to make sales, but also requires them to do the heavy lifting to photograph, describe, and price each item. Poshmark provides a prepaid shipping label when an item is bought, but the seller has to package it and take it to the post office to ship.
It also supports sellers with what it describes as virtual shopping parties where people gather on the app to enjoy selling events around a theme or brand. Success in fashion has given Poshmark confidence to branch out into home decor and housewares.

Awareness builds customers and consignors

To attract people to the circular fashion resale economy, both Credit Suisse’s Binetti and Cowen’s Chen identify building awareness of the potential of resale platforms like The RealReal, ThredUp and Poshmark is critical.
To create awareness, all three companies have taken to television to get the word out. In that Poshmark is the leader, running 14,872 spots in the last 30 days and ranking No. 311 in terms of overall advertising spending, according to ISpot.TV. ThredUp (2,674 airings and No. 839 in sending) and The RealReal (2,533 airings and No. 1,020 in spending) lag far behind.
And from that awareness, consignments grow. Signs are that American consumers are already lightening their load, as the ThredUp study reports consumers have reduced the number of items in their closets from 164 in 2017 to 136 in 2019. But that also means, they may have fewer choice items to pass along into the resale channel.
Ultimately Poshmark’s heavy-lifting in the awareness department may be a blessing for both ThredUp and The RealReal. After a few times a person does all the work on the back end to make a sale –or not make a sale if the price isn’t right or the description fails – my guess is that people looking to get in on the resale action may quickly turn to the frictionless and more convenient alternative that ThredUp and The RealReal offer.
Poshmark may open the door for customers to try online resale, but I bet that ThredUp and The RealReal will be the ones that will keep them around for the long haul and get the best pickings from their closets.

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Fake Allbirds and Glossier Dupes: DTC Brands Are Battling Counterfeits and Knockoffs

Direct-to-consumer brands like Allbirds, Glossier and Rothy’s are battling counterfeiters and copycats. These startups now face a problem even big-budgeted luxury brands can't fix.

A few weeks ago, some Facebook users spotted a rare deal: shoes from Rothy’s, the direct-to-consumer footwear startup, for 50 percent off. The discount, spotlighted via a targeted ad on Facebook newsfeeds, took people to a website that looked like the Rothy’s homepage, where shoppers were able to buy the company’s eponymous Meghan Markle-approved ballet flats for $79.99, instead of $145. Or so they thought.

The ads were a scam, and Rothy’s was inundated with complaints from shoppers whose credit cards were charged several times, without receiving any shoes. Rothy’s took the rare step of posting a warning about the scam and other similar schemes on its social media accounts a few weeks ago.
Counterfeits and knockoffs are nothing new in fashion, though the targets — usually luxury and sneaker brands — typically prefer to keep the problem out of public view. But the problem now dogs direct-to-consumer brands like Allbirds, Glossier and Rothy’s. These companies have found success by cutting out wholesalers and relying on social media to acquire customers. That model has proven wildly successful, but also creates an opportunity for copycats.

A counterfeit Rothy's site, Rothstore.com, selling counterfeit shoes for half off. | Screenshot by BoF

Fake DTC products litter Amazon, eBay, Instagram, Facebook and Chinese sites like AliExpress. Then there are the legal knockoffs, with companies like Zara, Fashion Nova and Steve Madden turning to popular start-ups for “inspiration” much like they rely on luxury brands’ runway looks.
“Counterfeiters go where the people go, from flea markets to the streets to stores to websites to social media,” said Maysa Razavi, the International Trademark Association’s anticounterfeiting manager. “Consumers now rely on social media to buy and discover goods, and counterfeiters are fully exploiting that. They are taking full advantage of the technology and beating these [DTC] brands at their own game.”
Fighting copycats can be treacherous and expensive, and most start-ups must take on clandestine counterfeit networks or battle with fast-fashion using a fraction of the resources of their luxury counterparts. Many digital brands are unprofitable, and need every cent of their investors’ cash for advertising, production and logistics, not court fights.

But at a certain point, fighting back ceases to be a luxury and becomes a matter of survival.
“If you’re a design and research-focused company, you absolutely have to be monitoring this,” said Joey Zwillinger, co-founder of Allbirds. “Direct-to-consumer brands have much lower awareness in people’s minds. Most don’t know who they are or what they make, so counterfeits have a better opportunity.”

Why DTC is ripe for knockoffs
The global trade of counterfeit goods nets about a half a trillion dollars a year, according to the Organisation for Economic Co-operation and Development, with industries like clothing, footwear and leather goods getting hit the hardest.
The new wave of DTC brands are particularly vulnerable, experts say. Many rely on a single, easily imitated “hero” product for much of their sales. Their main way to reach customers is online, where fraud is rife (in a statement to BoF, a Facebook spokesperson said that it "takes IP rights, including issues around counterfeiting, very seriously" and that "when we detect an ad that violates our Advertising Policies we disapprove it"). And though many people buy fake Louis Vuitton bags because they can’t afford real ones, the buyer of lower-priced goods like Rothy’s might have otherwise purchased the real thing.
Although a pair of Allbirds Wool Runners or Rothy’s ballet flats aren’t particularly expensive, they are status symbols, making them inviting targets for fakes. Zwillinger said counterfeit Allbirds hit the market within a year after launching in 2016.
“There were people launching knock-offs on Kickstarter, and counterfeiters coming from Korea,” he said. “In Europe, there was even one company that somehow had found old molds we’d use, scraped our names off of it, and put those up on the internet.”
It’s not just profits DTC companies stand to lose. Customers who unknowingly buy counterfeit items, like those that shopped on the fraudulent Rothy’s sites, could badmouth the company.

