Curbing the counterfeiters

Middle East countries are among the world's worst offenders on fake software.

  • E-Mail
By  Andrew Seymour Published  April 5, 2007

For vendors, counterfeiting of their products is something they simply cannot afford to take lightly. A reputation that has been built over a period of years can suddenly be destroyed, and profit levels eroded, if a batch of fake goods finds its way into the market. Meanwhile, every dollar that falls into the hands of the counterfeiters deprives authorised go-to-market channels of income.

Counterfeiting can massively compromise brand equity and credibility, especially if buyers do not realise they are handling a rogue product. As soon as the item experiences any problems, the possibility of the consumer associating that brand with poor quality increases tremendously.

"At the end of the day, if the product goes wrong and the reseller has either got away or is not providing the service, it creates a very bad name for the brand," says Sumit Kumar, regional manager MENA at networking vendor USRobotics.

The scale of counterfeiting is enormous. A study conducted two years ago by KPMG and industry body the Alliance for Grey Market and Counterfeit Abatement (AGMA) estimated that as much as 10% of all technology products sold globally were counterfeit.

Translated into value terms, more than US$100 billion of global IT revenue is lost to counterfeiters each year.

"In the Middle East it is difficult to estimate the size of the problem, but we do feel that compared with other regions like Europe it is slightly higher," says Sidney Pereira, consumables product manager at the Middle East arm of Canon. "We have carried out raids in Saudi, the UAE and Egypt so I guess we have come across this problem in quite a few places. Lebanon is another one as well; it is not really restricted to one place anymore."

Anecdotal evidence suggests that counterfeiting is more widespread in the larger Middle East markets where the intricacy of local channels, coupled with the extra resources it takes to efficiently police these environments, makes identifying the perpetrators an arduous task.

Ranjit Gurkar, general manager at Brother Gulf, cites Egypt and Saudi Arabia as markets where the printing and digital imaging manufacturer has witnessed high levels of counterfeit.

"To a certain extent - and it's also true about Iran - the problem is at the consumer level," he says. "They see the low prices as a bargain until they begin having copy quality problems and request replacements or warranty claims. Only at that stage do they face the music and realise that it is not worthwhile in the long term."

Certain items still remain more vulnerable to counterfeiting than others, particularly if they possess strong brand recognition and can be reproduced at low cost. This includes software, of course. Piracy places a huge burden on legitimate software channels and swipes billions of dollars from the industry in the process.

Although piracy levels have been dropping around the region over the last couple of years, the last major study by IDC showed that the rate in the Middle East was an alarming 22 percentage points higher than the global average.

The printer market is also notorious for being a victim of counterfeiting, especially the - extremely profitable - consumables. Counterfeit ink cartridges - which illegally carry a vendor's trademarks and packaging, and contain an inferior product - are a huge headache for printer manufacturers.

Sources in the market claim fake cartridges can be procured in China for little more than a dollar and resold for a price seven or eight times that figure in markets such as the Middle East.

For illegitimate resellers capable of shifting thousands of units at a time this represents an attractive business.

The impact this has on the overall market is highly damaging and eats into the revenues of authorised channels, according to Gurkar at Brother.

"In terms of the extent of the problem I would say that for all machines that were introduced in the market more than three years ago, more than 50% of the consumables sold in the market are counterfeited," he says.

One dilemma facing the industry is how to overcome the increasingly inventive methods deployed by the perpetrators of this crime. "The counterfeiters are using pretty sophisticated tactics now," admits Pereira at Canon. "What used to happen is that we would look for customs to identify shipments where the entire product was coming through. But we have now found out that the counterfeiters are importing the components separately. In a toner box you typically have literature, packing material, shrink wrap and then the box itself. These products are coming in through different channels and then getting assembled locally within the country."

OEMs are taking a variety of different approaches to combat the counterfeiters, starting on the manufacturing floor where policies are put in place to ensure that anti-counterfeiting production techniques are strictly adhered to.

Making sure that this is being enforced by contract assembly partners, who may be responsible for overseeing packaging and security labelling, is vitally important too.

The use of holograms, for instance, has become a popular mechanism to indicate a product's authenticity, although it isn't necessarily foolproof.

"The problem is that unless the consumer has a device with which they can differentiate between an authentic hologram and a fake hologram it can be difficult to tell the difference," concedes Gurkar at Brother.

As the Middle East market evolves and more vendors increase the amount of resources they have in the region, there is a higher chance that the counterfeiters will find it more difficult to penetrate the market.

Addressing the problem from a remote central location always has its drawbacks, whereas a strong and visible local presence makes it easier to transmit a consistent anti-counterfeiting message and monitor what is happening in the market.

The Middle East channel has a huge role to play in eradicating counterfeit products from the market, but it must understand that the nature of the threat is permanently changing.

"Every time we do a raid something new comes up," reveals one vendor. "That's the only way we learn about their new modus operandi. And in that sense we have just got to keep catching up with them."

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code