From the evolution of noise cancelling and wireless technologies to the advancements in high fidelity audio, there have been a lot of catalysts for the growth we’re experiencing right now in the audio industry. However, with this growth, the parasitic entity that is counterfeiting grows along with it.
From headphones to speakers, mics to band gear, the market is rife with knockoffs. In the beginning, they start off as pretty nominal in terms of damage to the industry. However, the longer counterfeiters are allowed free reign on the market, the bigger and more intolerable their effect are on both the audio industry and society at large.
The first obvious victims of counterfeiting are both the OEMs and the consumers. When consumers buy knockoffs, OEMs lose out on profits.
Knockoffs are cheap to make therefore they’re often priced much lower than the original. Consumers are attracted by them because of this. However, since counterfeit manufacturers often do not operate under the strict quality control measures of the OEMs, they tend to be of lesser quality than. Buyers of fake audio hardware, therefore, end up with a low-quality equipment that break easily and are not covered by the warranty policies of the brand.
In some cases, the detriment to the consumer doesn’t just end with easily breakable hardware. Fake goods also pose a very real physical threat to consumers. Because of their subpar quality, they can be a fire hazard.
As for OEMs, the damage isn’t limited to their financial bottom lines, their brand equity also suffers. When consumers aiming to buy legitimate goods end up with fake ones, brand loyalty takes a huge hit. This priceless relationship cultivated through the years can be quite difficult to reestablish once broken.
But it’s not simply just the OEMs and the consumers that suffer due to fakes. Society as a whole suffers as well. Because OEMs and the brands that sell them don’t get to take in the profits that they’re due, they pay less taxes and therefore, contribute less than they otherwise would have.
Why the Counterfeit Industry is on the Rise
Counterfeiting has always been present in the marketplace. Back then, however, the counterfeiting methods were so rudimentary that it was quite easy to tell the counterfeits from the original. Discerning consumers, therefore, were able to protect themselves from the fake goods.
For some brands, the loss is so minimal that they don’t even bother going after them. This complacency gives counterfeiters the green light to make more and better copies until they eventually eat up a portion of the original brand’s market share. By this point, getting counterfeiters to stop will be a more difficult and expensive task.
Sometimes the costs get so prohibitive that affected brands that compete for the same market has to team up and share the costs of going after counterfeiters. This is exactly what the giants of the audio industry such as Harman, Audio Technica, Sennheiser, and Shure did just to get make a significant dent on the illicit activity. It’s a necessary alliance between competitors so they can all continue to focus on innovating in their products.
Furthermore, developments in eCommerce have made it infinitely easier for counterfeiters to mix their goods with authentic ones. The lack of physical examination of the product makes it much easier for consumers to mistakenly buy fake ones even if they do intend to buy original hardware. Because of this vulnerability, most sales of counterfeit goods are done online.
Another problem is the lack of customer awareness. Some companies might downplay counterfeiting because they’re aware of the damage that it can do to brand equity. However, lack of awareness about this matter makes customers more vulnerable to getting duped by fake goods.
On another level, some customers don’t seem to mind buying fakes as long as it looks close enough to the original. They even seek these knockoffs out because they’re cheaper and easier to find not knowing about the risks that these bogus products pose on their health and on the industry at large.
What’s Currently Being Done About Counterfeit Goods?
One way the audio industry is retaliating against the threat of counterfeiting is by teaming up and going after counterfeit organizations. Fortunately, there is some progress in this department. As earlier mentioned, industry giants, Audio Technica, Shure, Sennheiser, and Harman recently joined forces for a massive sting operation in Enping City, China. The 2019 operation was a massive success that yielded in the closure of Soundpu – a counterfeit goods manufacturer that has amassed a fortune in mass producing bogus audio hardware.
The products seized were a dizzying array of counterfeit goods that might even fool the most loyal customers of the brands they’re trying to imitate. The street value of the illicit goods is estimated to be around $600,000. Industry experts believe that there are countless other factories that manufacture the same if not larger volumes of fake products.
Just going off this figure, it’s easy to approximate that the entire industry loses millions of dollars every year to counterfeiters. In essence, the market share that counterfeiters occupy can be seen as another industry player. The only difference is that there are no rules for this new player therefore, everyone else is already at a disadvantage.
The only problem with this method is that counterfeit manufacturers can simply set up shop elsewhere and continue to make fake audio gear. The whole measure can easily end up as an expensive cat and mouse chase that OEMs might not have the endurance to win.
A much more sustainable solution is to educate consumers on how to distinguish counterfeit from original so that they purchase the latter. However, even if consumers desire to learn how to determine authenticity, counterfeiters have both the resources and the freedom to adjust their manufacturing processes to make their products feel more authentic.
Even the most subtle details are not spared by these counterfeiters. From texture, to the free cleaning cloth OEMs provide with their products, these tiny details can be copied quite accurately by the counterfeiters. Customer education campaigns, therefore, can only go so far. There is a need for a better way to make sure only authentic products get to our customers.
What Needs To Be Done?
The counterfeit problem is not merely a legal issue or a supply chain exploit. It’s an amalgamation of complex factors that can’t be simplified and solved by sting operations and customer education campaigns.
What the industry needs is to create a coherent strategy that entails assessing how big the problem actually is, hunting down and eliminating vulnerabilities in the supply chain, and working with governments to bring down counterfeiters once and for all.
Join our Managing Director, Alfons Futterer, as he will be speaking in this webinar by the Audio Product Education Institute. He will be discussing about advanced anti-counterfeiting materials and strategies in the audio industry as well as:
- Profiling a brand’s risk exposure to #counterfeits, parallel trading and production overruns
- #Brand #protection strategies and solutions for start-ups and mature companies
- Developing dynamic strategies to improve counterfeit resilience and increase #customer #loyalty and relationship.
Join us on Wednesday, February 17, 2021 – link below!