“Startups depend on word of mouth to build their business and reputations, and poor quality products floating around the internet spread misinformation,” said Razavi with the International Trademark Association.
The DTC model has opened up brands for fraudulent activity. Glossier, for example, limits distribution to its stores and website. That’s fed an entire network of unauthorised sellers who have Instagram shops and websites that claim to sell Glossier products, said Erin Miller, the brand’s head of customer experience. Sometimes the sellers offer authentic Glossier product, but they are often mixed in with counterfeits, something Redditors have noticed is happening on Chinese websites sites like Carousell, and on eBay.

When it’s worth it to go after them
Allbirds pays for MarkMonitor, a company that searches for fraudulent and counterfeit activity. Most of the time, though, the brand won’t go after copycats, said Zwillinger.
“Going after a tiny brand that has no money or reputation that launched a knockoff doesn't do anything and will draw attention towards that brand, so why even bring it up?” he said. “It’s expensive and distracting. Even small ripoffs take a lot of resources.”
Experts say when it’s a big brand doing the copying, more action is required because the distribution of the knockoffs could be widespread enough that customers will eventually forget where the designs originated.
In 2017, Allbirds sued Steve Madden after the footwear company introduced wool sneakers (the two sides quickly settled for an undisclosed amount).
Bluebella, a UK-based DTC lingerie company with a large Instagram following sent cease-and-desist letters to Fashion Nova and Pretty Little Thing in June after noticing both companies had copied two of its best-selling bra styles. Both agreed to stop selling the bras. Fashion Nova and Pretty Little Thing did not respond to requests for comment.
Bluebella spent about £10,000 ($12,200) on the whole ordeal, a significant amount for the brand, which only became profitable last year, after recording about $6 million in sales, according to Brand Director Janet Mudge. But she said the company’s leadership felt they had to take a stand.
“The spending was really painful because that was money we should have put back into our marketing and research, but we felt too emotional not to do something,” she said. “Not only are they stealing designs, they are also undercutting our price point tremendously. If you are a relatively small brand, it’s worth it for you to fight back because the damage to your company could be so much worse.”

The alleged imitators don’t always back down. Rothy’s sent a cease-and-desist order to Steve Madden in early August for selling shoes that it says closely resemble its Point flat. Steve Madden responded by suing Rothy’s.
“Rothy's is claiming exclusive rights to common elements of a ballet flat used by competitors and non-competitors,” Steve Madden Vice President and Deputy General Counsel Lisa Keith said in a statement. “Our company has been making this silhouette since the 90's, since before Rothy's even existed.”
Steve Madden took a different approach with Greats, another DTC footwear brand. Earlier this month, the company acquired the start-up.

Other ways brands can fight back
Many DTC brands have cultivated communities of devoted customers — a free army of sorts that can quickly smoke out copycats, said Stéphane J.G. Girod, a professor at the IMD business school in Switzerland
“Brands that don’t have a lot of resources should be using their loyal customers to be the ears and eyes of the internet to help them monitor the situation,” he said.
Miller said Glossier customers flag fraudulent products and unauthorised Instagram resellers to the company, which then informs the accounts that they have violated Glossier’s terms of service. Glossier said it also works directly with platforms like Instagram to shut down fake accounts.
Though shoes and makeup can be copied, a unique brand experience can't, said Renée Richardson Gosline, a research scientist at MIT’s Sloan School of Management who’s studied the counterfeit industry.
“Brands should be looking at all opportunities and touchpoints beyond the functionality of a product to stand out,” she said. “Louis Vuitton handbags are the most counterfeited item in the world but the real products are still in high demand because the customer experience cannot be replicated by counterfeiters.”

This is an advantage a brand like Glossier has leveraged. The brand’s stores frequently have lines outside. Shoppers eagerly wait to try out the beauty products because they want the shopping experience and millennial pink-hued selfies as much as the Glossier product itself.
Allbirds sees widening its distribution as a way to fight counterfeiters — if anyone can buy the real thing, they won’t need to resort to fakes. In February it opened a store in Shanghai, and it also teamed up with Chinese e-commerce giant Alibaba to sell its footwear on the Tmall platform. Previously, the only Allbirds available via Alibaba were fakes or from unauthorised sellers.
“Being in China helps and hurts,” Zwillinger said. “Any success will mean there will be plenty more counterfeits because there’s more of a counterfeit industry in Asia. But … we are creating brand awareness and are able to serve Chinese customers who want the real deal.”
Ultimately, the best way to fight counterfeits is to stay ahead of them. In this, DTC brands have the advantage over luxury brands, because they are typically faster at designing and releasing new products.
“Speed is on their side,” Girod said. “Launch new products, faster, and shape the trends. Make them keep coming.”


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Vestiaire Collective finds 73% of women just can't spot a fake

73% of Australian women are not sure how to tell a counterfeit fashion item from a genuine piece, according to findings from a survey commissioned by designer re-sale site Vestiaire Collective. 

