Companies facing online counterfeiting in Russia
Focus on the luxury sector
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]Counterfeiting is a growing problem for many organizations. According to a 2019 report by the OECD (Organisation for Economic Co-operation and Development) and the European Union Intellectual Property Office, The trade in counterfeit products represents 3.31 TPH of world trade [1]. This illicit activity, which consists of reproducing characteristic elements of the original product without the consent of the trademark holder, affects many sectors, from textiles to electronics, including cosmetics.
Counterfeiting has negative repercussions for both the brand and the consumer.. The infringed trademark risks losing exclusive distribution rights for its product and suffers from a negative image among consumers. This can, in fact, impact the company's profits and generate significant lost revenue.
As for consumers, they face health risks stemming from the poor quality of counterfeit products and the fact that some of their components do not comply with existing health guidelines. Nevertheless, despite these consequences, consumers resort to these products due to their affordability and, in some cases, their still satisfactory quality.
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]Russia and the scale of the counterfeit market
[/et_pb_text][et_pb_image src="https://www.intrinsec.com/wp-content/uploads/2019/12/russia1.png" align="center" _builder_version="4.0.7"][/et_pb_image][et_pb_text _builder_version="4.0.7"]Homepage of a Russian e-commerce website
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]According to a study by Brandmonitor, a Russian firm specializing in intellectual property protection, The annual turnover generated by the underground economy of luxury goods (280 billion rubles, or 3.9 billion euros) is estimated to have exceeded the turnover of the official market (250 billion rubles, or 3.5 billion euros)..[2]
This phenomenon has notably developed with the democratization of Internet use in daily life and the elimination of intermediaries in the sales sector. The digitization phenomenon, which has many positive impacts on the economy, could, in some cases, facilitate the sale of counterfeit products. Indeed, in the past, counterfeit goods were more readily available through physical markets such as…« Gorbushkin Dvor »"located in Moscow. Nowadays, parallel networks are increasingly using the internet to offer their products on a large scale. According to consumer behavior analysis, The online sale of counterfeit luxury goods is estimated at 84 million rubles, or 1,187,000 euros. [3].
Therefore, given the significant role of Russian networks in the trade of counterfeit goods, the Cyber Threat Intelligence unit sought to shed light on the overall state of the phenomenon. We will thus approach the subject from the perspective of three questions that can provide a general overview of the problem of fraud on the Russian-language web: where are these parallel networks located? what are the main products offered? how do these networks manage to attract consumers?
In order to make an initial identification of potential counterfeiting networks, we turned to search engines known as «"classics"» like Google. An additional search was also carried out via Yandex, the Russian search engine, which made it possible to detect some cases not indexed in the first pages displayed by Google.
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What are the Russian distribution channels for counterfeit goods?
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]Counterfeit networks use the identity of legitimate businesses to promote their products. Indeed, these networks tend to claim in their "shop" or "advertisement" description that they are an official distributor of the brand. These networks operate through the following channels:
- E-commerce platforms or classified ad sites
Screenshot of products offered on an e-commerce platform
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- Distribution via social media
Screenshot of perfumes offered on the social network Facebook
[/et_pb_text]Screenshot of perfumes offered on the social network Instagram
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- Instant messaging applications such as WhatsApp or Telegram
- Online stores dedicated solely to counterfeit products
What are the top 5 most frequently offered products on these networks?
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]In Russia, several sectors are impacted by counterfeiting. However, some areas are particularly affected by this problem:
- Perfumes
The cost of manufacturing counterfeit perfume is attractive due to the use of industrial alcohol and inexpensive synthetic fragrances. This makes the business highly profitable, and consequently, parallel networks successfully imitate perfumes from luxury brands, as well as inexpensive products aimed at a wider audience.
The screenshot visible below demonstrates the excessively low price of the counterfeit product compared to the original perfume (approximately 33 times cheaper).
[/et_pb_text]Screenshot of a luxury perfume sale
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- Cosmetic
The sale of cheap cosmetics by counterfeit networks is becoming increasingly popular. Many French cosmetic brands are among the products offered. It should also be noted that some American and Korean brands, actively promoted through social media (influencers, etc.), are also featured.
- Ready-to-wear
A similar situation exists with replicas of luxury ready-to-wear products. The price difference can vary depending on the quality of the counterfeit. Furthermore, these networks readily use certain attributes of a brand (logo, shape, etc.) to produce, for example, a new model of bag or sneakers.
[/et_pb_text]Screenshot of product templates using a luxury brand logo
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- Tobacco
According to a study conducted by the Kantar TNS agency, in the first quarter of 2019, counterfeit cigarettes represented 10.31% of the entire tobacco market in Russia. The trend in recent years has been that these counterfeit products are manufactured outside the Eurasian Economic Union, particularly in the United Arab Emirates and Serbia.
- Spirits
Among the most frequently counterfeited spirits are vodkas, whiskies, and certain types of French wines and cognacs.
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]How do these networks manage to attract consumers?
