When you buy a brand product, you have certain expectations: The quality has to be right, the producer has to provide great customers service, and using the product has to be perfectly safe. But what if the product you are buying is not the original, but a counterfeit instead? Alas, the risk of that happening has increased over the course of the past years as the number of copycats and rip-offs keeps going up. EAN discussed this problem with Susan Colvin, founder and CEO of CalExotics, Chad Braverman, COO of Doc Johnson, and Nick Orlandino, Chairman and CEO of Pipedream. These three industry insiders shed a light on the risks facing the industry, and they talk about steps that can be taken to support the trade members and protect the consumers.
Would you agree that the erosion of the traditional distribution chain, that we can witness at the moment, is a consequence of globalisation?
Susan Colvin: I don’t believe there is one model of doing business. Different business models perpetuate in various industries. Globalisation improves cost, lowers prices and can improve the overall quality of the goods. However, globalisation is not positive for everyone. Globalisation allows more people to enter the market, making it harder to determine reputability.
Nick Orlandino: It’s a dangerous side effect of globalisation and the internet. Ultimately, the consumer pays the price by getting an inferior, untested, unregulated, and uninsured product that could be a potential risk to their health.
Chad Braverman: I think it is definitely a consequence. Whether it is normal or not I am not sure. As I said, the world is getting smaller and the accessibility of everything can create issues that we have not faced in the past. As industries grow– and our industry is really in the beginning stages of rapid growth– things can get messy and jumbled. But keeping a clean distribution chain is extremely important to the success of our industry.
“Globalisation allows more people to enter the market, making it harder to determine reputability.” – Susan Colvin
Why is this behaviour becoming increasingly problematic?
Nick Orlandino: Everyone is out to make a fast buck, and they’re putting profits before their responsibility as a manufacturer. Also remember that products and entities can be disguised, marketed and moved through the internet faster than ever before – we’ve got an online environment that’s ideal for pirates to thrive.
Many retailers buy directly from factories in the Far East. Are they even aware of the risks for themselves and for their customers?
Susan Colvin: I don’t believe retailers are acutely aware of the risk they are taking when purchasing from these factories. In our business, we provide a variety of value-added services retailers will not receive when working directly with these factories.
Let me give you a few examples on the types of risk retailers may encounter. A large capital risk is involved when dealing with these factories as they expect you to pay up front before receiving the final goods. When the goods arrive in the country, they are now the responsibility of that retailer. If they are damaged, fraudulent or harmful, that retailer is ultimately responsible. Another example is with merchantability. If the goods do not meet a certain standard, the retailer may not be able to sell them. Quality is also a top concern. The material, product compliance, and motor quality are all virtually unknown factors that go into making the products. If any of these factors do not meet consumer standards retailers will face the consequences. We must remember, these are intimate products that are used on the body. Ensuring the safety of everything that goes into them is paramount, and it ultimately falls on the retailer’s shoulders if something goes wrong. This leads into the issue of liability. If a consumer is harmed by a product, the responsibility lies with the retailer. Another point of concern is with the brand reputation. If consumers are dissatisfied with a brand the word will spread and eventually cause a loss in market share. With the rise in social media and consumer reviews, ensuring your brand has a good reputation is imperative.
Nick Orlandino: Most have no idea and we’ve heard a lot of horror stories. A lot of times, they get into trouble and look for us to pick up the pieces and clean up their mistakes.
“We’ve got an online environment that’s ideal for pirates to thrive.” – Nick Orlandino
What are the biggest risks when buying from Far Eastern factories? And is it really as easy as some people imagine to procure sex toys from those sources?
Nick Orlandino: A large number of these factories are uninsured and unregulated, meaning as a retail store, you have no recourse when something goes wrong, they can disappear as quickly as they popped up in the first place. It’s easy for stores to contact these suppliers because of the internet, but it’s like going to Las Vegas – it’s gamble with their money and consumer’s health!
How big would you estimate the yearly damages that legitimate businesses suffer because of copies and counterfeit products?
Susan Colvin: Counterfeit goods are an issue for many industries, spanning numerous genres. In fact, the International Anti-Counterfeiting Coalition estimates the value of global trade in counterfeit and pirated goods was $1.77 trillion in 2015.
Nick Orlandino: It’s hard to estimate, but we know that we aren’t the only manufacturers in the industry dealing with this problem.
Chad Braverman: It has become increasingly clear that knock-offs and imitations have crossed the line between what is good for business in our industry, and what is harmful. If imitations continue to be encouraged in our industry, we’re going to start seeing a major breakdown in brand-related economic activity and investments.
Not every company from the Far East is involved in counterfeit and product copying. How can the industry separate the wheat from the chaff?
Susan Colvin: We do our best to work with established, reputable companies. And in doing so, we do a tremendous amount of work on the back end to ensure our relationships yield the highest quality products.
