Beauty Store Business

JAN 2018

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68 January 2018 | beautystorebusiness.com A WIDESPREAD ISSUE Counterfeiters have cashed in on the Gen Z and millennial woman's appetite for highly coveted cult makeup brands such as Kylie Cosmetics, Ben Nye, MAC and Anastasia Beverly Hills, which in some cases are sold exclusively online. These criminals are specifically targeting a younger consumer by baiting them with "Instagram candy" makeup brands that are in high demand and sell at a price many can't afford. It's interest- ing to note that brands geared more toward an older audience, such as Giorgio Armani Beauty or La Mer, pose relatively little issue. The lack of brick-and-mortar stores stocking youth-oriented items only heightens the challenge of monitoring them, which can lead to dire consequences for consumers. If a customer buys a fake Lip Kit, they aren't just walking away with an unchecked product. These cosmetics will more often than not cause a physical reaction–rashes, infections, acne, psoriasis–or worse. The lack of regulation of beauty prod- ucts is only exacerbated by the fact that there is no government agency monitoring cosmetic production at all–the industry is an open playing field. All American cosmetics–real and fake–are produced without FDA guidelines. There are no specific banned chemicals for cosmetics. For instance, lipsticks sometimes include lead. And although we take it on good faith that the items on our shelves are not harmful, clinical testing is not required in the same way as for pharmaceuticals. When applied at the counterfeit level, manufacturing conditions are downright appalling and poisons are literally pumped into the products–think gasoline, arsenic, paint thinner, mercury and dangerous levels of bacteria. Anything goes so that counterfeiters can maximize their profits at the expense of the consumer. Counterfeit cosmetics are reaching pandemic levels. In 2016, the Department of Homeland Security confiscated 2,255 cosmetics–or 46 percent of its seizures in the personal care category, up from 40 percent in 2015. Since counterfeit cosmetics are so hard to spot, they are apt to creep up anywhere. This even includes the leading industry trade shows. While attending such an event last year, members of the Passion Beauty team noticed what resembled their distinct Y.S. Park combs, but were defi- nitely different. They quickly realized that knockoffs of their product were circulating around the tradeshow floor. A counterfeiter registered as an exhibitor manufactured these fake combs. Appalled at the violation, Passion Beauty confiscated the bogus merchandise. The company is currently in a lawsuit with the tradeshow organizers for allowing these products to make it to the show floor, as well as the counterfeit manufacturer. This serves as an example, however, of how rampant and difficult to monitor fakes really are. WHAT TO LOOK FOR Counterfeiting very directly impacts every beauty store owner; constant vigilance is key to avoid stocking counterfeit items. To make sure you're safe, Deborah M. Lodge, a partner at Squire Patton Boggs in Washington, D.C., advises you do your homework. "Buy from a reputable source– such as the manufacturer or an authorized distributor," she says. Lodge cautions that online purchases from unverified and unauthorized sources can be as risky for the business owner as the consumer. In addition to working with a trusted seller, you should "know your market." Many beauty brands invest in anti-counterfeiting strategies, such as imprinting packages with holograms or watermarks, and tracking serial numbers. Once you know what to look for, bad copies may be easy to detect. "Pay close attention to detail, and make sure that the products you receive have the details you expect from originals," Lodge says. Never let your guard down throughout the buying process, as counterfeiters are truly opportunistic. "Be cautious of samples sent as examples of orders. Counterfeiters have been known to send legitimate products as 'samples' and then fill the orders with fakes," warns Lodge. Again, it all goes back to your relation- ship with your seller. "Ordering from the manufacturer or authorized distributors is the best bet for avoiding counterfeits," she continues. Finally, "beware of prices and terms that are 'too good to be true'–they probably are too good to be for legitimate goods," she says, noting that price point is a key factor when purchasing in bulk. This is echoed by Peter Browne, vice president of delivery and online brand protection for OpSec Security, a tech com- pany dedicated to protecting their clients in the fight against counterfeiting. He says that your best defense is attention to detail–if you're informed about fakes, you can spot one regardless of where you are. "Look at the packaging. Stay away from products with shoddy packaging, low-resolution imagery or anything that does not appear in a manner to which you are used to seeing," Browne says, pointing out the power of intuition. "The gut check is a good indicator. If you're not entirely sure, do not apply it to your skin." As for ordering online, your source is again crucial. "Buy direct from the manufacturer's website, but beware of impersonators," he advises. "If the manufacturer does not sell direct, they will often provide a list of authorized online retailers on their website." THE MORE YOU KNOW It's important to remember that your consumer does not want to buy a counterfeit, and is relying on the brands–and you–to protect them. According to a survey on counterfeit- ing by MarkMonitor, a leader in enterprise brand protection, 34 percent of respondents believe it is a brand's responsibility to protect them from counterfeiters. This is evidenced by the fact that almost 40 percent of consumers who unwittingly bought a fake product complained directly to the brand. Again, these consumers are not seeking out fakes, they are just unaware of the risks of buying from a third party. Five in every six consumers surveyed said they would not buy non-genuine consumer products, including makeup, skin care and medicines. To make sure you are shielded from fake cosmetics, research the brands you carry. Nick Daniels, director of sales and marketing for Scout Investigation Management Soft- ware, advocates employing key technology to stay in the know. Scout stores all counter- feit case or investigation information for a product on one server. Ideally, this leads to actionable insight–when a company is aware of patterns in counterfeiting, they can take preventive measures to address them. Scout is linked to an app, appropriately dubbed FakR, which lets users log fakes as they encounter them. Again, this information goes directly from you to the brand. Information sharing is crucial for keeping informed, involved and on the lookout. "Do your due diligence on the brand you are investing in," Daniels says. The app offers an authentication pro- cess in case you have any doubts. Simply scan the barcode and you will immediately know if a product is real. "Those numbers mean more to the brand than you may realize," he adds, noting a UPC not only may indicate that a product is real, but also may contain information that is meaningful to the manufacturer, such as location. Like it or not, the tremendous increase in counterfeit cosmetics has changed our indus- try. "It seems that every time new anti-fake technology is developed, the counterfeiters quickly mimic the new 'safety' measures," Lodge notes. "The U.S. government has taken actions against counterfeiting rings and businesses, and has an informational website called stopfakes.gov." However, she continues, "the efforts often seem like a whack-a-mole game, as new problems pop up every time a fake source is exposed." To outsmart counterfeit- ers, work with manufacturers to learn about authenticity measures and actively check for them. "Some brands have adopted packaging with microtext printing or design features," she adds. Again, it's about becoming aware of details and checking for them. "Be vigilant to cry foul if duped," she says. Ultimately, stay ahead of your market by keeping informed. Lodge advises, "The best antidote to counterfeiters is an educated market, with manufacturers, distributors, retailers and consumers working together to stamp out counterfeits and demand authentic products." ■ Emilie Branch is a writer based out of New York City. "Ordering from the manufacturer or authorized distributors is the best bet for avoiding counterfeits." —Attorney Deborah M. Lodge

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