 

 

The survey, which consulted more than 500 Australian women aged 25-45, also found that 45% of respondents have been fooled into buying a fake item, while 63% have been tricked into buying a knock-off more than once.

The survey results also indicated that 43% of respondents were angry about how much money they had spent on a knock-off, while 18% of women were not able to reclaim any money spent on a fake, despite their best efforts.

According to the World Customs Organisation, in 2017 counterfeit goods accounted for approximately 10% of global trade, totalling US$1.2 trillion annually. The counterfeit industry is estimated to reach US$1.82 trillion by 2020.
Handbags and sunglasses are the most purchased counterfeit products, with 50% of respondents indicating that they didn't know that the items were fakes until after making the purchase.

Vestiaire Collective head of authentication and quality control Victoire Boyer Chammard said that there are four key signs that an item might be counterfeit.

A few tell-tell signs of a fake include:
- Material: The leather should feel like leather, take time to feel and even smell it.
- Typography: Check the logo, which is often a slip up area for many fakes.
- Stitching: Take a good look at the stitching, uneven or slanted stitching is a sign of a poorly made item.
- Serial number: Look for a serial number and ask to see proof of purchase if you’re buying online," she said.
Vestiaire Collective is a member of the Charter Against Counterfeiting on the Internet and campaigns to stamp out fakes from its APAC hub in Hong Kong.

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Huge LAX Bust Stops Smuggled Counterfeit Hermes, Louis Vuitton, Gucci Products From Entering US

 

Thousands of counterfeit items that would be worth millions --if they were genuine -- were seized in an LAX bust. The items included fake brands like Gucci, Hermes, Louis Vuitton and more Aug. 14, 2019. 

Customs inspectors recently prevented thousands of counterfeit items from being smuggled into the country from Hong Kong through Los Angeles International Airport, including products falsely labeled as being produced by Hermes, Louis Vuitton, Gucci and other companies, officials said Wednesday.

The 5,300 items that were seized in recent weeks would have had a retail value of more than $3.4 million if genuine, according to Jaime Ruiz of U.S. Customs and Border Protection.

Among the seized items were 1,242 counterfeit Gucci belts, 678 pairs of counterfeit Nike shoes, 531 counterfeit Louis Vuitton handbags, 230 counterfeit Hermes handbags, 192 counterfeit Casio Shock watches, 144 counterfeit Ferragamo belts and 100 counterfeit Versace belts.

"CBP protects businesses and consumers every day through an aggressive intellectual property rights enforcement program,'' said Carlos C. Martel, CBP director of field operations in Los Angeles. "These seizures demonstrate the high level of skill and vigilance of our officers and import specialists.''

The merchandise arrived at LAX via air cargo from Hong Kong, Ruiz said.

"The quantity and value of counterfeit merchandise seized is a clear indication of the profits that are involved in the illegal trade of luxury goods,'' Ruiz said.

Available on illegitimate websites and sold in underground outlets, counterfeit high-fashion commodities multiply the illegal profits of smugglers and traffickers, Ruiz said.

"Consumers are tricked into believing they are buying an original product at a significant discount, and the money they spend on these types of goods is often used in other forms of criminal enterprises,'' Ruiz said.

Ruiz urged anyone with concerns about whether a product is genuine, or who has any information regarding suspected fraud or illegal trade activity, to report the information via the e-Allegations Online Trade Violation Reporting System, or by calling 800-BE-ALERT.

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Amazon Admits to Having a Counterfeiting Problem

image: Amazon

Amazon admits that it might have a problem with counterfeits. For the first time ever, the Seattle-based e-commerce giant made mention in its annual 10-K filing of the elephant on its platform: fakes. In a single line in the “risk factors” section of the yearly report it files with the U.S. Securities and Exchange Commission, the Jeff Bezos-owned company stated, “We may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies.” 

The arguably long-overdue admission comes amidst mounting criticism of and a growing number of lawsuits filed against the world’s largest e-commerce platform, most of which have accused Amazon of being “complicit” in the widespread sale of counterfeit goods on its site. These qualms have largely followed from Amazon’s 2014 move to enable China-based entities to sell directly to Amazon shoppers in the West, and in the process, growing its sales by a whopping 20 percent in a single year and enabling its total revenues to blaze past the $100 billion mark for the first time.

To date, Amazon-specific criticism has come from a multitude of sources, including this website, which questioned the merit of its “zero tolerance” policy when it comes to fakes in light of the fact that searches for things, such as “Fake Gucci” bags and “replica Birkin” bags, readily return results for counterfeit goods.

Independent sellers — forced to directly compete on Amazon’s marketplace with scammers who blatantly steal their intellectual property — have spoken out. Casey Hopkins, the founder of industrial design firm Elevation Lab, penned a highly-cited post on his website last year, calling out Amazon for directly profiting from the sale of fakes.

Brands also have not been shy about taking the $1 billion giant to task. Birkenstock, for instance, publicly cut off Amazon, not once, but twice, “terminating  [its] business relations with Amazon” in the U.S. and the European Union, due to Amazon’s alleged failure to commit to “proactively policing its site for counterfeits.”

Still yet, at least one trade group, the American Apparel & Footwear Association, has urged the U.S. Trade Representative to include Amazon’s international arms to its annual blacklist of “Notorious Markets,” asserting that its “members are growing increasingly frustrated with how [Amazon] protects their intellectual property.”