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]Counterfeit distribution networks rely on sophisticated methods that can make it difficult to distinguish between a legitimate product and a counterfeit one. These networks appear to have developed an intelligent way of offering counterfeit products and creating the illusion of a legitimate sale for a potential buyer. These methods reportedly include providing:
- A description claiming the authenticity of the product sold, supported by falsified certificates. :
Screenshot of certificates of authenticity made available on an e-commerce platform
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- Displaying positive feedback and "good ratings" associated with sellers, The availability and responsiveness of vendors would also be factors in stimulating the development of these networks and businesses:
Screenshot of a seller's profile on an e-commerce platform
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- The implementation of a "transparency" strategy explicitly stating that it is a replica of an original product. This phenomenon can involve either individual sellers on e-commerce platforms or websites that only resell counterfeit products:
Screenshot showing the presence of the word "replica" in the ad description
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- Making available a product considered to be "vintage"«. This would particularly concern perfumes that would no longer be distributed by official brands:
Screenshot of a website offering vintage products for sale
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- An attractive price well below official market prices
- On this website, delivery would be free for purchases of 3,000 rubles (or 42 euros).
Screenshot of a website offering free delivery above a certain amount
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- Some e-commerce sites are implementing sales techniques such as promotional offers. This technique stimulates sales and increases visibility:
Screenshot of a website offering promotional deals
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- Establishment of a social media advertising strategy. This method allows these shops to expand their customer base and gain greater visibility:
Screenshot of a VK social network profile offering perfumes and cosmetic products for sale
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]- Another way to gain visibility and buyer trust is the use of legitimate platforms to promote shops or advertisements. For individual sellers, this method allows them to publish their listings and benefit from the trust of the platform's customers. As for more organized networks, they can directly promote their own stores on the platform.
Screenshot of a store accessible from an e-commerce platform
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]Conclusion
[/et_pb_text][et_pb_text _builder_version=»4.0.7″]Counterfeiting is not a problem unique to Russia's parallel networks; however, it is very prevalent there. As mentioned earlier, the counterfeit market has undergone significant changes following the emergence and proliferation of online sales platforms. This phenomenon, fueled by the widespread use of the internet, is detrimental to the profitability of businesses.
In such a context, It appears essential to ensure that the measures implemented by these entities minimize collateral damage. (loss of revenue, tarnished brand image, etc.). Alongside counterfeiting, Enterprise ecosystems are regularly targeted by attackers and are exposed to a variety of cyber threats. :
- Technical and business data leaks
- Fraud and identity theft
- Denigration
- Cybersquatting
- Phishing
- Asset compromise
The solution for businesses? Combat these threats by monitoring and protecting their brand's online presence!
The identification and mapping of spaces and actors, and the characterization of practices These are activities that Intrinsec has developed in continuity with its cyber threat analysis activities, through the business relationship built with these clients.
Consequently, to address the considerable growth in risks faced by companies exposed on the web, Intrinsec offers its clients a Cyber Threat Intelligence service, a threat intelligence and detection service within the different layers of the web: Surface, Deep and Dark.
Our service is composed of 4 complementary building blocks :
- DataLeak Detection – Detection, remediation and awareness
- Brand(s) Protection – Help in protecting your brands
- Risk Anticipation – Anticipation of technical and business risks (monitoring of vulnerabilities, sector reports, cybersecurity newsletters, etc.)
- Asset Security Monitoring – Reducing your attack surface (monitoring your known surface and identifying your unknown assets, detecting compromises)
This type of service can subsequently serve as a starting point for activities initiated by the companies concerned through legal proceedings or investigations to understand and act on the levers used by the sectors.
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section fb_built= »1″ _builder_version= »4.0.7″ background_color= »#00146d » width= »85.1% » custom_padding= »|0px|||| »][et_pb_row column_structure= »3_4,1_4″ _builder_version= »3.25″ width= »96.1% »][et_pb_column type= »3_4″ _builder_version= »3.25″ custom_padding= »||| » custom_padding__hover= »||| »][et_pb_text _builder_version= »4.0.7″ text_font= »Nunito Sans|||||||| » text_text_color= »#ffffff » text_font_size= »24px » text_line_height= »1.4em » header_font= »|||||||| » width= »100% » custom_margin= »-11px|||10px|| » custom_padding= »13px|||0px|| »]Your operational security is not limited to your IT system, DDiscover our Cyber Threat Intelligence service
[/et_pb_text][/et_pb_column][et_pb_column type= »1_4″ _builder_version= »3.25″ custom_padding= »||| » custom_padding__hover= »||| »][et_pb_button button_url= »https://www.intrinsec.com/contact » url_new_window= »on » button_text= »Contactez-nous » button_alignment= »center » _builder_version= »4.0.7″ custom_button= »on » button_text_size= »21px » button_text_color= »#e02b20″ button_bg_color= »#ffffff » button_border_color= »#ffffff » button_font= »Nunito Sans|700||||||| » button_icon= »%%86%% » button_icon_color= »#ffffff » button_icon_placement= »left » custom_margin= »8px|-31px||-27px|| » custom_padding= »|21px|||| »][/et_pb_button][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section fb_built= »1″ _builder_version= »4.0.7″][et_pb_row _builder_version= »4.0.7″][et_pb_column type= »4_4″ _builder_version= »4.0.7″][et_pb_text _builder_version= »4.0.7″][1] OECD.“Trade in fake goods is now 3.3% if world trade and rising, 18/03/2019, https://www.oecd.org/newsroom/trade-in-fake-goods-is-now-33-of-world-trade-and-rising.htm
[2] BMONITOR, “The annual turnover of counterfeit goods in the luxury sector amounts to 280 billion rubles”, 08/07/2019, https://brandmonitor.ru/materials/godovoy-oborot-kontrafaktnogo-lyuksa-sostavil-280-mlrd-rubley-/#_ftn1
[3] Idem
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