Entrupy’s Annual Report Sheds Light on the Evolving Counterfeit Market
Despite ongoing action being taken against counterfeits over the years, dupe culture remains big business.
As Entrupy, the scalable, AI-powered product verification solution company, continues to tackle higher quality counterfeits and gray market goods the company has released its 2023 State of the Fake report. The report details the current scope of the issues at hand, growing trends and impacts on the global economy.
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Across all categories, including consumer goods and digital piracy of entertainment and software, nearly $2.8 trillion of counterfeit goods are confiscated each year, according to Entrupy. It’s a global problem, counting for $991 billion in international trade each year, with high costs to the environment, society, businesses and economies.
Notably, in its authentication testing, in 2022 Entrupy found the brands with the highest amount of unidentified counterfeits to be Goyard (21.4 percent), Saint Laurent (13.1 percent), Prada (12.9 percent), Dior (12 percent) and Celine (10.2 percent). Businesses with the highest unidentified rates in 2022 were pawn shops (13 percent) and offline resellers (10.1 percent), followed by online resellers (7.7 percent), C2C marketplaces (4.5 percent) and wholesalers (1.6 percent).
“With the continued expansion of luxury resale, we see more and more trading platforms and models take shape everywhere around the world,” said Vidyuth Srinivasan, chief executive officer at Entrupy Inc. “Consequently, counterfeits have mushroomed everywhere, even in erstwhile smaller markets such as Mexico, where counterfeits were rarer to appear.”
Entrupy’s research finds that in 2020 illegitimate imports into the U.S. cost the economy $54.1 billion in retail sales, $33.6 billion in wages and benefits and $13.5 billion in state and local sales tax revenue. In 2022, the U.S. customs and border protection seized IP-infringing items with a retail value over $2.98 billion with apparel (30 percent) and handbags and wallets (28 percent) counting as the top seized products, followed by footwear (13 percent) and watches and jewelry (12 percent).
In the U.S., Entrupy’s data finds that consumers collectively spend more than $100 billion each year on intellectual property rights-infringing goods, accounting for 20 percent of counterfeits sold illegally worldwide. U.S. Customs and Border Protection ports across the country reported staggering seizures in 2022. 2022 marked the first year that the Los Angeles/Long Beach seaport seized $1 billion worth of counterfeit products in under a year. The port of Indianapolis seized 7,901 counterfeits, a 55 percent increase from 2021. Other ports with high counts of counterfeit seizures in 2022 include Louisville, Kentucky; New Orleans; Chicago, and Cincinnati.
In addition to the impact on the economy, Entrupy’s report details the price that society and the environment are paying because of counterfeits.
According to testing conducted by The American Apparel & Footwear Association, 36.2 percent of counterfeit apparel tested contains “dangerous levels of toxins” with one item showing more than 600 times the exposure limit of cadmium (a toxic heavy metal that damages kidneys, bones and respiratory systems). Meanwhile, counterfeit footwear, which is made with lower-quality materials, is also causing harm even leading to a higher risk of injuries.
Moreover, counterfeiting has ties to organized crime, the exploitation of forced and child labor and the production of toxic materials that get sent to landfills and can seep into the ecosystem. Counterfeiting is a more profitable industry for organized crime than drug trafficking or human trafficking and, according to the United Nations, it is estimated that the practice provides $250 billion to organized crime annually.
Among the factors that are exacerbating counterfeiting, Entrupy lists the impact of COVID-19, evolving sales channels and shifts in culture.
Entrupy’s findings show that growing the culture is a group of consumers who are drawn to fakes because of the high prices and the ubiquity of luxury products. Gen Z consumers especially are turning to super fakes, said the company, as a response to high inflation and a decreased demand for conspicuous consumption.
Alarmingly, authors of the report say, fakes are trendy, “rising in popularity on social media, the pandemic’s e-commerce boom and Gen Z consumers thinking that knockoffs are subversive.” It has become, in some ways, “trendy to show off how good of a dupe one could find and for how good of a price.”
“Dupe culture is a question that I have been asked repeatedly in the past year, with many folks trying to blame specific social media platforms,” Srinivasan said. “I find this argument to be short-sighted and cudgel, when in fact, counterfeits have always been acceptable for a certain segment of the population, regardless of geography or income. Only, the modes of availability of fakes have changed and become more ubiquitous, which has no bearing on the platform but the demand itself.”
Srinivasan went on to say that surprisingly, he has seen that this segment of consumers purchasing counterfeits today has equal amounts of younger people who have budding income and extremely wealthy individuals who seek counterfeits to protect their authentic products, but ultimately show off counterfeit versions in the same way.
As the battle against counterfeits continues, authors of Entrupy’s report write that collaborative approaches across the industry will be required including participation from brands, retailers, marketplaces, governments, the industry and social media. Solutions listed include authentication technology, sharing information, monitoring takedowns, international coalitions, public education campaigns, shop selling guides and legislation.
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