These complaints, among others, have coincided with legal action. Mercedes Benz’s parent company, Daimler AG, filed suit against Amazon in November 2017 on trademark infringement grounds, claiming that in additional to its problematic marketplace, Amazon’s model for labeling products as “Shipped from and sold by Amazon.com” amounts to a “fraudulent business act.” In particular, Daimler asserted that by using the “Shipped from and sold by Amazon.com” model,  “Amazon itself sells infringing items” and “capitalizes upon and profits from Daimler [and other brands’] reputation and goodwill.”

Less than a year after that legal battle was initiated, fashion brand Ella Moss filed a trademark infringement suit against Amazon, alleging that the giant launched a similarly-named private label, Ella Moon, with a similar aesthetic and lookalike designs  in an effort to confuse consumers and steal sales from Ella Moss.

All the while, Amazon’s PR team has been adamant that it “strictly prohibits the sale of counterfeit products and invest heavily – both funds and company energy – to ensure our policy against the sale of such products is followed.”  

According to CNBC, the newly-added acknowledgement of counterfeit goods in its 10-K filing “reflects Amazon’s increased concern over the counterfeit problem on its marketplace, as the words ‘counterfeit’ and ‘pirated’ were never mentioned in its annual filing before.”

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How small U.S. firms fight off floods of Chinese knockoffs

In this case, they are real. But many brands like sunglasses company 100% find themselves in an uphill battle against cheap knockoff products that come from China. (100%/Yahoo Finance)

Two months after the new model of sunglasses came out in May, knockoffs started popping up.

“It was amazing,” says Ludo Boinnard, CEO of 100%, a California-based eyewear company whose popularity has ballooned in the past year. “Two months!”

It was the second time this had happened. Just over two years before, the motocross-rooted company turned to cycling eyewear, and the fakes sprung up in early 2017.

For a small, up-and-coming company looking to gain market share — 100% has fewer than 30 employees in San Diego — there’s an aspect of flattery at seeing facsimiles, both branded with the company logo and unbranded, show up in the marketplace. But it’s also the source of stress.

“They just started to show up. It’s been just exponential; we used to see a lot of Oakley knockoffs but we never paid much attention because we were not in that world. Sometimes you’d see the Facebook and [Instagram] ads with the fake Oakleys,” said Boinnard. “Now, because we’re in the eyewear business, we’re more aware of what’s going on and it’s insane.”

Incidents like these have been going on for a long time, as domestic intellectual property (IP) is co-opted and duplicated with lesser materials abroad, either to be sold as cheap counterfeits, fraudulently, or as something of a generic.

The ongoing trade conflicts and back-and-forth tariffs with China have largely been about the President’s interest in closing the trade deficit, but intellectual property has also been at the forefront of U.S. complaints: China has been guilty of ripping off American tech in the past. (The U.S. has long said that theft of intellectual property, including copyrights, trademarks, patents, has cost American companies billions of dollars.) 

In the discussions of IP by China, the focus has often been on the theft of technology and electronics, often via foreign ownership restrictions that require U.S. companies to show their cards to China or a Chinese corporate partner if they want to operate there. But while a simple copy-paste for consumer goods like sunglasses may not pose the same security risks or enormous financial damage of a complex tech algorithm, it does significant damage to a company.

The potential harm to the company has a few layers. The simplest is that they take away business, as some people will buy the cheaper knock-off on eBay or China’s Ali Express for $25 instead of $150 from an authorized retailer. Many companies and brands suffer from this issue, from Ray-Ban to Gucci to Apple earpods.

Sometimes people know it’s a fake, but mistakenly believe they are getting the same product from the same factory simply with a different logo, or maybe the factory stayed open an extra day off-contract. (This is not the case for 100%, which sources from France and Italy only.)

But the fakes are sometimes sold at full price to unsuspecting consumers, which for sports sunglasses that require shatter-resistance, can cause serious injury. Other times, “people think they’re getting a deal,” said Boinnard. Unfortunately, the lower prices for knock-offs usually means that there isn’t a budget for R&D or safety testing.

“One of the first occurrences is one guy who called and said, ‘I’m very unhappy about your product, I was injured by it,’” said Boinnard. He sent photos of the cracked product and cuts of his forehead, and the company told the guy to send the product. It turned out to be fake. “He bought it full pop on a Chinese website,” said Boinnard.

In other instances, he said, people import fakes and sell them at events — at full price.

“They have the experience of touching and feeling it and saying ‘oh this product is crap,’ which hurts us at a different level,” he said.

A game of ‘Whac-a-mole’

For the most part, 100% contracts out the job of enforcing design patents and IP to Red Points, a firm based in Barcelona that has the technology to crawl the web for design infringement. The company told Yahoo Finance’s sister site TechCrunch that catches around 200,000 fake products for sale every month. Tools like reverse-image search help, as many listings use the company’s actual product photos.

“We have it automated and we have a clear message to all our distributors – if you find a link to a fake please send it and that email gets forwarded to Red Points,” said Boinnard. If there’s a question of legitimacy, the company does have to manually look through flagged products to make the final judgment, something that costs time and money. “It’s a whac-a-mole kind of business,” he said. 

