Traditionally, cosmetics companies have relied on in-person retail stores to not just attract customers but also keep the existing clientele for the longest time. However, the pandemic brought massive challenges and developments in the cosmetics industry - upending it with technological disruptions giving way to digital transformations. The age of e-commerce has its share of pros and cons. While shopping online has become easier, it has highlighted the prevalence of counterfeit products.
It is no secret that personal care products, such as perfumes, moisturizers, color cosmetics, shampoos, and deodorants, amount to a huge industry that continues to grow. However, counterfeit cosmetics not only pose a significant health risk to consumers but also raise serious legal concerns for brands, manufacturers, distributors, and retailers - causing substantial damages to businesses.
By expropriating valuable trademarks, frauds deprive brand owners of the revenue to which they are entitled after years of investing billions of dollars in product research and development. In addition, counterfeiting also diminishes the goodwill of brands either by making substantially cheaper versions available or selling the defective products at lower prices via “black” markets. The fact that the majority of these products originate overseas leaves little or no legal recourse for brands to tear down counterfeiters.
Potential Health Risks
In addition to tarnishing the reputation of brands and diminishing customer loyalty, counterfeit products may contain toxic ingredients as these products are manufactured in poor & unhygienic conditions, which could expose consumers to long-term health problems. Experts believe that the absence of good manufacturing practices can lead to products causing serious skin problems, eye infections, as well as potentially permanent issues.
In the absence of clear guidance and growing costs of counterfeit products, the regulatory landscape enforcement becomes challenging. Since consumers injured/affected by counterfeit products have very few options in seeking recourse, they may seek to impose liability on the brand manufacturers, distributors, and/or retailers. Although, there is no clarity if these bodies can be called-out when the consumer is impacted by fake products. However, many federal courts have addressed the issue of liability of these counterfeited products, which has opened up doors to potential liability for brands and their knowledge for foreseeable counterfeit products.
Now the question arises how can business giants protect themselves from rising counterfeit cosmetics? In many cases, cosmetics brands are now partnering with law enforcement to remove counterfeit products from the marketplace. Moreover, some brands are also taking the help of social media platforms to raise awareness among consumers about possible counterfeit products.
The cosmetics industry has grown massively in recent years and continues to grow. Moving forward, there are going to be numerous challenges facing the industry as well as combating counterfeits will most likely be multifold. Explore more on the possible ways to prevent the damage as a brand and a customer at the Marketing 2.0 Conference.