We research the company diligently, ensuring they are a legitimate business. Our team checks references to understand the way they do business with respect to customer interactions. This is also important as we can ask questions openly and get an unbiased opinion of the organisation. Our product team flies to the factory to inspect, review and meet the business owners. This ensures the company is legitimate and allows our team to get an inside look at the people we are doing business with. While we are at the factory, we also do product line checks with an independent international firm that inspects the facility. We also ensure product compliance and standards are being met, and require to see the documentation in person. To keep our relationships tight, both parties sign resale agreements. This ensures both parties are protected and held to the highest business standards. We also test our products with an international company, insure them and assume all the risks.
Our goal with all of this is to ensure we align ourselves with businesses that have the same goals and values, and that we can build a long-term, mutually beneficial relationship.
Nick Orlandino: I’ve personally spent the last 30 years establishing, vetting, and improving our supply chain. We’ve invested time and energy into making sure that we have solid, trustworthy relationships with all of our worldwide suppliers, which we’re very confident with. As for the rest of the Johnny-Come-Lately’s, good luck!
Chad Braverman: Our advice is to always to do your homework, and shop recognised distribution channels.
Do you think that more information and education on this topic is needed?
Susan Colvin: Education is necessary on the subject of counterfeiting. The more knowledge we have, the better equipped we will be in alleviating the situation.
We encourage consumers to do their research when making a purchase. They should pay close attention to the 3 P’s; price, packaging and place. Price- if the price is dramatically lower than the competition, it is most likely a counterfeit good. Packaging- if the product is being sold without the packaging or the packaging is low quality with printing errors it is probably counterfeit. Place- purchase from legitimate, established merchants only. When purchasing online, do research on the company. Check out the reviews, fine print and business information. Calling their local phone number is also a good way to ensure the business is legitimate. We encourage our customers and resellers to share the 3 P’s with their customers.
Nick Orlandino: Yes, education and training are key. This is not just an intellectual property issue – it’s a consumer health and safety issue.
“We encourage consumers to do their research when making a purchase.” – Susan Colvin
Does the average consumer even notice if she or he is buying a counterfeit or copied product?
Susan Colvin: The average consumer is not aware they have purchased counterfeit goods until they are delivered an inferior product. At CalExotics, we monitor counterfeit goods closely and routinely make purchases to ensure only legitimate goods are being sold under our brand. We’ve received counterfeit product and the quality is much lower and poses a potential safety risk.
Nick Orlandino: They are becoming more and more aware of counterfeits. We get letters everyday asking if the product is ours or not and how to spot a counterfeit. It’s very frustrating. We’ve hired cyber-security firms to help combat piracy.
Chad Braverman: Some knock-offs are outright fakes that are pretty much identical to the original product, down to the manufacturer’s name and packaging. This is mostly done online; and there’s no foolproof way to tell that it’s a knock-off unless you have the actual product to compare it to and see the difference.
You also have imitations, or ‘copycat products’, which is when someone just copies an item of the original manufacturer’s in likeness, and uses a generic brand name at a cheaper price point. The copycat manufacturer’s goal is to profit from association with a stronger, more innovative brand without incurring any of the costs of brand development, or building brand recognition. These types of knock-off products have become an even more insidious problem in our industry.
Copycat products not only impact the brands they are stealing from in a negative way by loss of sales and market saturation, but they also harm the pleasure products community as a whole in a less obvious way. Our industry has always been built on resourcefulness and creativity. By supporting knock-offs of any kind, we end up supporting a practice that is actively harmful to the pleasure products industry and our community as a whole.
Why would a factory from the Far East have an interest in selling directly to the USA or Europe? After all, such practices could hurt their own best customers …
Susan Colvin: The market is changing in the Far East, and many businesses will do anything to survive and make money. Even at the risk of losing current customers and potentially jeopardising the safety of the consumers.
Nick Orlandino: A lot of these newer factories are short-sighted and foolish. They aren’t looking at the big picture and their business will suffer because of it.
Chad Braverman: The world has become much smaller. Everything is accessible and I truly do not believe that people are realising the long terms effect this will create within our industry. It is important to support and build brands, as well as support your suppliers and customers. Unfortunately, that is not always happening, on both sides, and it could be disastrous.
“Our industry has always been built on resourcefulness and creativity. By supporting knock-offs of any kind, we end up supporting a practice that is actively harmful to the pleasure products industry and our community as a whole.” – Chad Braverman
Which measures should be taken against copycats and counterfeits?
Susan Colvin: Over the past year, we’ve begun taking action; bringing in top experts and enlisting the help of several outside organisations. We’ve met with US Customs and the US Consumer Protection Agency about the importation of counterfeit products to ensure we are stopping this issue at the source.
Nick Orlandino: We have to continue to educate consumers about not buying from these unregulated manufacturers.
Chad Braverman: Counterfeiting is an industry-wide problem that demands industry solutions. One of the most important tasks for all of us is to share the role of educating the media and consumers about the problem, the cost involved, and the threats associated with counterfeit products. In working together as an industry, and doing our collective parts to raise awareness and help rid the marketplace of counterfeit goods, we can promote security in an economic sense, and bring peace of mind to consumers who rely on trademarks as markers of safety, quality, and dependability.