Ethan Wolff-Mann

Senior Writer

Yahoo FinanceAugust 29, 2018

WeChat Being Used by Counterfeiters to Build up their Fraud Chain

Cashing in on the price difference between luxury goods sold in China and overseas, Daigou (代购) – aka. overseas purchasing agents – have long bought goods on behalf of consumers in China. But, as the Chinese government puts in place new measures to boost domestic spending, many luxury brands have lowered their prices in China, bringing them in line with global price points. Consequently, the role of a middleman like Daigou has been threatened, and a career as an overseas buyer has become increasingly unsustainable.
Now, the overseas purchasing business is evolving in a different, darker direction, coined “Daigou 2.0″. Targeting consumers who are looking for luxury goods at a steal, counterfeiters from China are now providing fake goods under the guise of authentic Daigou vendors.


According to an investigative report by the Chinese state media People’s Daily on August 7, which was trending on China’s social media platform Weibo, luxury goods counterfeiters employ a variety of techniques to disguise the true origin of their products, such as paying insiders for production batch codes to reprint onto packaging, giving consumers the illusion they will be able to verify the authenticity of the item
Another common trick, according to the People’s Daily report, is known as ‘gold plating (镀金)’, referring to a practice of shipping the counterfeits abroad first to obtain overseas shipping documents and entry certificates, in an attempt to prove the product has been bought overseas.
Earlier this year, Jiangsu policemen seized more than 80,000 pieces of counterfeit luxury makeup from WeChat vendors in the city of Suzhou, who had been creating products imitating brands like Dior, MAC and Fresh. The total worth of these products was more than 1.5 million USD (approx. 10 million RMB), according to the local police.
In Jiangsu’s case, the main suspect confessed to purchasing barrels of cheap fragrance from Guangdong province, bringing the manufacturing costs to only 15 cents (1 RMB) per 50 ml bottle of counterfeit perfume. These fake products are then labeled with luxury brands, and sold at upwards of 30USD (200RMB) per bottle, leaving room for a huge profit margin.
The presence of trusted Daigou agents in this process can add a layer of credibility to the counterfeiters. In turn, the high profitability offered from selling fake luxury goods has motivated many traditional Daigou agents to participate in this illegal business. In recent years, the livelihood of Daigou agents has been adversely affected, as the Chinese government implements measures such as lower import tariffs on luxury goods, encouraging international brands to lower their China prices.

Recommended ReadingAlibaba’s Anti-Counterfeiting Efforts Appear to Pay OffBy Yiling Pan

An overseas Chinese student, Li, who admits to helping to sell fake luxury goods on WeChat, told Jing Daily, “the profitability now is attractive, and it’s hard to recognize the difference between counterfeit and real goods.”
She continued, “we don’t handle the manufacturing process of any product, but deliver them to clients. We then keep a certain percentage of the profits from every client we bring in.”
The intimate nature of WeChat as a one-on-one private messaging tool now serves as a shortcut for counterfeiters to strike deals.
“There is a huge loophole in the current law enforcement for the punishment of WeChat vendors” commented one Weibo user. “Wait, I think I might have bought a counterfeit product,” said another, demonstrating the widespread distrust shoppers now have for buying luxury goods via WeChat.
Both luxury cosmetic brands and WeChat itself are taking actions to prevent counterfeiting. Many high-end cosmetic brands like Estée Lauder, SK-II, La Mer, and Sulwhasoo now offer to recycle their customers’ empty skincare bottles for small rewards, leaving less room for Daigou to collect empty packaging. WeChat also claims to have punished more than 72,000 vendors selling counterfeit goods and shut down 875 counterfeit-related mini-programs.
Tencent did not immediately respond to a request for comment.

$70M of fake Nike Air Jordans seized in Newark from China

They looked like thousands of generic shoes without any logos or labels.
But that was just the start of the ruse.
Federal authorities on Tuesday arrested five individuals charged in a scheme to import more than $70 million in counterfeit Nike Air Jordans through Port Newark from China.
The sneakers were manufactured to resemble various editions of Jordans, which typically retail for $190, but without any identifying markings so they would not be flagged by customs officials, authorities said. Fake logos were allegedly added to the shoes after they came through the port, and then the footwear was sold to people throughout the U.S.

Real Air Jordans. (Nike)

The five -- Miyuki Suen, Jian Min Huang and Kin Lui Chen, all of New York, and Songhua Qu and Fangrang Qu of Hicksville, N.Y. -- are accused of importing at least 42 shipping containers between 2016 and 2018, bringing in an estimated more than 380,000 pairs of sneakers. If convicted, they face up to 20 years in prison.
It is not an uncommon scam, officials say.
U.S. Customs and Border Protection last year seized $1 billion in counterfeit goods, and inspectors say they frequently come across shoes, handbags and other consumer goods that appear generic because there are no identifying brand names affixed to them. Those logos and names are then added after the items pass through customs, they said.
In one case, a shipment of Timberland boots had an insert glued over the logo on the bottom of the boot. An inspector discovered the ruse with a flick of a knife on the heel-side of the shoe.

By Ted Sherman

tsherman@njadvancemedia.com

NJ Advance Media for NJ.com

LINK

Life Funded by Selling Luxury Designer Counterfeit Labels

A dishonest businessman who funded a luxury lifestyle by running a large-scale counterfeit designer clothing company has been jailed.

Vinay Kumar Hansrani (48) splashed out some of the profits of his "sophisticated and successful illegal business enterprise" on several cars including an £187,000 Rolls-Royce and an Audi A5 – while declaring profits to the taxman of just a few thousand pounds.
Leicester Crown Court was told that when city council's trading standard officers raided his factory, called Can, in Halkin Street, Belgrave, Leicester, in December 2011, they seized nearly 6,000 counterfeit items with an estimated retail value of between £239,000 and £478,000 – although Hansrani's cut would have been about £100,000.

In a 20-month period, £364,000 of unexplained cash went into his bank accounts.

'The whole place was full of boxes of counterfeit items'

He spent the money on a £187,000 Rolls-Royce

Jane Sarginson, prosecuting, said that when the premises were raided three embroidery machines, worth £30,000 each, were churning out clothes with fake designer logos, including Armani, Gucci, Boss and Ralph Lauren.
"It was a work in progress," she said, "The whole place was full of boxes of counterfeit items, from top to bottom, on both floors."
Ms Sarginson said supplies were delivered nationwide, including to numerous customers in Manchester, but also Glasgow, London and Exeter for onward sale by warehouses and retail outlets. Hansrani (48), of Hall Close, Kibworth, was jailed for two years. Sentencing, Recorder Heidi Kubik said she took into account the six-year delay in bringing the case to court and his ill health.
She said: "It was entirely your own enterprise and you were blatantly spending money from profits on several separate transactions on several vehicles, including a Rolls-Royce.
"It was a sophisticated and successful illegal business enterprise."

What the defendant pleaded guilty to

Labels found at the factory

The defendant pleaded guilty to 29 counts of possessing trademark logos and labels, relating to world-famous designer brands including Boss, Barbour, Diesel, Fred Perry, Lacoste, Gucci, Superdry, Tiffany & Co, Adidas and Nike.
He also admitted three counts of application of a trademark, by using a sign likely to be mistaken for a registered trade mark.

He admitted possessing three embroidery machines adapted to make copies of trademarks.
Hansrani pleaded guilty to money laundering of £198,000, relating to car purchases, between March 2011 and April 2012.

'He recognises the stupidity in going into counterfeiting'

Vinay Kumar Hansrani outside Leicester Crown Court

Nicholas Flanagan, mitigating, said that before 2011, Hansrani ran a legitimate family business in textiles.
When a major customer went out of business, the defendant was forced to make redundancies which caused "significant hardship".
Mr Flanagan said: "He now recognises the stupidity in going into counterfeiting to keep his business afloat."
The barrister disputed the estimated value of the goods seized. He said Hansrani accepted being "a key integral part" of the black market chain, but he also had legitimate contracts, including supplying clothing for schools.
The money laundering related to five or six transactions with car dealers and the Rolls Royce was bought with a view to using it for weddings, which never got off the ground and he sold it having done less than 10,000 miles in it at "a considerable loss."
Mr Flanagan said the six-year gap between arrest and sentence had a detrimental effect on Hansrani and his family, resulting in ill-health, stress and anxiety.
References spoke highly of him as a churchgoer, charity fund-raiser and voluntary work. He was no longer running a business but working in a warehouse to support his family.

'It was a long and complex inquiry'

A number of branded hoodies were found in the factory

Afterwards, Ron Ruddock, manager of the city council's trading standards department, said: "We are pleased with the sentence. Mr Hansrani was given a significant reduction for his personal circumstances and the delay in the prosecution.
"It was a long and complex inquiry into this sophisticated operation that saw goods going in blank, being embroidered and coming out branded.
"We prosecute such cases not just to protect the brand-holders but legitimate businesses and traders who comply with the law."

The delay in the complex investigation was due to a number of factors, explained Ms Sarginson, including obtaining statements from all 29 designer brand companies to confirm sample goods were fake.
It involved following a financial trail with limited departmental resources due to "austerity measures," tracking down more than 70 trading contacts, of which only four turned out to run legitimate businesses.

How Well Known Labels Are Changing the Counterfeit Stigma

 

A Guccy shirt from Gucci Resort 2018Photo: Yannis Vlamos / Indigital.tv

Once upon a time, counterfeit designer goods were a fashion no-go. Buying a fake piece of clothing or accessory was associated with a try-hard attitude and an empty pocket. Take, for example, Sex and the City’s “Sex and Another City” episode, in which Samantha Jones bought a knockoff Fendi bag from the trunk of a car. After showing it off to her friends, she noted, “You’d never know it wasn’t real Fendi unless you look inside at the lining.” Later on, Samantha’s dirty little $150 made-in-China secret was found out publicly at a party—a small price to pay for long-lasting embarrassment.

But times have changed. Recently, some of the most influential runway designers have created cringe-worthy, definitely-not-real clothes and accessories—a far cry from Samantha’s trunk-plucked Fendi, inspired by the more modern appeal of bootleg fashion. Alessandro Michele showed Fake Gucci T-shirts loudly emblazoned with the label’s logo for Resort 2017, a design based on counterfeits that were popular on the streets during the ’80s. The brand’s Resort 2018 collection continued with the theme of through-the-looking-glass bootleg culture: A coat with Gucci-monogrammed sleeves became the meme heard round the Internet after it drew comparisons to a similar topper by Harlem-based designer Dapper Dan, the original kingpin of DIY luxury bootlegs, who created a Louis Vuitton monogrammed coat for Olympic medalist Diane Dixon in the ’80s. There were also shirts that read Guccy—reflecting a trend at bargain bazaars, where misspelled names (deliberate or otherwise) are on every corner.

Before Gucci’s foray into faux fakes, there was, of course, Vetements, which turned the concept of fake fashion on its head and shilled “real fakes” to the mass market. In October 2016, the brand held an “official fake” garage sale outside Seoul, where off-kilter remakes of iconic pieces nodded cleverly to the proliferation of Vetements bootlegs in that city. Since Vetements, like Gucci, has become one of the most copied labels in the world, the strategy makes sense: If you can’t beat the copycats to the punch, then join them for a higher price tag. The approach seems to be working. Those Fake Gucci T-shirts have sold out both at Selfridges and Farfetch.

A Fake Gucci T-shirt from Gucci Resort 2017Photo: Yannis Vlamos / Indigital.tv

I recently returned from Tbilisi, Georgia, with hoards of thick plastic “Chinatown” bags printed with the double-C Chanel logo (with the house’s name written as “Ceanhl”) and other totes combining Louis Vuitton’s classic Damier monogram with Gucci monogrammed tabs. The cheap carryalls may be considered the bane of luxury—they are scathingly, shamelessly fake—but there’s also a cheeky charm that comes with proudly sporting something so obviously not real. My colleagues seemed to agree with this line of thinking: The totes were a hit at the office. “It’s a so-bad-it’s-good thing,” said Vogue’s Fashion News Director, Chioma Nnadi, the recipient of one of the bags. “There’s nothing subtle about the fakeness of it. It’s like no-shame fake.”

Fake Chanel tote bags, a fake Versace shirt, and fake Chanel bedsheets from Eastern EuropeCourtesy of Liana Satenstein / @liana_ava

On a smaller scale, there is the rise of millennial bootleg artists. Designer Ava Nirui of @avanope has built a career out of embroidering Gucci onto Champion hoodies and merging Carhartt with the Chanel name. Imran Moosvi, aka @imran_potato, uses the Louis Vuitton and Gucci monograms in almost everything—splicing them into Nike zip-up hoodies or creating natty ties from them. “For me personally, fake stuff is more fun,” he says. “There’s more freedom to do whatever you want with it. I think the stigma associated with something being bootleg or fake is starting to disappear a little bit, because at the end of the day, people just want to see a cool product.”

But does the trend have legs? “I don’t think this design culture has longevity, because people will always find a way to overdo and ruin,” Moosvi says. After all, is there really fun in spending top dollar for an item that mimics a fake $15 one? Luxury consumers so far seem not to mind; it remains to be seen whether Guccy will have the same effect. Until then, maybe it’s more real to stick with the fake deal.

$1.5M in Counterfeit Goods Seized & 5 Arrested in Nassau County

Photo: Alyssa Reichel, Fern Ciraolo, Jack Huzarsky and Elsa Bonilla
Search warrants conducted Monday morning led to five arrests and the recovery of an estimated $1.5 million worth of counterfeit designer pocketbooks, watches, jewelry and clothing, law enforcement officials said at a Tuesday press conference.
Among the many items recovered during the Nassau County counterfeiting sting, a Hermes birkin bag, which retails for $21,000, was being sold for only a couple hundred dollars, police say.
The birkin, along with a Chanel bag were some of the fake designer items recovered from a Woodmere location. Alyssa Reichel, 49, of North Woodmere, was arrested for the second time for selling fake merchandise out of Ego Trip inside the Cheveux Day Spa and Salon, located at 964 Broadway, police say.

A Chanel bag, which retails for $3,000 to $4,000, and a birkin bag were being sold by Reichel out of a North Woodmere location for a couple hundred dollars each, police say.

The recovered goods, taken from locations in Hewlett, Woodmere, Syosset and Westbury, were being sold out of homes, businesses and cars, police say.
Fern Ciraolo, 53, of Hewlett Harbor, was arrested after police conducted a search warrant at her home. “When we executed that warrant, there was a strong odor of marijuana in the house,” Nassau County Det. Sgt. Patrick Ryder said.
Police say they recovered marijuana, MDMA and acid from the home.

Fern Ciraolo’s 21-year-old son, Justin Ciraolo, was arrested and charged with felony drug possession.

Justin Ciraolo via NCPD

Others arrested during the search warrants were Jack Huzarsky, 74, of Syosset, and Elsa Bonilla, 31, of Westbury. Police also conducted a search warrant in the Hempstead area, but the woman was not at home at the time. An outstanding warrant has been issued for her arrest.

Recovered goods from the Syosset location.

Recovered goods from the Syosset location.

Recovered goods from the Hewlett location.

Recovered goods from the Westbury location.

Recovered goods from the Hempstead location.

Selling fake merchandise is a nonviolent, “housewife” crime that isn’t normally viewed by the public as a serious crime.
However, Nassau County District Attorney Madeline Singas says counterfeiting is not a victimless crime. In fact, counterfeiting is a felony and those convicted face up to four years incarceration.
Counterfeit products are often synonymous with child labor and deplorable conditions, officials say. Fake goods are not tested and may contain toxic materials. Fake electronic equipment have been known to explode or items that people put on their skin or lips have caused burns, Singas says.
Counterfeiting also costs American businesses, including mom and pop stores, more than $250 billion annually, Singas says.
Homeland Security Inspector Jason Molina says all the goods recovered from these search warrants will be destroyed.
“The holiday season is prime time for counterfeiters,” Singas said. “The message for consumers is to be vigilant and buy only from trusted retailers.”

How do you know if a good is counterfeit or not?

• High-end brands do not sell their items out of cars, houses or on the street.
• Check for stitching and the quality of the goods.
• Logos may be blurred out or have subtle spelling errors, such as a "Bolex" watch instead of a Rolex watch.
• “If it’s too good to be true, it is,” Singas says.

Fern Ciraolo was charged with two counts of second-degree counterfeiting. Huzarsky was charged with second-degree counterfeiting. Reichel was charged with two counts of second-degree counterfeiting. Bonilla was charged with four counts of second-degree counterfeiting.
All four who face counterfeiting chargers were issued a desk appearance ticket returnable at First District Court in Hempstead. Justin Ciraolo, who was charged with four counts of third-degree criminal possession of a controlled substance and fourth-degree criminal possession of marijuana, will be arraigned Tuesday at First District Court.

6 REAL REASONS FAKES ARE DANGEROUS

6 REAL REASONS FAKES ARE DANGEROUS

Counterfeit handbags, shoes, jewelry and accessories are not only illegal, they can be toxic to the economy, environment and even your health. According to CBS New York, the sale of counterfeit goods account for a detrimental $250 billion industry. Here are 6 reasons, the price simply does not justify the purchase:

1. Child LaborThe counterfeit market relies on cutting corners to maximize profits - this ideology unfortunately applies to every aspect of counterfeiting process. Counterfeiters do not abide by the standard government regulations put into place with intention to protect workers. Employees assembling counterfeit goods are often children, working for less than fair wages, in less than acceptable conditions. It is not uncommon for these underaged employees to be sent by their families to live and work in counterfeiting factories in order to help provide for their impoverished families back home. 

2. Counterfeit Goods Fund Illegal Activity

Many counterfeit operations are created as a front to launder money acquired from criminal activities. Most often, organized crime networks operate many illegal activities all at once and use the sale of counterfeit goods to either launder money or generate funds for other criminal activities like drug trade, human trafficking, sex trafficking, robbery or terrorist activities. All of these activities hurt both local and global economies as well as cause severe injury and harm to basic human rights.

3. Unsafe Working ConditionsTo make matters even worse, the factories themselves force unsafe working conditions upon their employees. Workplace safety is of no concern and many serious injuries often occur while on the job. Protective clothing such as masks and gloves are not provided to employees and therefore they work unprotected from toxic chemicals, dyes and unclean air quality clouded with dust, fumes, or even fabric particles from sewing, cutting or distressing fabrics. Exposure to these elements can cause serious longterm illness.

4. Health Risks and DiseaseOne of the most common health issues caused by poor working conditions is Silicosis, a respiratory disease that can lead to death if left untreated. Silicosis, is the result of silica dust particles entering the lungs and is most frequently acquired from sandblasting materials to achieve a 'distressed' look (thats right - the faded jeans that literally everyone wears). In 2009, over 20,000 workers suffered from this disease (due to workplace conditions) in China alone.

5. Negative Environmental ImpactLooking at the issue from an environmental standpoint, counterfeiting factories do not dispose of their waste properly or in accordance to any regulation. Surrounding communities can feel the affects by becoming unknowingly exposed to toxic chemicals in their air, soil or water sources. Again, potentially leading to longterm illness and environmental issues.

6. They Can Kill You.Counterfeit goods can be hazardous to your health. The technical construction of counterfeit goods is under par at best. Materials used to make fake handbags, shoes, clothing and accessories are often completely toxic! This is primarily concerning when counterfeiting children's apparel, though the toxins can most certainly affect adults as well. Lead paint can often be found in counterfeit goods which is highly toxic and can be deadly if ingested or if the child puts their hands in their mouth after coming into contact with the product containing lead paint. Many of the fake handbags, shoes and accessories that we have seen over the years have a pungent plastic-like or even gasoline-like odor to them. This can undoubtedly be bad for not only your health but also the environment.

Currently, trade in counterfeit goods is estimated to be a $500 billion dollar global industry. By the year 2025 it is predicted that the global economic loss due to counterfeiting could reach $2 trillion dollars annually. In 2005, customs preformed 8,000 seizures of goods valued at more than $92 million. In the United States alone, it is estimated that 750,000 jobs are lost each year due to counterfeit goods. Please follow this link for an extensive report on the severity of counterfeiting in the global marketplace.

Real Authentication offers expert authentication services for luxury designer handbag brands like Chanel, Hermes, Louis Vuitton, Givenchy, Burberry and many more. Our handbag authentication experts have truly studied the ins and outs of each and every brand we offer authentication services for. It may seem hard to believe, but with daily research of each designer handbag brand, we are able to confidently pass our expertise off to you through authentication, appraisal and identification services. We are always happy to answer any questions or concerns you may have regarding your preowned designer purchases. We specialize in handbag authentication but also provide many additional services you may need as well!

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